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Compensation rule must address CU difference CUNA

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WASHINGTON (6/1/11)--The National Credit Union Administration’s (NCUA) final rule on incentive-based compensation arrangements should distinguish between credit unions that have not rewarded undue risk taking and those financial institutions that have, the Credit Union National Association (CUNA) has said. Any burdens that this rule places on credit unions should be minimized, CUNA added in a Tuesday comment letter. The NCUA proposal seeks to ensure that the incentive-based compensation arrangements of credit unions with $1 billion or more in assets "appropriately balance risk and financial rewards," are "compatible with effective controls and risk management," and are "supported by strong corporate governance.” The compensation proposal, which is required by the Dodd-Frank Act, does not cover salaries or other compensation, such as bonuses, where risk is not involved. The proposed rule was jointly issued by the NCUA, the Federal Reserve, the Federal Deposit Insurance Corporation, the Federal Housing Finance Agency, the Office of the Comptroller of the Currency, the Office of Thrift Supervision, and the Securities and Exchange Commission. CUNA in the letter said that credit unions have generally not provided the kinds of abusive compensation plans that are the subject of this proposal and that encouraged unmanageable risks, and added that many credit unions would likely not be subject to the rule, as they generally do not provide the type of compensation addressed by the proposal. However, CUNA still urged the agency to work with other regulators “to make important changes in the proposal that will recognize the significant differences between credit unions and other institutions regarding compensation arrangements that are the subject of this proposal.” CUNA also recommended that the agency revise and clarify its definitions of “executive officers” and “incentive-based compensation.” CUNA also called on the NCUA to exclude Credit Union Service Organizations (CUSO) from the final compensation rule. While the NCUA had not proposed including CUSOs under the rule, it did request input on whether or not CUSOs should be covered. The NCUA should also clarify which types of information financial institutions must include when they file compensation policy disclosures to the agency, CUNA added.

Magnolia FCU purchases assets of Valued Members FCU

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ALEXANDRIA, Va. (6/1/11)--Valued Members FCU of Jackson, Miss., with $9 million in assets and 2,000 members, was liquidated by the National Credit Union Administration (NCUA) Tuesday. Magnolia FCU, also of Jackson, immediately purchased and assumed the closed credit union’s assets, liabilities and members. Early in May, the NCUA announced it would work with Valued Members FCU to “resolve issues” affecting safety and soundness. The agency said that placing the troubled credit union into conservatorship would enable the institution to continue regular operations "with expert management in place, correcting previous service and operational weaknesses." It also enabled members to continue their business with their credit union. However, yesterday the NCUA said the credit union's declining financial condition led to its closure and subsequent purchase and assumption. The accounts of the new Magnolia FCU members remain federally insured by the National Credit Union Share Insurance Fund up to $250,000. The new Magnolia FCU members also will experience no interruption in services. Magnolia Federal is a large, full-service institution with $104 million in assets and more than 14,600 members.

Call report results show CU resiliency Matz says

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ALEXANDRIA, Va. (6/1/11)-–National Credit Union Administration (NCUA) Chairman Debbie Matz said the “solid financial start to 2011” reflected by first quarter credit union call report data released on Tuesday “shows the resilience” of the credit union industry and demonstrates that credit unions are continuing “to make solid progress during the economic recovery.” The NCUA’s quarterly survey compiles the results of 2011 first quarter call report data from 7,292 federally insured credit unions. The report noted that the most telling sign of credit union recovery was the 23 basis point (bp) increase in return on average assets (ROA). ROA totaled 74 bp during the quarter. The agency also noted improvements in several key indicators, including a 2.72% increase in assets, a 3.21% increase in member shares, and a 10.55% increase in net income. Net credit union income during the quarter totaled $1.7 billion. Credit Union National Association (CUNA) Chief Economist Bill Hampel said that the improvements in loan quality and net income “are really good signs, and are likely to persist throughout the year.” “Fueled largely by lower provision for loan loss expenses in 2011 than 2010, we expect credit union ROA to be at least 60 bp for the full year, even after the corporate stabilization assessment,” Hampel added. The number of credit union members increased by 300,000, totaling 90.8 million during the quarter. Total assets held at credit unions totaled $939 billion as of March 31, a $25 billion increase from the previous quarter’s numbers. Operating expenses and provisions for loan loss expenses also declined during the quarter, and net worth ratio dropped 10 bp due to assets growing more rapidly than capital, the NCUA said. The agency also noted improvements in several key indicators, including a 2.72% increase in assets, a 3.21% increase in member shares, and a 10.55% in net income. Net worth totaled $93.6 billion and investments, excluding cash on deposit or cash equivalents, totaled $253.8 billion, the NCUA reported. Loans were the only indicator to decline, falling 0.86% to a total of $560 billion. The NCUA said that credit unions made $564.8 billion in loans during the previous quarter. Credit quality continued to improve. While the delinquency rate remained near a 25-year high, it continued to drop, from 1.75% in December to 1.62% in March. The ratio of net charge-offs to average loans also fell, to 1% in the first quarter, a drop of 13 bp from the 2010 full-year rate, the NCUA said.

House holds hearings as Senate stays in recess

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WASHINGTON (6/1/11)--With members of the Senate remaining in their home districts after the Memorial Day holiday, and no major action expected in the House, credit unions will want to watch out for four House hearings. The first of these hearings will take place on Wednesday when the House Small Business Committee will discuss capital access for small businesses. The House Financial Services Committee’s monetary policy and technology subcommittee will later that day hold a hearing entitled, “Federal Reserve Lending Disclosure: FOIA, Dodd-Frank and the Data Dump.” Federal Reserve representatives from the central office and the Fed’s New York branch will testify during that hearing. A House Budget Committee hearing on Fannie Mae, Freddie Mac and taxpayer exposure to housing markets will take place on Thursday, with the full House Financial Services Committee discussing allegations of mismanagement and waste in the U.S. Department of Housing and Urban Development’s HOME Investment Partnership Program during a Friday hearing. Legislation that would lift the debt ceiling, as well as legislation related to domestic security and military construction spending, are also on the schedule. The House will have its own district work period next week, and the Senate is scheduled to return to Washington. Both the House and Senate will be in session on June 13.

Inside Washington (05/31/2011)

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* WASHINGTON (6/1/11)--A bipartisan group of 39 senators forwarded a letter Friday urging regulators to expand the proposed exemption from risk-retention rules mandated by the Dodd-Frank Act. The lawmakers said the 20% down payment required for a qualified residential mortgage (QRM) would prevent too many borrowers from obtaining loans (American Banker May 31). “The proposed regulation goes beyond the intent and language of the statute by imposing unnecessarily tight down payment restrictions,” the senators wrote. “These restrictions unduly narrow the QRM definition and would necessarily increase consumer costs and reduce access to affordable credit. Well-underwritten loans, regardless of down-payment, were not the cause of the mortgage crisis.” The proposal would implement provisions of Dodd-Frank requiring lenders to retain 5% of the credit risk for securitized loans. But the act also calls for QRMs to be exempted. The comment period ends June 10, but agencies have received many requests to extend the comment period, said the Banker

Inside Washington (05/30/2011)

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* WASHINGTON (5/31/11)--Mortgage industry and real estate insiders last week acknowledged the need for market reforms, but also told Senate Banking Committee members that completely removing the government from the mortgage sector could harm the overall housing market. National Association of Realtors President Ron Phipps told the committee that "pure privatization of the secondary mortgage market is unacceptable," and warned that limiting the government’s role would “cause mortgage products to be more aligned with business goals than the nation's housing policy or the consumer" (American Banker May 27). Sen. Richard Shelby (R-Ala.) countered these claims, saying that Congress “cannot assume a government guarantee of mortgages can be achieved without risk to the taxpayer." Committee Chairman Sen. Tim Johnson (D-S.D.) said that his committee must find ways to bring private funds back to the mortgage market “while also ensuring that credit remains available." Several witnesses said some form of government backing would need to be maintained in order to draw private funds back into the market … * WASHINGTON (5/31/11)--Federal Deposit Insurance Corp. (FDIC) Chairman Sheila Bair told members of the House Financial Services subcommittee on financial institutions and consumer credit that she wants to prove that the FDIC’s new resolution powers would work as planned (American Banker May 27). While some members questioned the FDIC’s ability to deal with its new authority over larger institutions, Bair said that her group addressed the failure of $300 billion-asset Washington Mutual and also aided other large banks. Bair said that her agency understands these banks due to their work as an insurer, and added that she would match her staff’s experience “against anybody” in the Federal Reserve, the U.S. Treasury, or the Office of the Comptroller of the Currency. “We have very smart people who do this for a living," Bair added. Bair also addressed the structure of the pending Consumer Financial Protection Bureau, saying that she has “no reservations” about allowing the CFPB to maintain its single-leader structure. Some members of Congress have suggested that CFPB leadership be expanded to a five- member board, and legislation that would make that change, among others, is currently active …

Compliance Notifying members under Reg E

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WASHINGTON (5/31/11)--Member notifications and other disclosures are addressed in this month’s Credit Union National Association (CUNA) Compliance Challenge. In the Challenge, CUNA recommends that credit unions inform members who do not wish to be sent monthly account statements that other notification options exist. They include electronic statement delivery via e-mail, the option of picking up their paper statements at their credit union, or delivery to an alternate address or P.O. box. Credit unions may not simply cease sending statements; they are required to provide statements to their members by Regulation E. Those statements must be sent in each monthly cycle that a direct deposit, ATM transaction, debit card purchase, or other electronic transfer occurs. However, the frequency can be scaled back to four times per year if these transactions do not occur. Credit unions may also stop sending notifications for accounts that have become inactive, CUNA noted. ATM-related disclosures that are required by Reg E were also covered this month. According to CUNA, credit unions do not need to disclose on their own ATMs that their members may be charged fees for using another institution’s ATM. Disclosures for so-called “foreign fees,” which are charged by the account-holding institution when a credit union member uses an out of network ATM, are disclosed in the account agreement and appear on the member’s monthly account statement. For more of this month’s Compliance Challenge, use the resource link.

NCUA webinar covers ALLL best practices

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ALEXANDRIA, Va. (5/31/11)--Credit unions must fully understand the current economic environment and various economic trends before they determine whether, and to what degree, to adjust their allowance for loan and lease losses (ALLL), National Credit Union Administration (NCUA) Chief Economist John Worth said during a webinar held last week. Worth and NCUA staff used the webinar to cover some best ALLL practices for credit unions. The NCUA staffers did not provide any new information regarding the ALLL, but did provide guidance on how credit unions can adjust their ALLL based on different qualitative and environmental (Q&E) factors. NCUA Senior Economist Ralph Monaco and regional problem case officer Elizabeth DiNapoli also took part in the interactive webinar. The NCUA staff mentioned the importance of appropriate historical look-back periods for assessing the ALLL, and recommended that credit unions assess each type of loan individually in order to determine an appropriate historical period for that particular type. The NCUA staff also noted that credit unions may determine that a shorter look-back period is more appropriate for their credit card loans than their auto loans. Staff stated that such a determination is appropriate, as long as it is based on adequate evaluation of the factors affecting the type of loan and the evaluation is documented. CUNA’s Accounting Subcommittee continues to review the NCUA webinar, and will release more information on the webinar and on ALLL in general later this week.

30- 15-year rates set new lows for 2011

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WASHINGTON (5/31/11)--Thirty- and fifteen-year fixed-rate mortgages continued to slide during the week ended May 26, setting new yearly low points, with 30-year loans averaging 4.60% and 15-year loans averaging 3.78%. The previous lows for this year were set last week. Freddie Mac Vice President/Chief Economist Frank Nothaft said that reports of slowed economic activity cause the decreased mortgage rates. Nothaft added that U.S. home prices may bottom out soon, as prices only fell by 0.3% between February and March. Five-year and one-year adjustable rate mortgages (ARM) also fell during the week, averaging 3.41% and 3.11%, respectively. Those rates stood at 3.48% and 3.15% last week. Five-year ARMs averaged 3.97% this time last year, while one-year ARMs averaged 3.95%.

SBA suggests 7a compliance changes

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WASHINGTON (5/27/11)--The U.S. Small Business Administration (SBA) has identified the adoption of a single electronic application for all SBA 7(a) guaranteed loans as one of several ways it could reduce compliance burdens. This 7(a) streamlining would, according to the SBA, “reduce the paperwork burden on lenders” and increase the participation of credit unions and other lenders in the 7(a) program. It would also improve the timeliness of loan approval deliveries, the SBA added. The SBA also discussed allowing credit unions and other SBA lending partners to use an automated credit decision model for 7(a) loans of less than $250,000. Doing so could reduce the cost of delivering loans to eligible borrowers, thus expanding lender interest in making low-dollar loans. This change could also encourage new credit unions and other lenders to become SBA partners, increasing the amount of lending options for small businesses, the SBA added. The SBA was one of 30 federal agencies that this week released a regulatory review following an early 2011 executive order calling on federal agencies to design cost-effective, evidence-based regulations that are compatible with economic growth, job creation, and competitiveness. The Obama administration also instructed regulators to reduce burdens on small businesses whenever possible, called for greater transparency and accountability in regulatory compliance, and requested that regulators identify areas where regulations could be effectively harmonized to reduce costs. The SBA said it would also explore whether adding greater flexibility to its lending criteria and increasing the participation of lenders and borrowers in underserved communities could “reduce federal barriers” for entrepreneurs working to start and grow their own businesses. The SBA added that it would soon report on the feasibility of these and other ideas. For the full SBA release, use the resource link.

NCUA may lift prepayment plan contribution cap

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ALEXANDRIA, Va. (5/27/11)--While the National Credit Union Administration (NCUA) has said that the maximum corporate stabilization assessment prepayment a credit union may make would be 36 basis points (bp), the agency on Thursday said that it would consider lifting that cap if enough credit unions request that it be raised. The NCUA covered its voluntary prepayment plan, which was proposed at last week’s May board meeting and is designed to help smooth out future corporate credit union stabilization assessment rates, during a Thursday webinar. NCUA Chairman Debbie Matz reiterated that the prepayment plan was in response to several requests by credit unions. Credit unions would need to advance the minimum amount of $10,000 to participate in the plan, and the NCUA said it would not move forward with the plan if credit unions do not commit a combined $300 million in funds to the proposal. The prepayment plan would generate $2.8 billion in funds if all eligible credit unions contributed the maximum amount. The Credit Union National Association (CUNA) has estimated that voluntary payments by all eligible credit unions at the maximum payment amount could reduce the amount of corporate stabilization-related assessments charged in 2011 from 25 bp to 11 bp. Corporate assessments charged in 2012 could fall to 10 bp from the currently planned 13 bp if maximum advance payments are made. The plan would affect the amount of each year's assessment through time, but not the total amount of assessments. CUNA estimates that the NCUA will need to collect a minimum of $1 billion in funds for credit unions to recognize any benefits. Credit unions that wish to take part in the prepayment program can pledge their desired amount to the NCUA, and the agency would then process a direct debit from those credit union accounts. The agency is accepting credit union comments on the potential effectiveness of its plan, the level of interest in the plan, and any account treatment considerations until June 20. The NCUA said it could implement the plan by mid-August. CUNA is urging all eligible credit unions to consider the benefits of the prepayment program and to suggest revisions as appropriate. CUNA has also compiled its own FAQ on the proposal, and has issued a corresponding comment call. Comments are due to CUNA by June 10. The National Credit Union Share Insurance Fund (NCUSIF) was also addressed during the webinar, with NCUA Director of Examination and Insurance Melinda Love reiterating that an NCUSIF premium for 2011 is not likely. However, such a premium might be necessary in 2012, she indicated. CUNA President/CEO Bill Cheney in last week's NCUA board meeting summary noted that a premium for this year is unlikely. For more on the prepayment plan, and to access CUNA’s FAQ, use the resource links.

Inside Washington (05/26/2011)

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* WASHINGTON (5/27/11)--During the next several weeks, the U.S. Treasury will sell its warrant positions in SunTrust Banks Inc. and Webster Financial Corp. The department acquired the warrants through investments made under the Troubled Asset Relief Program (American Banker May 26). Both companies repurchased the Treasury’s preferred stock investment. Treasury said it will conduct auctions to sell the warrant positions. The warrants will be sold through public offerings, using a system that establishes a market price by allowing investors to submit bids at specified increments above a minimum price for each auction. The Treasury holds 17.9 million warrants in Sun Trust and 3.28 million in Webster. The strike price on one set of 11.89 million Sun Trust warrants is $44.15, with an expiration date of Nov. 14, 2018. The strike price on the other set of 6.01 million Sun Trust warrants is $33.70, with an expiration date of Dec. 31, 2018. The strike price on the Webster warrants is $18.28, with an expiration date of Nov. 21, 2018 … * WASHINGTON (5/27/11)--The Office of the Comptroller of the Currency has published in the Federal Register a proposal to take over a number of responsibilities from the Office of Thrift Supervision. The changes are tied to the implementation of the Dodd-Frank Act and address organization and functions, the availability and release of information, post-employment restrictions for senior examiners, and fee assessments. The OCC is accepting comment on the changes until June 27… * WASHINGTON (5/27/11)--A proposal issued by the Office of the Comptroller of Currency (OCC) Wednesday would amend its federal pre-emption of national banks, but largely preserve the office’s authority. The new pre-emption plan, part of the Dodd-Frank Act, would require operating subsidiaries of national banks to follow state consumer protection laws and remove language from OCC regulations that state officials argued was too rigid (American Banker May 26). Language from the OCC’s 2004 pre-emption rule stating national banks can avoid state laws that “obstruct, impair or condition” the business of banking would be removed. Many states said the language could be used to avoid more than just banking laws. But while the proposal alters the preemption standard, the 1996 U.S. Supreme Court decision solidifying the OCC’s authority through the so-called Barnett standard still stands. “Because the Dodd-Frank Act preserves the Barnett conflict pre-emption standard, OCC’s rules and existing precedents (including judicial decisions and interpretations) consistent with that analysis are also preserved,” the proposal said. The proposal has a 30-day comment period …

CUNA CEO meets with key Treasury official

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WASHINGTON (5/26/11)--Debit card interchange fee regulation, preserving the tax-exempt status of credit unions, the National Credit Union Administration’s Corporation Credit Union Stabilization Fund, increased member business lending authority, and supplementary capital authority for credit unions were among the central issues Credit Union National Association (CUNA) President/CEO Bill Cheney discussed with Treasury Undersecretary for Domestic Finance Jeffrey Goldstein during meeting at that agency yesterday. Concerning the tax exemption for credit unions, Cheney focused on the benefits consumers receive in the way of favorable rates and fees that are directly attributable to the tax-exempt status of credit unions. CUNA urges the administration and the U.S. Congress, as they grapple with solutions to the nation’s budget deficit, to be mindful of the importance of credit unions in the financial marketplace. On debit card fee regulation, Cheney emphasized that CUNA is doing all it can, working with credit unions and leagues, to urge Congress to delay implementation of the Federal Reserve Board’s final interchange rule, due to go into effect July 21. That rule, as proposed, would set a seven- to 12-cent cap on debit card interchange fees for issuers with more than $10 billion in assets. While smaller issuers are exempt from the cap, CUNA has concerns that the statutory exemption will not be sufficiently effective, resulting in substantial declines in fees to smaller issuers. Cheney also indicated that CUNA is working on the regulatory side of the interchange issue, pushing the Fed to improve its rule for credit union debit card issuers. CUNA is scheduled to meet with key Federal Reserve Board officials again next week. The proper role of the Consumer Financial Protection Bureau (CFPB) was also on the agenda. CUNA wants to ensure that the agency protects consumers as Congress intended, but without imposing unnecessary regulatory burdens on credit unions in the process. To further fight regulatory burden, CUNA is also working with credit unions and leagues to provide comment on the Consumer Financial Protection Bureau’s proposed new form that would combine and significantly reduce the number of mortgage disclosure forms provided by lenders to borrowers under the Truth-in-Lending Act and the Real Estate Settlement Procedures Act. (See related story: CUNA/CFPB meet on mortgage disclosure, comment deadline Friday.) Cheney also said at the Wednesday meeting that CUNA wants to work closely with the Treasury on greater authority for credit unions to provide member business loans (MBL) and to obtain supplementary capital authority. He thanked the department for its support of the legislation championed by Sen. Mark Udall (D-Colo.) to raise the MBL cap. Under Secretary Goldstein advises Treasury Secretary Geithner and leads the department’s efforts on domestic finance and fiscal policy, among other issues. Also at the meeting were Don Graves, Treasury Deputy Assistant Secretary, and Felton Booker, acting director of the agency’s Office of Financial Institutions Policy. Attending the meeting with Cheney were CUNA senior staff John Magill, Ryan Donovan, and Mary Dunn.

CUNA meets with CFPB on mortgage disclosure

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WASHINGTON (5/26/11)--Just two days before comments are due on the Consumer Financial Protection Bureau’s (CFPB) proposed simplified mortgage disclosure document, the Credit Union National Association (CUNA) met with bureau officials to continue discussions regarding the form. The CFPB, earlier this month, released for comment its "Know Before You Owe" project, which attempts to combine the complicated documents required under the Truth in Lending Act (TILA) and the Real Estate Settlement Procedures Act (RESPA) into a single page, two-sided disclosure. Comments using the CFPB’s online interactive “Industry Tool” can be provided through this Friday. At a meeting attended by CUNA earlier this month, CFPB architect Elizabeth Warren that was the first step in a long process of gaining feedback from financial institutions, consumers and other interested parties on the new draft form. After the initial comment period ends this week, the CFPB intends to revise the forms five separate times between May and September, with a final version of the new form scheduled for a July 2012 release. According to CFPB transition team members, each new draft of the form will also be available for online review and comment using the CFPB’s website. The CFPB is concurrently conducting consumer testing of these disclosures in both English and Spanish. At yesterday’s meeting, CUNA Deputy General Counsel Mary Dunn, CUNA Senior Assistant General Counsel Michael Edwards, and representatives from ten credit unions were among those that met with CFPB assistant director for community banks and credit unions Elizabeth Vale and other CFPB representatives. CUNA and credit union representatives will again meet with the CFPB when it releases an updated mortgage disclosure proposal next month. Vale said that the CFPB wants to have frequent dialogue with credit unions as it develops new rules or revamps existing regulations. CFPB representatives during the meeting added that they would seek credit union input and follow similar development timelines in their future rulemaking projects. CUNA has recommended that the CFPB outreach effort include a separate interview panel comprised solely of credit union lending professional because--as not-for-profit cooperatives organized to promote thrift and make loans to members at reasonable rates of interest--credit unions are different from for-profit banks and non-depository mortgage lenders, as well as different from mortgage brokers. Use the resource link below for information on how to comment on the proposed combine disclosure form.

CU interchange push at critical point Cheney

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WASHINGTON (5/26/11)--As the Credit Union National Association (CUNA), leagues and credit unions nationwide enter a “critical stage” in the battle to ensure the best possible operating environment for credit unions, CUNA President/CEO Bill Cheney again called on credit unions and state leagues to keep up the grassroots pressure during the Memorial Day congressional recess and the weeks that follow by continuing to urge their legislators to delay implementation of the Federal Reserve’s debit interchange fee cap regulation. The Fed's proposed interchange regulations could limit debit card transaction fees to as little as seven to 12 cents per transaction. A proposed exemption for issuers with under $10 billion in assets is included in the proposal, but CUNA, leagues and credit unions have been emphasizing that the exemption is flawed and will not work in practice. Cheney in a Wednesday call with state league presidents said that credit union advocacy – through direct, in-district meetings, meetings in Washington, and CUNA’s online grassroots action center – has made the esoteric debit interchange fee cap issue one of the hottest and most-lobbied issues on Capitol Hill. Over 500,000 credit union contacts have been made to legislators. And about half of the 11,000 comment letters the Fed has received on its proposal came from credit unions. “We still have the momentum to reduce the impact of this new law and rules on credit unions—but we cannot let down now,” Cheney emphasized, “particularly with a holiday weekend coming up, and some crucial days ahead over the next three to four weeks.” The debit interchange regulations, which have not yet been finalized by the Fed, must by statute take effect on July 21. The current congressional schedule shows both joint and separate recess periods for the House and Senate, and this scheduling arrangement means that there are essentially only five complete weeks of full sessions of Congress between now and that deadline, adding to the urgency to enact pending legislation delaying the rules. Cheney’s call for continued grassroots pressure comes as Sen. Majority Leader Harry Reid (D-Nev.) reportedly said that interchange delay legislation could come up for a Senate vote in mid-June. After this week, the Senate will recess until June 6. The coming Memorial Day recess is another chance for credit unions to be heard on this issue while legislators are back home. “Every time they turn around, someone should be there from a credit union to talk to them about interchange,” Cheney told the league presidents. “Participate in any town hall meetings—live, phone or ‘virtual—and keep up the pressure,’ said Cheney. “Visit your Senators’ Facebook page and post questions and comments about interchange.” Cheney also pointed out the stepped up credit union contacts with legislators is having another benefit: All the Capitol Hill contacts put more pressure on the Fed to make substantive changes to its proposed rule. Further, all the grassroots action by credit unions has made the interchange issue “radioactive,” squelching earlier talk from some lawmakers and merchant groups that wanted next to reform credit card as well as debit interchange. Sens. Jon Tester (D-Mont.) and Bob Corker’s (R-Tenn.) S. 575 would delay implementation of the debit interchange provisions by 15 months. A study of their impact on consumers, credit unions and other financial institutions, and merchants would also be ordered. (See related May 18 story: Tester: 15-mo. interchange delay is 'bare minimum') Similar legislation has been offered in the House, but House members have said that they would wait for the Senate to act first on the interchange issue, since that legislation was first offered in the Senate.

NCUA advises on hurricane season preparedness

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ALEXANDRIA, Va. (5/26/11)--With National Hurricane Preparedness Week ending this weekend, the National Credit Union Administration has reminded credit unions in hurricane-prone areas of the many resources that can help them and their members remain physically and financially safe. The NCUA has provided a number of online resources aimed at helping credit unions review their existing disaster plans. The agency will also soon release a letter to credit unions addressing hurricane planning. NCUA Chairman Debbie Matz in a release said that credit unions should ensure that their disaster plans are commensurate with the complexity of their operations. Those plans should “focus on minimizing service interruptions” and should also “instill confidence during an emergency,” according to the NCUA. Credit unions may also call their regional NCUA office or examiner in the event of a disaster, the agency added. The NCUA also suggested that credit unions and their members make use of direct deposit to avoid potential postal service delays that could be caused by the storms. The 2011 season will start on June 1, and the National Oceanic and Atmospheric Administration has predicted that as many as 18 named storms could develop. Up to ten of those could develop into “named” storms with winds of 74 miles per hour or higher, and as many as six of those named storms could eclipse the 111 mph sustained wind threshold and become “major” hurricanes. For the full NCUA release, use the resource link.

Inside Washington (05/25/2011)

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* WASHINGTON (5/26/11)--Kansas City Federal Reserve President Thomas Hoenig expressed his support for the Volcker Rule and said banks need to get “back to the business of banking.” He made the comment during a speech in Philadelphia on Tuesday. The Volcker Rule, part of the Dodd-Frank Act, restricts banking organizations from engaging in proprietary trading activities and involvement with hedge and private equity funds. Dealing, market making, brokerage, and proprietary trading create instability in core banking services such as deposits and lending, Hoenig said. The difficulty in assessing those risks led to the recent financial crisis, he said. “Banking is based on a long-term customer relationship where the interests of the bank and customer are more aligned,” Hoenig said. “Both the bank and loan customers benefit if borrowers do well and are able to pay off their loans. In contrast, as shown only too clearly with this recent crisis, trading is an adversarial zero-sum game--the trader’s gains are the losses of the counterparty, who is oftentimes the customer” … * WASHINGTON (5/26/11)--Five of the nation’s largest banks were told by state attorneys general on Tuesday that they could face more than $17 billion in civil lawsuits if a settlement is not reached on foreclosure handling abuses The Wall St. Journal May 25). Still to be included are billions of dollars in potential claims from federal agencies. Federal officials have not submitted a possible settlement figure. Representatives of the nation’s largest banks met on Tuesday with state and federal officials to discuss potential costs they will face if a settlement isn’t reached. Federal and state officials have dismissed banks’ $5 billion settlement offer to compensate borrowers negatively affected by the foreclosure process. Some officials have said $20 billion would be sufficient to resolve foreclosure-handling abuses that surfaced last fall …

Cheney voices interchange concerns on Bankrate.com

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WASHINGTON (5/25/11)—The Credit Union National Association (CUNA) continues to advocate for a delay in the implementation of the Federal Reserve Board’s debit interchange fee rate cap, most recently via an interview with CUNA President/CEO Bill Cheney published this week in Bankrate.com’s Banking Blog. Overall, Cheney said that while some aspects of the debit card interchange fee market need to be reformed, the Fed’s proposed solution is flawed and will harm both consumers and credit union debit card issuers. The Fed’s proposed interchange regulations could limit debit card swipe fees to as little as seven to 12 cents per transaction. A proposed exemption for issuers with under $10 billion in assets is included in the proposal. Cheney said that this carveout would not work as planned. While the exemption would allow smaller institutions to charge higher rates for the convenience of accepting debit cards, Cheney said that a two-tiered debit fee system won’t work in practice. CUNA maintains that merchants would reject a two-tiered system and credit unions would incur significant losses on every debit card purchase made by a consumer. Cheney also predicted credit union debit cards could face discrimination in practice--that larger institutions could “use their marketing clout and greater resources” to convince merchants to accept bank debit cards over credit union-offered cards. These factors would likely result in credit unions losing money on their members’ debit card transactions, Cheney noted. That in turn would force credit unions to raise fees charged members to offset the lost revenue. The proposed 12 cent limit would not be adequate to cover the expenses associated with providing debit card accounts, he added. Another issue of concern to credit unions is potential damage they could face from routing provisions of the regulation. Credit unions are currently allowed to choose their own payment network, but the Fed proposal would force financial institutions to offer multiple transaction routing options to merchants. Cheney said that this change, which has no small institution exemption, would “cost credit unions and cripple their ability to be competitive.” For the full blog post, use the resource link.

CUNA IDs NCUA corporate prepayment plan concerns

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WASHINGTON (5/25/11)--The Credit Union National Association (CUNA) has developed more useful information on the key elements of the National Credit Union Administration’s (NCUA) proposed plan for voluntary prepayment of corporate credit union stabilization fund assessments. The information, which is in a question-and-answer document, is designed to help credit union officials understand the proposal and assess whether they want to take part in NCUA’s proposed prepayment plan. The NCUA’s plan, which would allow most credit unions to voluntarily prepay up to 36 basis points (bp) of their assessments, was released at last week’s May NCUA board meeting. The plan is not mandatory, but, legally speaking, all federally insured credit unions may participate. However, NCUA noted that 6,023 credit unions have more than $2.8 million in assets and could be able to take part in the plan. The NCUA said credit unions would need to advance the minimum amount of $10,000 to participate in the plan, and that it would not move forward with the plan if credit unions do not commit a combined $300 million in funds to the proposal. Credit unions that wish to take part in the prepayment program can pledge their desired amount to the NCUA, and the agency would then process a direct debit from those credit union accounts. CUNA said that the plan “would affect the amount of each year’s assessment through time, but not the total amount of assessments.” The primary goal of the plan is to smooth assessment rates. Based on current estimates of future losses on the legacy asset portfolios, NCUA will still need to collect $8.5 billion to cover the cost of corporate stabilization. However, the ultimate losses could end up requiring more or less than $8.5 billion in funding. Assessments beyond 2012 would be somewhat higher than they would be without the NCUA prepayment plan, according to CUNA. The exact amount of assessment reduction would depend on the level of participation. According to CUNA, the NCUA would need to collect $1 billion in funds for credit unions to truly recognize the benefits of the proposal. CUNA estimated that the NCUA’s 2011 and 2012 assessments would be reduced by 16 basis points if the proposal brought in $1.2 billion in funds, dropping each of those assessments to around 11 bp. The assessment levied in 2013 could be around 10 bp, CUNA added. The NCUA will hold its own Q&A session during a May 26 webinar. The agency is also accepting credit union comments on the potential effectiveness of its plan, the level of interest in the plan, and any account treatment considerations until June 20. To register for the NCUA webinar use the resource link.

Three NCUA Small CU Workshops planned for June

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ALEXANDRIA, Va. (5/25/11)—The National Credit Union Administration's Office of Small Credit Union Initiatives is offering a trio of credit union workshops next month. The workshops will focus on:
* Issues facing credit unions; * NCUA--Consumer Protection Office--What It Means To You; * Duties of federal credit union boards of directors (NCUA Regulations 701.4); * Basic financial literacy requirements; * Due diligence and evaluating payment system service providers; and * Examination issues.
Portland, Maine will host a credit union roundtable on June 2, with workshops following in Salt Lake City, Utah on June 11 and Atlanta, Ga. on June 23. Additional roundtables and workshops are scheduled through November. Use the resource links for registration information.

NCUA OIG Agency dealing with financial crisis impact

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ALEXANDRIA, Va. (5/25/11)--Recovery from the impact of the recent financial crisis, and related challenges and opportunities, are the focus of the National Credit Union Administration as it works to “ensure the future stability of the nation’s financial system,” the NCUA’s Office of the Inspector General said in its semi-annual report to the agency and Congress. The agency has reviewed its supervision and regulation of failed corporate and natural-person credit unions, and has worked to enact reforms required by the Dodd-Frank Wall Street Reform Act, in the six months ended March 31, the report noted. NCUA actions related to Dodd-Frank implementation included the issuance of new rules related to credit ratings, share insurance protection, and incentive-based compensation, as well as the creation of the NCUA’s Office of Minority and Women Inclusion. The semiannual report also noted that the NCUA had provided several details on additional corrective actions that were taken after the OIG last year said that more aggressive NCUA supervisory actions could have helped the NCUA avoid the failure of nine credit unions and prevented the National Credit Union Share Insurance Fund from taking on substantial losses. For prior coverage of these recommendations, use the resource link. The overall financial status of the credit union industry was also covered in the report, with the OIG finding growth in assets, and an increase in credit unions’ return-on-average assets, during the six-month period ended December 31. The OIG also noted that while total share accounts and money market shares increased during this time period, the amount of loans taken out at credit unions fell. Credit union-related legislative actions, including recent efforts to lift the credit union member business lending cap and ensuring that a planned small issuer exemption from rules that would cap fees charged for debit card transactions is meaningful, are also covered in the OIG report. For the full NCUA OIG report, use the resource link.

Inside Washington (05/24/2011)

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* WASHINGTON (5/25/11)--Foreign banks with U.S. operations have expressed concerns that they will be negatively impacted by the Dodd-Frank Act. Under the law, institutions with global assets of more than $50 billion are required to provide regulators with details of how the living wills they hold can be dismantled in a crisis, and are subject to “enhanced supervision” by the Federal Reserve Board (American Banker May 24). Foreign banks are uneasy because the designation is tied to global assets, not only their U.S. operations, the Banker said. Based on that threshold, about 100 foreign banks would be subject to the living will and enhanced supervision provision, compared with 35 U.S. banks. Thomas Pax, a partner at Clifford Chance in Washington, said many foreign banks have only one or two branches in the U.S. as a way to take advantage of the benefits available to U.S. bank holding companies. Most foreign banks were unprepared for the possibility that they would be affected by Dodd-Frank, he said. Federal Reserve officials have indicated they will scale supervision to a bank’s size and complexity … * WASHINGTON (5/25/11)--Big banks are urging the Federal Deposit Insurance Corp. (FDIC) to revisit new reporting requirements. Institutions with more than $10 billion of assets are required to report subprime consumer loans and loans to highly leveraged commercial borrowers in call report data due June 30 (American Banker May 24). The information will be used with other factors to create a risk-sensitive price. In creating the rule, finalized in February, the FDIC sought to make a bank’s price reflect the risks it was taking before those risks affected its performance. But in comment letters and during a meeting with the regulator this month, banks said the FDIC’s new definition of the two factors is more burdensome, and the accuracy of the new information cannot be guaranteed by the June deadline. They have requested adjustments to the reporting demands or more time to comply. A response from the FDIC is critical because bankers say implementing the changes places a burden on resources … * WASHINGTON (5/25/11)--The Capital Purchase Program (CPP), established as part of the Troubled Asset Relief Program, officially broke even last week. If banks continue making their scheduled dividend payments, the CPP will make a profit for the Treasury Department, according to a report released Monday by Keefe, Bruyette & Woods (American Banker May 24). Treasury invested $204.9 billion in more than 700 banks and thrifts through the CPP during the financial crisis. As of May 18, $205.1 billion (including interest) had been repaid to Treasury, the report said. So far, 109 banks have repaid the Treasury in full, for an average return on investment of 9.2%. In all, the Treasury still has $22 billion invested in 555 institutions, most of which are making quarterly payments. Treasury has written off four investments, totaling $2.6 billion. More than 150 banks have missed at least one dividend payment. In all, $194.5 million in dividend payments are past due, the report indicated …

CUNA asks NCUA to re-work net worth plan

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WASHINGTON (5/24/11)--The Credit Union National Association (CUNA) in a Monday comment letter said that while it generally supports the National Credit Union Administration’s (NCUA) proposed revisions to "net worth" and "equity ratio" definitions, portions of the agency’s proposal addressing so-called “bargain purchase gains” are problematic. A “bargain purchase,” in this case, is defined as a situation in which the fair value of net assets acquired in a credit union merger is greater than the fair value of the acquired credit union. The CUNA comment letter noted that this treatment may improve matters for some merging credit unions by reducing the difference between regulatory net worth and net worth under U.S. generally accepted accounting principles under a particular set of facts and circumstances. However, this treatment could cause problems in certain cases. Overall, CUNA said, the benefits of this treatment are questionable, and this portion of the proposal should not be finalized before it can be studied further by accounting professionals. A separate proposal could then be offered, if needed, CUNA suggested. The “bargain purchase” provisions were issued as part of a larger proposal that was released at the NCUA’s March board meeting. The NCUA proposal would also amend the Federal Credit Union Act's definition of "net worth" for natural-person credit unions under NCUA's Prompt Corrective Action authorities to allow the NCUA's Section 208 Assistance made to troubled credit unions to qualify as regulatory net worth. The NCUA proposal also included a "technical correction" to its regulatory definition of "net worth." This technical correction would generally decrease the amount of a combined credit union's "net worth" in a credit union merger. The proposed equity ratio changes would clarify that the National Credit Union Share Insurance Fund's (NCUSIF) equity ratio must be based solely on the financial statements of the NCUSIF alone without consolidation with other statements, such as those of conserved credit unions. CUNA in its letter spoke in support of the section 208 assistance changes, saying that these permitting that assistance would help maintain the safety and soundness of the credit union system and is consistent with statutory requirements. CUNA also said it supports the NCUA’s proposed NCUSIF clarification. For the full comment letter, use the resource link.

Hearings of interest before Memorial Day breaks

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WASHINGTON (5/24/11)--Both the House and Senate are in session this week, with notable hearings taking place in both bodies of Congress. The first hearing of credit union interest will take place on Tuesday, when the House Financial Services Committee conducts a mark-up session covering the derivatives section of the Dodd-Frank Wall Street Reform Act. Two of that panel's subcommittees have scheduled hearings for Wednesday. The subcommittee on insurance, housing and community opportunity will discuss the future roles of the Federal Housing Administration, the Rural Housing Service, and the Government National Mortgage Association in housing markets. And the capital markets subcommittee will discuss additional steps needed to end the bailout of government-sponsored entities (GSE) Fannie Mae and Freddie Mac. That GSE hearing is expected to focus on seven separate bills. Those bills would, in part, prevent dividend payment decreases, abolish the affordable housing trust fund, and prevent legislators and regulators from creating a future system similar to the current GSE setup. The GSE-related bills would also set a cap for government assistance to the GSEs, subject them to freedom of information act standards, require them to dispose of all assets that are not mission-critical, and prevent taxpayers from paying for the legal fees of Fannie and Freddie executives. The Senate Banking subcommittee on securities, insurance and investment subcommittee will also hold a hearing on Wednesday, discussing derivatives clearinghouses. Further Senate Banking action will take place on Wednesday, with the National Association of Realtors, the National Multi-Housing Council and National Apartment Association, and the National Association of Home Builders testifying during a hearing on potential housing finance reforms. The House Financial Services subcommittee on financial institutions and consumer credit has also planned a Thursday hearing on Federal Deposit Insurance Corp. oversight. The FDIC”s current role, and its work during the recent financial crisis, will be examined during that hearing. Aside from the hearings, little of this week’s action is expected to be relevant to credit unions. Discussion and votes on the Patriot Act and budgetary issues are expected. After this week, the House and Senate will not be in session at the same time again until the week of June 13. The Senate will recess until June 6 at the end of this week. The House will return to work following the Memorial Day holiday, but they will leave for the week of June 6.

NCUA rate-risk plan is onerous unnecessary CUNA

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WASHINGTON (5/24/11)--The National Credit Union Administration (NCUA) has not fully demonstrated a need for a new interest rate risk rule, especially one that makes compliance with the rule a condition of keeping National Credit Union Share Insurance (NCUSIF), the Credit Union National Association (CUNA) has said. The NCUA earlier this year proposed amending its federal share insurance regulations to include a requirement that federally insured credit unions have both a written interest rate risk (IRR) policy and an effective interest rate risk management program. The proposal would not apply to credit unions with less than $10 million in assets and credit unions with assets of $10 million to $50 million that meet set mortgage and investment volume criteria. Those covered by the rule would need to address IRR from several sources, including re-pricing risk, yield-curve risk, spread risk, basis risk and options risk. The agency could withhold NCUSIF coverage of member accounts for credit unions that did not comply with the proposal if it is adopted. CUNA in its comment letter said that it “has consistently supported appropriate safety and soundness regulations that are well-tailored to address problem areas and that enhance strong yet reasonable oversight,” but added that the agency has not justified the need for the rule. Also, tying compliance to federal share insurance coverage, with the possibly of losing coverage, would be “a punitive and unnecessary step that the agency does not need to take,” CUNA said. Noting the budensome regulatory environment under which credit unions operate, CUNA added that the proposal, if adopted, “would result in significant overlap between the rule and existing agency guidance on asset/liability management and concentration risk.” The NCUA already has the supervisory mechanisms needed to “monitor, assess and direct corrections be made to any deficiencies in credit unions’ interest rate risk policies and management,” CUNA added. The IRR proposal could also allow some agency examiners to micromanage the credit unions they oversee, CUNA warned. The NCUA has previously estimated that about 25% of credit unions, or around 800, would need to develop written IRR policies if its proposal is made final. CUNA suggested that the NCUA first focus on these credit unions before it imposes a broader rate-risk proposal. CUNA noted that the proposed guidance could be useful to credit unions, as long as it is not a regulation, and that the agency should post it on its website as a resource for credit unions. For the full comment letter, use the resource link.

Cheney promotes aSmarterChoice.org on the airwaves

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WASHINGTON (5/24/11)--Credit Union National Association (CUNA) President/CEO Bill Cheney launched a radio tour this week to call attention to aSmarterChoice.org, the new web site CUNA and the leagues have created to help consumers learn more about credit unions and find one they are eligible to join. Cheney underscored the value and service credit unions routinely provide consumers in a series of radio interviews focused on the recent launch of aSmarterChoice.org. He spoke yesterday with the Ohio Radio Network, which has 37 affiliated stations, the 40-affiliate Tennessee Radio Network, the Montana-based Northern News Net, which has 24 affiliated stations, plus stations in Boston, Buffalo and Virginia. Later this week Cheney is scheduled to talk about the new site with the Fox News radio network and Wall Street Journal radio, among others. “Last year consumers saved $6.5 billion in better rates and lower fees using not-for-profit credit unions rather than banks. Credit unions are the smarter choice for financial services,” Cheney emphasized during the interviews.“If you want to know more about credit unions, aSmarterChoice.org is a great place to start.” Cheney pointed out the credit union locater tool on aSmarterChoice.org has the ability not only to show consumers which credit unions are nearby, but which ones they are eligible to join. He also discussed the new site’s other major features, including basic information on credit unions, member testimonials, examples of what the media has been saying, and a bank v. credit union average rate and fee comparisons. The new consumer site debuted at CUNA’s Governmental Affairs Conference earlier this year. The stimulus for the project came from a task force created by the American Association of Credit Union Leagues (AACUL) with the goal of raising awareness and fostering credit union membership growth, especially among young adults. Its online locator tool is powered by findacreditunion.com and includes all U.S. credit union in its database.

Inside Washington (05/23/2011)

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* WASHINGTON (5/24/11)--The Office of the Comptroller of the Currency (OCC) outlined a more thorough process for big banks to review their foreclosures on Friday. Joe Evers, the OCC’s deputy comptroller for large banks, emphasized that the process will not include short cuts such as submitting a high-level sample of foreclosures (American Banker May 23). Large banks such as Bank of America Corp. and Wells Fargo & Co. may have several thousand foreclosure files reviewed by auditors. Any errors will result in more extensive reviews, possibly of entire portfolios, according to the OCC. But the findings of the reviews will be sealed, a detail that some critics criticized. Law firms will review foreclosures to determine if servicers had proper legal standing, but the OCC will not allow them to audit fees and penalties assessed. The process will be handled by accounting firms such as PricewaterhouseCoopers LLP, Navigant Consulting Inc. and Promontory Financial Group LLC. Francine McKenna, a forensic accountant, questioned whether the large accounting firms would be credible, because they had signed off on financial statements of mortgage servicers … * WASHINGTON (5/24/11)--A long list of proposed new rules could have negative consequences for the securitization market, financial services representatives told a Senate Banking Committee on Friday (American Banker May 23). They worry that rules such as new risk-retention requirements, proposed Basel III restrictions, Volcker Rule limitations and enhanced derivatives regulation will give the private market little chance of making a full recovery. Their primary concern is how the risk-retention proposal will affect the securitization market. A proposal by federal banking regulators requires lenders to retain 5% of the credit risk on loans they securitize. Some in the industry maintain that the criteria are too strict and will result in less-available mortgage credit. But Sen. Jack Reed (D-R.I.) said because lenders were allowed to cut corners during the financial crisis--emphasizing volume over quality and easy fees over long-term viability--government intervention became necessary to maintain the viability of the markets …

Corporate prepayment proposal webinar on May 26

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ALEXANDRIA, Va. (5/23/11)–The National Credit Union Administration (NCUA) will deliver a presentation on its proposed voluntary prepaid Corporate Stabilization Fund assessments program, and field credit union questions about this proposal, during a May 26 webinar. The webinar will be led by NCUA Deputy Executive Director Larry Fazio and Office of Examination and Insurance Director Melinda Love. It is scheduled to begin at 4 p.m. (ET). The NCUA has invited credit union industry representatives and all public stakeholders to take part in the webinar. The agency said those already registered for its May 26 webinar on allowance for loan and lease losses -– which begins at 2:00 p.m. (ET) –- can just stay online at 4 p.m. (ET) to participate in the second webinar. Those interested only in the voluntary prepaid assessments proposal should log in at 4 p.m. The NCUA prepayment proposal would allow most credit unions to voluntarily prepay a portion of their future Corporate Credit Union Stabilization Fund assessments. The Credit Union National Association last week commented on the proposal, saying that “spreading the cost of assessments is an issue of importance to credit unions” and one that has been raised often with the agency. The NCUA proposal would allow credit unions with more than $3 million in assets to pay up to 36 basis points of their fund assessment in advance. The minimum payment would be $10,000. These payments could reduce fund assessments in 2011 and 2012, and, potentially, beyond those two years. The agency is collecting comment on the proposal, and has said it will only go forward with the prepayment plan if it receives $300 million in commitments from eligible credit unions. For News Now coverage of the proposal, and to register for the NCUA webinar, use the resource links.

CUNA seeks comment on Fed remittance disclosures

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WASHINGTON (5/23/11)--The Credit Union National Association (CUNA) has encouraged credit unions to comment on a Federal Reserve proposal that would require institutions to add new disclosures to remittance transfers that are sent to foreign countries. The Fed proposal would apply to virtually all cross-border, consumer-initiated electronic funds transfers – other than debit or credit cards, transactions from a consumer’s U.S. credit union account to a credit union or bank account in that consumer’s name in another country, or online bill payments made through a website. International wire transfers, international ACH transfers, and products such as the World Council of Credit Unions (WOCCU) IRnet, as well as money transfer organizations such as Western Union and Vigo, would be subject to the rule. However, international wire transfers that are initiated from accounts at federally insured credit unions would be exempt from many of the cost estimate requirements until at least 2015. Credit union international wire and ACH transfers would not be exempted from some of the error resolution and cancellation requirements. There are additional proposed exemptions for transfers between a sender’s account in the U.S. and an account in the sender’s name in another country, as well as a proposed exemption for institutions that do not regularly engage in international transfers. The proposed disclosures are required by the Dodd-Frank Act. One disclosure would be provided before the remittance transaction is initiated. A second disclosure would need to be provided when the remittance is received. The initial disclosure would include the actual exchange rate, fees and taxes, and the amount of currency to be received by the recipient, although, as noted above, federally insured credit unions would be able to provide an estimate of the costs rather than the exact costs. The second disclosure would come in the form of a written receipt that includes that same prepayment disclosure as well as additional information about error resolution, provider and regulator contact information, and the availability of the funds upon receipt. For the CUNA comment call, use the resource link.

Renacci to Durbin Interchange fee cap is price fixing

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WASHINGTON (5/23/11)—Rep. Jim Renacci (R-Ohio) in a recent letter to Sen. Richard Durbin said the Illinois Democrat could remain consistent with his recent “commitment to ending price fixing” by allowing a vote on Senate legislation that would delay the implementation of debit card interchange fee rate cap regulations. Renacci referenced a recent Durbin letter to the Federal Trade Commission in which the Illinois legislator called the practice of price fixing “beyond reproach.” The Ohio-based House member, Renacci, said that he fully supports “the concept that consumers should not be subject to an artificial price set on a good or service integral to day-to-day life. “Whether set by the private sector or government, an artificial price undermines the spirit of capitalism and the free markets on which our society relies,” Renacci added. Sen. Durbin was the author of interchange language added at the eleventh hour to the Dodd-Frank Wall Street Reform Act. That amendment requires the Federal Reserve Board to set a cap on debit card interchange fees. That cap could be as low as seven-to-12 cents per transaction. Sens. Jon Tester (D-Mont.) and Bob Corker (R-Tenn.) have introduced S. 575 to delay implementation of the cap. That legislation originally proposed a 24 month delay to allow time to study the impact of the interchange provisions, but Tester last week said that he would adjust his proposed delay to 15-months after some Senate colleagues indicated they thought the 24-month delay was too long. Tester in remarks made before the Senate added that he considered 15 months to be the "the bare minimum" to get a study of the issues "right." The 15-month delay would be broken into three periods: six-months to study issues surrounding government imposition of a cap on what card issuers may charge for use of the debit card system, six months for the Federal Reserve to rewrite rules to implement the Dodd-Frank Wall Street Reform provision, and three months to implement rules. S. 575 had 16 cosponsors as of Friday. Absent a delay, the Fed’s interchange provisions are scheduled to come into effect on July 21. A final version of the proposal, however, has not yet been offered by the Fed.

Fixed mortgage rates continue to drop

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WASHINGTON (5/23/11)--Thirty-year fixed-rate mortgages continued to trend down last week, averaging 4.61% during the week ended May 19, the lowest average mortgage rate recorded this year. Fifteen year mortgages also reached a yearly low, averaging 3.80%. Freddie Mac Vice President/Chief Economist Frank Nothaft said that the decreased mortgage rates were tied to mixed home market and economic data. Five-year and one-year adjustable rate mortgages (ARM) crept up during the week, averaging 3.48% and 3.15%, respectively. Five-year ARMs averaged 3.91% this time last year, while one-year ARMs averaged 4.00%.

Inside Washington (05/20/2011)

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* WASHINGTON (5/23/11)--Pending mortgage-related regulations could create unintended harmful consequences within the industry, Acting Comptroller of the Currency John Walsh said Thursday (American Banker May 20). Walsh said 15 to 20 regulatory measures could create a “tsunami” of change for mortgage servicers at a time when the industry is already in a fragile recovery period from the housing crisis. The regulations include registration and compensation requirements for originators and standards for the independence of appraisers, the finalization of a rule mandating risk-retention for securitized loans, new servicing guidelines from Fannie Mae and Freddie Mac and proposals by the new Consumer Financial Protection Bureau. Walsh likened the possible side effects of combining so many rules to the dangerous side effects of a drug interaction … * WASHINGTON (5/23/11)--Senate Small Business Committee members pressed the Obama administration for details on the Small Business Lending Fund (SBLF) during a hearing on Thursday (American Banker May 20). Don Graves, the deputy assistant Treasury secretary in charge of SBLF, said funds will be distributed next month, but committee members wanted more details. Sen. Ben Cardin (D-Md.) pressed Graves for the amount of funds that would be distributed. Sen. Olympia Snowe (R-Maine), the committee’s top Republication and an opponent of the program, also questioned whether applicants of the Troubled Asset Relief Program were seeking further assistance from the program. Treasury will make decisions on the first round of funding within the next few weeks and the money will be distributed to banks in June, Graves said. The deadline to distribute funds is Sept. 27 … * WASHINGTON (5/23/11)--The Government Accountability Office (GAO) on Thursday advised federal bank regulators to update their commercial real estate guidance to standards that are compatible with how examiners deal with loans following the financial crisis. The recommendation was made in a report issued by the GAO at the request of Rep. Barney Frank (D-Mass.), the ranking Democrat on the House Financial Services Committee, in response to concerns from banks that examiners have been overly strict in treatment of commercial real estate loans (CRE) following the crisis. The reports said agencies typically follow 2006 interagency guidance, which was designed to limit CRE concentrations. “A number of banks reported that examiners have been applying guidance more stringently since the financial crisis and believe that they have been too harsh in treatment of CRE loans,” the report said. “Regulators have incorporated lessons learned from the crisis into their supervision approach, which may help explain banks’ experiences of increased scrutiny.” The report said balance in bank supervision is needed to help ensure the banking system can support economic recovery …

CUs could pre-pay assessment under NCUA plan

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ALEXANDRIA, Va. (5/20/11)--Responding to the comments of many credit unions nationwide, the National Credit Union Administration (NCUA) Thursday released a proposal that would allow most credit unions to voluntarily prepay a portion of their future Corporate Credit Union Stabilization Fund assessments. The Credit Union National Association (CUNA) said it acknowledges that the NCUA has tried to find a different approach to address an issue of importance to credit unions, even though, based on credit unions’ reactions, the plan may need more work before final adoption. If credit unions participate in the plan as outlined, the corporate credit union stabilization fund assessments would be reduced for 2011 and 2012. NCUA staff said today that without a prepayment plan, the assessment for this year’s corporate stabilization fund will hypothetically be around 25 basis points (bp) and around 13 bp for 2012. “Spreading the cost of assessments is an issue of importance to credit unions and one we have raised often with the agency. We will need to learn more about what the full impact of this proposal will be on our member credit unions, and we will be working with them to determine that,” CUNA President/CEO Bill Cheney said Thursday. Under the proposed plan credit unions could prepay corporate stabilization assessments on a voluntary basis of up to 36 bp of insured shares this year. The minimum amount that a credit could advance would be $10,000, meaning that credit unions with less than about $3 million in assets would not be able to prepay assessments. The prepayments, once made, would be held as part of an “account” from which assessments for 2013, 2014 and subsequent years could be withdrawn. The prepayments would be counted as an asset purchase, and not expenses, for accounting purposes, and would not be expensed until used to cover assessments in 2013 and beyond. The NCUA has released the proposal for public comment, and the agency has said that it would only move forward with the plan if it receives commitments from credit unions that equal a minimum of $300 million. The board did not vote on the proposal during Thursday’s meeting. Any prepayments are expected to be made this year. According to CUNA, the structure of the proposal means that participation by any credit union would essentially involve granting the corporate stabilization fund an interest free loan for a few years. At current interest rates, there would not be substantial opportunity costs, but rates could be higher next year and in later years, CUNA said. CUNA has estimated that voluntary payments by all eligible credit unions at the maximum payment amount could reduce the amount of corporate stabilization-related assessments charged in 2011 from 25 bp to 10 bp. Corporate assessments charged in 2012 could theoretically drop to 10 bp from the currently planned 13 bp if maximum advance payments are made. CUNA is urging all eligible credit unions to consider the benefits of the prepayment program and to suggest revisions as appropriate. “We urge all credit unions to participate in the coming information and education events about the program, so that they can develop their own thoughtful views to share with NCUA by June 20, the end of the comment period,” Cheney said, He added, “In the meantime, we appreciate that NCUA has been listening to stakeholders and has taken up a creative approach, like this, to help credit unions deal with the costs of these assessments.” The relatively short comment period is necessary, the agency has indicated, because it will need to adopt a program by late June for any voluntary payments to impact its 2011 assessments. CUNA will be providing more analysis on the proposal to credit unions shortly. An NCUA webinar is planned for next week. Watch for more details in Monday's News Now. For the full NCUA proposal, use the resource link.

CDRLF ad requirements addressed by board

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ALEXANDRIA, Va. (5/20/11)—Hoping to improve transparency and ease credit union use of the Community Development Revolving Loan Fund (CDRLF), the National Credit Union Administration (NCUA) approved changes to its rules.
Click to view larger image NCUA Board members receive their monthly report on the status of the NCUSIF and corporate stabilization from NCUA CFO Mary Ann Woodson. Looking on in the foreground are CUNA Chief Economist Bill Hampel and CUNA Deputy General Counsel Mary Dunn. (CUNA Photo)
The proposed changes, however, would also impose new reporting and monitoring requirements, the Credit Union National Association (CUNA) has noted. The NCUA proposal, which was approved unanimously by the board, would change the CDRLF rule’s low-income credit union (LICU) designation criteria to use “median family income” in the standard for LICU determination instead of “median household income.” The NCUA in a release said that the CDRLF changes would likely increase loan demand “due, in part, to reduced program burdens on participating credit unions, thereby enhancing the provision of basic financial services for low-income households.” The proposal was released for a 60-day comment period, and CUNA will soon post a regulatory comment call on the release. The board also approved revisions to its advertising regulations to require radio and television ads to include a reference to National Credit Union Share Insurance Fund (NCUSIF) coverage. Ads that are less than 15 seconds would be exempted. The final rule applies to the cover page of credit union annual reports and main internet pages. Another final rule would implement the Dodd-Frank Act’s temporary unlimited share insurance for non-interest-bearing transaction accounts. The share insurance rule, which will continue until Dec. 31, 2012, applies only to traditional non-interest-bearing accounts, such as a demand checking or share draft accounts that are held by individual members or businesses. The insurance does not apply to negotiable order of withdrawal accounts, money-market accounts, or interest on lawyers trust accounts. Insurance and loan funds were also covered during the monthly briefing on the status of the agency’s NCUSIF and its corporate stabilization fund. NCUA Chief Financial Officer Mary Ann Woodson reported that the NCUSIF's equity ratio stood at 1.29% as of April 30, holding steady in line with last month’s number. The agency also did not write off any insurance loss expenses for the second month straight. The NCUSIF held $1.2 billion in reserves and the Temporary Corporate Credit Union Stabilization Fund had earned $7.2 million in revenues as of April 31. CAMEL 3, 4, and 5 credit unions represented a combined 22% of total insured shares. The number of CAMEL 4 and 5 credit unions increased by eight, totaling 374, while the number of CAMEL 3 credit unions dropped by four. While not discussed at the meeting the NCUSIF report indicates an insurance premium is not planned for this year. For more on the NCUA meeting, use the resource link.

NCUA alters indemnification proposal

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ALEXANDRIA, Va. (5/20/11)--The National Credit Union Administration (NCUA) approved a final rule addressing so-called “golden parachute” compensation arrangements and indemnification payments, with several clarifications. The rule does not apply to “bona fide” deferred compensation plans or severance pay plans that are not just for certain employees. One key clarification from the agency’s initial proposal, which was released in September, is language that ensures that current contracts held by credit union executives would not be impacted by the new rules, unless they are revised. The new rules would apply to new contracts. The golden parachute provisions would apply if the credit union is in insolvent, in conservatorship, has a CAMEL 4 or 5 rating or is otherwise in "troubled condition." Severance packages and other assorted employee benefits will not be impacted. The indemnification payment limits would only apply to legal proceedings that are brought by the NCUA or a state regulator where the wrong-doer was assessed a civil money penalty, removed from office or subjected to a cease and desist order. Repayment of related legal expenses will then only be permitted if a given credit union’s board of directors determines that the employee in question acted consistently with their fiduciary duty and the payment of these legal expenses will not materially adversely affect the credit union’s safety and soundness. The Credit Union National Association (CUNA) remains concerned about the application of this rule and is urging the NCUA to re-examine this final rule after it has been in effect for one year. The final rule will come into effect 30 days after it is published in the Federal Register. For the NCUA release, use the resource link.

Key senators reminded of fraud cost to card issuers

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WASHINGTON (5/20/11)--Credit Union National Association (CUNA) President/CEO Bill Cheney in a letter to senators in the 20 states impacted by a recent Michaels craft store data breach reminded the legislators that credit unions’ ability to help their members cope with the aftermath of these crimes would be hindered if interchange fee cap regulations become law later this year. “If constituents affected by these or other breaches contact your office, we hope you will encourage them to contact their card-issuing credit union for assistance,” Cheney said. While credit unions will work with their members “to investigate, reissue the debit card, and block future suspicious transactions,” Cheney added that the merchant responsible for the breach will not assist them. “Credit unions are able to provide these member services because of the interchange fees that merchants pay to participate in the payment system,” Cheney said. The proposed interchange regulations would limit debit card swipe fees to as little as 12 cents per transaction. While a proposed exemption for issuers with under $10 billion in assets is included in the proposal, Cheney noted that regulators, including Federal Reserve Chairman Ben Bernanke, are unsure whether this exemption would work in practice. The letter was sent to senators in Colorado, Delaware, Georgia, Iowa, Massachusetts, Maryland, North Carolina, New Hampshire, New Jersey, New Mexico, Nevada, New York, Ohio, Oregon, Pennsylvania, Rhode Island, Utah, Virginia, and Washington State. A letter was also sent to Sen. Mark Kirk (R) of Illinois. For the full letter, use the resource link.

Inside Washington (05/19/2011)

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* WASHINGTON (5/20/11)--Sen. Bob Corker (R-Tenn.) and Senate Banking Committee Republicans sent a letter to that panel’s chairman urging hearings and a speedy markup on legislation to establish an new governance structure for the Bureau of Consumer Financial Protection (CFPB). Similar legislation has been making its way through the House. The letter to Chairman Tim Johnson (D-S.D.) The senators back legislation that would broaden CFPB leadership from a single director to a multi-member board. The change, proponents argue, would bring more accountability to the new consumer agency. “As the financial regulatory reform bill (that created the CFPB) was being debated, the creation of a consumer bureau with no accountability and a director who answered to no one was a key issue that began to derail negotiations,” wrote Corker. “While we all believed consumer protections needed to be strengthened, whether Republicans or Democrats are in charge, no one person should have the power the director of the bureau is currently given,” the joint letter said… * WASHINGTON (5/20/11)--For the second time, global regulators will assess how effectively banks put in place international guidelines on pay and bonuses. The Financial Stability Board (FSB), which establishes international policies and standards in finance, completed its first peer review in March 2010, but concluded that some key issues were unresolved and effective implementation was incomplete. Group of 20 (G20) country leaders advised all countries and international financial institutions to implement the FSB principles and standards by the year-end 2010. The 2011 assessment will survey a sample of major firms directly, according to the FSB, and also ask for feedback on gaps in regulatory and supervisory oversight; progress and potential challenges faced by firms in implementing the principles and standards; and how market practices have evolved in recent years. The FSB principles for sound compensation practices and their implementation standards were endorsed by the G20 leaders at two summits in 2009 …

Inside Washington (05/18/2011)

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* WASHINGTON (5/19/11)--Mortgage lenders and appraisers are clashing over a provision of the Dodd-Frank Act that requires lenders to pay “customary and reasonable” fees to appraisers. The measure was written to address a long-held appraiser complaint that lenders drive down fees at the expense of quality through ownership of appraisal management companies (AMCs). The law seeks to ensure lenders hire the most competent, rather than the cheapest, appraisers (American Banker May 17). But appraisers and independent AMCs have complained to regulators that some lenders have lowered their fees since the provision took effect April 1. Other lenders have virtually done the same by demanding more work for the same pay as before. Interim federal guidance advises banks to look at the fees they have paid in the past year to determine what is “customary and reasonable.” Thomas J. Kirchmeyer, president of Kirchmeyer & Associates Inc., an AMC in Buffalo, N.Y., said lenders bear more risk and want more support for the value they get from the appraiser. For example, some lenders are asking for two current or pending listings in the area, as well as the usual three comparable sales. Bill Garber, director of government and external relations at the Appraisal Institute, an appraiser trade group, said instead of monitoring fees, regulators are primarily concerned with the competency of appraisers and whether AMCs’ appraisal ordering systems always accept the lowest bid … * WASHINGTON (5/19/11)--Federal Housing Finance Agency (FHFA) officials fear Federal Home Loan Banks have drifted too far from their original purpose. Four of the 12 FHLBs now hold more in investments than advances (American Banker May 17). Two others are near that threshold. In a speech to Home Loan bank officials last week, FHFA Acting Director Edward DeMarco emphasized that the role of the banks is to promote liquidity through advances, not to grow investments. “First, the Federal Home Loan Banks’ various financial problems of the past 20 years have not come from the traditional advances business,” DeMarco said. “Instead, investments and mortgage purchase programs have been the source of deterioration in the financial condition of some Federal Home Loan Banks. Second, a large investment portfolio intended to generate added earnings is inconsistent with the purposes of the Federal Home Loan Bank system and is a misuse of the system’s preferential access to capital markets.” A decade ago, banks’ assets were primarily composed of advances, which equaled roughly 80% to 90% of their assets. However, by March 31, advances accounted for just 52.4% of assets. Investments had grown to a combined 38.7% of total assets by the end of the first quarter …

Legal opinion a step toward mutual fund for MBLs CUSO attorney says

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ALEXANDRIA, Va. (5/19/11)--In a legal opinion letter that clarifies its rules regarding the sale of loans, the National Credit Union Administration (NCUA) said a federal credit union is permitted to sell loans of its members to a registered mutual fund. The agency letter, signed by Hattie M. Ulan, NCUA associate general counsel, was in response to an inquiry from Guy Messick, a credit union attorney with Messick & Weber P.C., Media, Pa. Messick told News Now that his firm approached the NCUA to take an existing pilot project “to the next level,” that is from an unregistered mutual fund to a registered mutual fund. Messick said the underlying assets are credit union business loans. The NCUA legal opinion said permission for a federal credit union to sell members’ loans to a registered mutual fund is found in section 701.23 of the agency’s regulations, which controls the purchase, sale, and pledge of eligible obligations. The NCUA letter notes that “eligible obligations” is defined as a loan or group of loans. The letter goes on to say that such sales are permissible provided the credit union’s board of directors or investment committee approves the sale, and a written agreement and a schedule of the eligible obligations covered by the agreement are retained in the seller's office. Messick said the purpose of his approach is to provide a liquidity tool for credit unions with a large lending demand and a means to sell business loans to relieve pressures on the aggregate business loan regulatory cap. Also, Messick said, it is intended to be a way “to share loan yield with credit unions by a means that is safer then loan participations because the repayment risk is spread across hundreds or even thousands of loans,” or, in other words, buying shares in a mutual fund such as this would be a safer investment than purchasing a loan participation. The NCUA opinion letter is just a step in Messick & Weber’s pursuit of this authority. As yet, credit unions cannot benefit from the yield of such a fund because they are not permitted to buy shares in the fund. Messick maintained that the Federal Credit Union Act confers power to the NCUA to permit this type of investment and contended it is a policy decision as to whether NCUA will permit it. “This power could also permit the creation of mutual funds consisting of any types of credit union loans including mortgage loans. With the uncertainty over the future of Fannie Mae and Freddie Mac, this could be a valuable tool for credit unions,” Messick argues. “There is capital in the system to share,” Messick said, “Loan participations can share loan yield but mutual funds of credit union loans is a more efficient and less risky means to share yield.” Another benefit of the mutual fund plan, Messick said, is that outside institutional investors could buy into these mutual funds and that would add further liquidity to the credit union system.

CUNA MBLs mean greater choice for small business

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WASHINGTON (5/19/11)—Credit Union National Association (CUNA) President/CEO Bill Cheney cited National Small Business Week as another opportunity to emphasize to Congress that it needs to lift the credit union member business lending cap to give small businesses greater affordable financing options. Cheney made the points in a Wednesday op-ed column for The Daily Caller, a news and opinion website founded by Tucker Carlson, a 20-year veteran of print and broadcast media, and Neil Patel, former chief policy adviser to Vice President Cheney. Cheney in the column noted that Congress’s focus during National Small Business Week, which runs until May 20, should be on “what is best for America’s small businesses.” “And what’s best is choice,” Cheney added. Cheney noted that banker opposition has been the “stumbling block” to advancement of credit union small business lending legislation — “which, should it pass, would still barely dent the banks’ dominant share of the market.” CUNA has supported House and Senate legislation that would lift the current MBL cap to 27.5% of total assets. Lifting the MBL cap would, according to CUNA estimates, generate $13 billion in new small business loans over the first year, creating 140,000 new jobs at no expense to taxpayers. H.R. 1418, MBL cap lift legislation that was introduced by Reps. Ed Royce (R-Calif.) and Carolyn McCarthy (D-N.Y.) last month, currently has 25 cosponsors. Sen. Mark Udall’s (D-Colo.) S. 509 was introduced earlier this year and has 18 cosponsors. Cheney noted that CUNA surveys have found that two-thirds of voting-age consumers agree that credit unions should be making more small business loans to help stimulate the economy and create jobs. He added that “a broad-based coalition of small business groups also supports [the MBL] legislation,” with the National Small Business Association, the National Association for the Self-Employed, the National Association of Realtors, the National Association of Manufacturers, and the League of United Latin American Citizens counting among those groups. For the full column, use the resource link.

Retailers feel CU heat on interchange Cheney

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WASHINGTON (5/19/11)--Retailers “are feeling the heat” from credit unions and others urging a delay of a statutory cap on debit card interchange fees, said Credit Union National Association (CUNA) President/CEO Bill Cheney, which is clear by their pledge announced yesterday to escalate their fight over the next 60 days. The National Retail Federation announced Wednesday that it soon will launch a nationwide 60-day grassroots, media and lobbying barrage--complete with hundreds of thousands of dollars in radio ads and Capitol Hill visits in June--to fight efforts to delay implementation of the cap in favor of further study. Without legislation to push back the effective date, the cap is set to go into effect July 21. Cheney said in response to the retailers’ plans that it is no surprise the merchants are fighting back, but credit unions will continue fighting as well: “Since March 15, credit unions have generated at least 325,000 direct contacts with members of Congress in support of bills by Sen. Jon Tester (D-Mont.) and Rep. Shelley Moore Capito (R-W.Va.) to delay and study the law and proposed rules. Congress is listening to credit unions.” At issue is a plan by the Federal Reserve Board to implement the Dodd-Frank Wall Street Reform Act cap on debit and interchange fees at seven to 12 cents per transaction. “Credit unions acknowledge that there should be sensible reform of interchange fees--but what is in the law now is not sensible at all,” Cheney said. The Federal Reserve Board’s proposal carries no enforcement mechanism to ensure a small issuer exemption works and, therefore, credit unions and small community banks will be affected by the regulation in a manner that Congress did not intend, the CUNA leader underscored. “Congress needs to stop, study and start over on the interchange rule,” he said.

Interchange advocacy efforts continue in CUNA Hill visit

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WASHINGTON (5/19/11)—A Wednesday meeting with Sen. Barbara Boxer (D-Calif.) was the latest example of credit union advocacy in the face of pending interchange regulations.
Click to view larger image CUNA President/CEO Bill Cheney (left), Senior Vice President of Legislative Affairs John Magill (far left) and Vice President of Legislative Affairs Ryan Donovan (center) discuss the issues that interchange fee cap regulation would cause consumers and credit unions during a meeting with Sen. Barbara Boxer (D-Calif.) (far right) and a member of her staff. (CUNA Photo)
Credit Union National Association (CUNA) President/CEO Bill Cheney, flanked by Senior Vice President of Legislative Affairs John Magill and Vice President of Legislative Affairs Ryan Donovan, urged the senator's support for a delay of the implementation of the interchange fee cap regulations. CUNA has noted the Federal Reserve's proposed debit card interchange fee cap of seven cents to 12 cents, down from a current average charge of 44 cents, would result in fees that are far below any card issuer's per transaction cost, eliminating any return on debit-card products and services. This reduction would likely force an introduction of new fees to all consumers who are debit card users, and could limit access to credit for some low-income debit card users. The statutory deadline for a Fed proposal is July 21, and the agency is expected to release a proposal before that date. CUNA has called on Congress to “Stop, study and start over” on the interchange proposal, and to ensure that a planned interchange exemption for credit unions and other small issuers with under $10 billion in assets would work as planned. Federal Reserve Chairman Ben Bernanke, whose agency is developing the interchange regulations, and several other regulators have said that they are unsure that the exemption will work in practice. A CUNA grassroots action alert has generated approximately 320,000 communications to federal lawmakers, and state credit union leagues and individual credit unions continue to be active in their own districts. CUNA and its partners in the Electronic Payments Coalition have jointly filed a court document in support of TCF National Bank's (TCF) lawsuit to block the Federal Reserve Board's implementation of proposed debit card interchange fee cap regulations. The TCF suit states that the government cannot write laws that would arbitrarily prevent a given business from recovering its costs sufficiently to avoid losses on its various business operations. For CUNA coverage of recent interchange actions, use the resource links.

CFPB sample mortgage disclosures ready for comment

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WASHINGTON (5/19/11)--The Consumer Financial Protection Bureau (CFPB) on Wednesday began the next stage of its mortgage disclosure simplification by releasing sample mortgage forms that combine the complicated documents required under the Truth in Lending Act (TILA) and the Real Estate Settlement Procedures Act (RESPA) into one document. Current CFPB leader Elizabeth Warren said that the CFPB's mortgage project, known as the "Know Before You Owe" project, "is about giving consumers upfront, easy-to-understand information that helps them compare different mortgage offers and find the one that's best for them." The CFPB release aims to make the costs and risks of mortgage loans clearer and would help consumers to comparison shop for the best offer. The combined form is required under the Dodd-Frank Act and is intended to reduce mortgage lender regulatory burden and make mortgage disclosures less confusing to consumers. A final version of the new mortgage form is required to be released by July 2012. The forms are available in both Spanish and English and have been posted online for review and comment. The CFPB will also collect input via direct interviews in Albuquerque, N.M., Baltimore, Md., Birmingham, Ala., Chicago, Ill., Los Angeles, Calif. and Springfield, Mass. Credit unions and credit union members may give online feedback regarding the draft mortgage disclosure. Comments on this version of the forms will be accepted until May 27, and a new draft form will be released soon thereafter for an additional round of online comments. Use the link below to access the "industry tool" to comment on the form. The CFPB will collect and evaluate comments and revise the forms five separate times between now and September, and new sample forms will be released about once per month. A single draft disclosure will then be developed. The Credit Union National Association met with the CFPB ahead of the Wednesday release, and CUNA is planning to meet with the CFPB next week as well. For the CFPB release, use the resource link.

NCUA closes Hmong American FCU

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ALEXANDRIA, Va. (5/19/11)--Hmong American FCU of St. Paul, Minn. was liquidated by the National Credit Union Administration (NCUA) on Wednesday. This is the eighth federal credit union liquidation to take place this year. The agency in a release said that the credit union was insolvent and had “no prospects for restoring viable operations.” Hmong American FCU held $2.7 million in assets from 700 members as of the first quarter of this year. The NCUA placed Hmong American FCU into conservatorship earlier this month. The agency at that time said that it would work with the financial institution to "resolve issues" affecting safety and soundness. For the full NCUA release, use the resource link.

Tester 15-mo. interchange delay is bare minimum

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WASHINGTON (5/18/11)--Sen. Jon Tester (D-Mont.), sponsor of a bill to postpone implementation of a statutory debit card interchange fee cap, said on the Senate Floor Wednesday that he would adjust his proposed two-year delay to 15-months to win over critics. Tester, who along with Sen. Bob Corker (R-Tenn.) drafted S. 575 to delay the fee cap, said the adjustment would reflect feedback from some Senate colleagues that a 24-month delay is too long. “Sen. Corker and I have decided to shorten the timeframe from 24 months to 15 months,” Tester noted in his remarks. He added, however, that he considered 15 months to be the “the bare minimum” to get a study of the issues “right.” The 15-month delay would be broken into three periods: six-months to study issues surrounding government imposition of a cap on what card issuers may charge for use of the debit card system, six months for the Federal Reserve to rewrite rules to implement the Dodd-Frank Wall Street Reform provision, and three months to implement rules. Tester also used his time on the Senate Floor to underscore the devastating impact of the Fed’s currently proposed rule--capping fees at seven to 12 cents per transaction--could have on credit unions and other small, community-based financial institutions--and also consumers. He said either debit card issuers would pass costs left uncovered by the low cap on to consumers--whom Tester said can ill afford it--or risk financial problems of their own. He noted that federal and state regulators have repeatedly voiced concerns that a provision meant to exempt small issuers under $10 billion in asset from the reaches of the interchange law is unlikely to work to that end. “(Fed Chairman Ben)Bernanke just last week said he’s still not sure whether the small issuer exemption would work, saying--quote: 'There are market forces that would work against the exemption.' Chairwoman (Sheila) Bair of the (Federal Deposit Insurance Corp.) has raised similar concerns about the workability of the small issuer exemption. So has Chairwoman Debbie Matz of the National Credit Union Administration. So has the Conference of State Banking Supervisors. So has the National Association of State Credit Union Supervisors,” Tester said. Credit Union National Association President/CEO Bill Cheney said with regard to the senator’s announcement, “We support his efforts to stop the implementation of the law and study its impact--which we hope will result in new rule that will be more favorable than the current proposed rule.”

Pew study puts CU cards ahead of the pack

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WASHINGTON (5/18/11)--Credit union credit cards give consumers “a better deal across the board,” generally offering lower interest rates, lower penalty charges, and reduced fees, a Pew Health Group study has found. The Pew study, entitled “A New Equilibrium: After Passage of Landmark Credit Card Reform, Interest Rates and Fees Have Stabilized,” used data collected between March 2010 and January 2011 to compare credit card rates and other terms offered by the 12 largest credit unions and the 12 largest banks. A credit union card also had the lowest annual percentage rate (APR) of any in the survey, with one credit union advertising a 9.99% rate. The lowest bank-offered rate came in three points higher, totaling 12.99% APR. The study also found that credit unions had lower cash-advance charges when compared with banks, totaling as low as 10.9% at one credit union. The lowest bank cash advance rate was 24%. While the number of banks that charged a yearly account fee increased by 7 percentage points over last year, the percentage of credit unions charging fees held steady at 14%. The average fee charged by those credit unions totaled $25, which was nearly half of the $59 fee charged by banks. The Pew study, and the great credit union rates, have received widespread coverage on MSNbc.com, TIME.com, the Associated Press, Fox News and other outlets. For the full study, use the resource link.

NCUA advises CUs on security breach prevention

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ALEXANDRIA, Va. (5/18/11)--Following a number of recent high profile security breaches, the National Credit Union Administration (NCUA) has reminded credit unions of the appropriate security incident prevention and detection steps needed to protect and secure member information. The agency in a Tuesday release noted that federally-insured credit unions “should have robust enterprise risk management practices in place to maintain member data integrity and confidentiality,” including “risk assessment, risk mitigation and controls, and risk measuring and monitoring.” Credit union risk assessment activities should include reviews of information security programs. The NCUA warned of the many ways that hackers and other criminals can attack credit unions through “phishing, spear-phishing, drive-by malware injection, and other malicious techniques.” These types of attacks can be used to directly access sensitive information or set up viruses that will ease access to sensitive information. “The increasing sophistication of the tools and techniques attackers use often includes stealth or other means that make their detection more difficult,” the NCUA added. The NCUA said that credit unions could increase their preparedness for these types of attacks by reviewing recent releases by the National Security Agency (NSA) and the United States Computer Emergency Readiness Team’s (US-CERT) Early Warning and Indicator Notice (EWIN). The advisories cover the controls needed to restrict and monitor outside access to sensitive information, systems, and control components, and cover web domains that are associated with incidences of malicious activity. For the full NCUA release, use the resource link.

CUNA in small group meeting with CFPB on mortgage disclosures

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WASHINGTON (5/18/11)--The Credit Union National Association (CUNA) was part of a small group meeting Tuesday in which financial institution representatives met with the Consumer Financial Protection Bureau (CFPB) to discuss how to combine current Truth-in-Lending/Real Estate Settlement Procedure model mortgage disclosure forms. The consolidation of the forms, which currently are considered lengthy and confusing, is ordered by the Dodd-Frank Wall Street Reform Act. CUNA urged Congress to include provisions in Dodd-Frank that would require streamlining and integration of these forms. Under Dodd-Frank, the revision and combination of these forms is due by July 21, 2012. Special advisor to President Barack Obama, Elizabeth Warren, said Tuesday that the meeting was the first step in a long process of gaining feedback from financial institutions, consumers and other interested parties on the new draft form. The agency plans to have a live link posted to its website later this week that interested parties will be able to use to review and evaluate the form. The CFPB also will host reviews for consumers in five cities, starting with Baltimore. Md. on Thursday. CUNA is organizing a group of credit union mortgage lending experts to help review the draft form and provide feedback to the CFBP. CUNA Deputy General Counsel Mary Dunn and Senior Assistant General Counsel Michael Edwards represented CUNA at the CFPB meeting.

CUNA urges NCUA Allow fund prepays drop parachute ban

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WASHINGTON (5/18/11)--The Credit Union National Association (CUNA) urged the National Credit Union Administration (NCUA) Tuesday to drop its proposed prohibition on golden parachute and indemnification payments--and to move forward to allow credit unions to prepay corporate stabilization fund assessments “without unfavorable accounting consequences.” The CUNA comments, in a letter sent to all three NCUA board members, were made in advance of a Thursday NCUA open board meeting at which both topics are set to be addressed. If adopted, the NCUA final rule on golden parachutes would implement a prohibition on certain arrangements and indemnification payments in certain circumstances. CUNA President/CEO Bill Cheney said the “golden parachute” rule proposed by the agency should not be adopted without major changes. CUNA is concerned by “the lack of agency substantiation for the proposal” and “the latitude the rule would seem to provide for examiners to challenge a credit union’s ‘good faith’ determination that indemnification should be provided.” On the other key topic, Cheney said that allowing voluntary prepayment of Corporate Credit Union Stabilization Fund assessments would “smooth out the expensing of corporate stabilization assessments as much as possible over the coming several years.”

CUNA staff recognized for charitable giving

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WASHINGTON (5/17/11)--America’s Charities, a large coalition of American charitable organizations, granted the Credit Union National Association (CUNA) and its National Credit Union Foundation (NCUF) an award for “the highest growth in contributions” from the prior year. With a 51% increase of pledge dollars in the Fall 2010 charity drive, CUNA employees had broken their own record of charitable giving through the campaign. According to Steve Delfin, America’s Charities President/ CEO and former NCUF executive director, "CUNA employees showed what happens when a motivated, dedicated, mission-oriented workforce is united with a chance to engage in workplace giving.” “The increase in donations, and level of giving, were extraordinary--particularly in today's continued unstable economy," Delfin said. CUNA President/CEO Bill Cheney added, “CUNA employees have always viewed the America’s Charities campaign as a priority and, as someone who, obviously, works daily with the CUNA staff, it is no surprise to me that CUNA folks dug in even deeper when the need was greater.” Cheney offered sincere thanks to America’s Charities for recognizing the generosity of the CUNA staff. For its efforts, CUNA received the Growing Giving Award, which is presented each year to the organization that has the largest increase in pledge dollars, measured by percentage, on May 10. 2010 was the ninth year of CUNA’s involvement with the America’s Charities campaign. America’s Charities represents over 100 national and local charities in employee workplace giving campaigns throughout the country. In 2010, America’s Charities raised more than $37 million for those members, and for thousands of other charities to which employees donated through payroll giving. Use the resource link for more information on America’s Charities.

Inside Washington (05/17/2011)

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* WASHINGTON (5/18/11)--Following the financial crisis and Dodd-Frank Act’s mandate to create the Consumer Financial Protection Bureau (CFPB), the Federal Deposit Insurance Corp. (FDIC) has launched its own Division of Depositor and Consumer Protection (American Banker May 17). The agency said the division intensifies the agency’s compliance efforts while retaining its authority to enforce CFPB rules for community banks. Observers said the move enhances the perception that the agency has given its consumer protection responsibilities higher priority. Richard Riese, director of the American Bankers Association’s Center for Regulatory Compliance, said a key indicator of the new division’s priority is that consumer compliance oversight reports to the FDIC chairman without going through the safety and soundness division, as it did previously. The National Credit Union Administration (NCUA) launched its Office of Consumer Protection in 2010, which NCUA Chair Debbie Matz gave top priority … * WASHINGTON (5/18/11)--The Federal Deposit Insurance Corp., (FDIC) has appointed Bret Edwards as the director of the Division of Resolutions and Receiverships (DRR). Edwards has served as acting director for DRR since January. Since 2007, he has permanently served as the director for the Division of Finance (DOF), where he oversaw the development of a $4 billion budget. He also was responsible for the collection of $71 billion in deposit insurance assessments and the implementation of upgraded financial reporting software systems. Prior to 2007, Edwards served in senior management positions in the FDIC’s executive office and DOF, and in DRR’s predecessor organization, the Division of Liquidation …

Maine CU League leader noted on House Floor

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WASHINGTON (5/17/11)—Maine Credit Union League President/CEO John Murphy was honored yesterday with a statement entered into the Congressional Record by Rep. Mike Michaud (R-Maine) noting Murphy’s induction into the Credit Union House Hall of Leaders. Michaud noted that Murphy has served as league president for nearly two decades and has “worked diligently on behalf of credit unions for even longer.” In his many opportunities to work with Murphy, Michaud said, he has found that the people and economy of Maine have benefitted from Murphy’s dedication and thought advocacy. Michaud said that the Credit Union National Association’s induction of Murphy to the Hall of Leaders reflects his “unique level of commitment to ensuring that these vital community institutions are able to continue serving the individuals and small businesses that make up their customer base.” “It has been an honor to work with John in the past, and I have no doubt that this recognition in the Hall of Leaders will inspire him to continue his advocacy on behalf of credit unions and the people they serve. I know that the 64 credit unions in Maine, as well as their 613,000 members, greatly appreciate John as a resource and as their representative fighting for the issues that matter to them,” Michaud said on the House floor. Murphy was among 10 credit union leaders who have made a significant impact on the credit union movement at the local, state or national level who were inducted into the Credit Union House 2011 Hall of Leaders in March. Also named were: Harold Allen, Nebraska; D.S. "Scotty" Broome, Mississippi; Raymond Brunner, Pennsylvania; James Bryan, Texas; William Eckhardt, Alaska; John Fiore, Illinois; Gene Hensley (posthumously), Tennessee; Robert Walls, Delaware; and Jim Williams, Texas. Use the resource link to read more about the Hall of Leaders inductees.

Inside Washington (05/16/2011)

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* WASHINGTON (5/17/11)--In a letter to lawmakers outlining how it has interpreted its authority under the Dodd-Frank Act, the Office of Comptroller of Currency (OCC) maintained that its 2004 preemption rule is still valid for national banks. Some Democrats and state regulatory officials argued the 2004 rule was overturned by Dodd-Frank. State rights advocates maintain the OCC misinterpreted Congress’ intentions in Dodd-Frank (American Banker May 16). Dodd-Frank appeared to overturn the OCC’s preemption rule, which said that national banks do not have to comply with any state laws that “obstruct, impair or condition” the business of banking. This is known as the Barnett standard, a reference to a landmark 1996 Supreme Court decision related to preemption. Dodd-Frank appeared to overturn additional language used by the OCC in its 2004 preemption rule. While the agency said the new language was an attempt to "distill" the Barnett standard, many state officials said it was an attempt to preempt additional laws. In the letter sent to Sen. Tom Carper (D-Del.) and other lawmakers, the OCC admitted the new language should be removed from the 2004 regulation, but the agency said it does not substantively change its position. Carper said the provisions do not create a new preemption standard, but clarify that the preemption tests laid out by the Supreme Court in the Barnett case still apply .. * WASHINGTON (5/17/11)--House Republican lawmakers on Friday introduced seven more bills designed to break up the government-sponsored enterprises. That makes 15 bills total that seek to dismantle Fannie Mae and Freddie Mac. The bills cover everything from the GSEs’ legal expenses to a cap on their liabilities and subjecting them to the Freedom of Information Act (American Banker May 16). Rep. Don Manzullo (R-Ill.) said the incremental approach is good public policy, integrating opinions, suggestions, and criticisms from a variety of sources within the financial system. Of the new bills, one measure introduced by Manzullo would prevent the Treasury Department from decreasing the 10% dividend that Fannie and Freddie are required to pay taxpayers to ensure the two companies continue to repay on their public debt. Two other bills would cap Fannie's and Freddie's liabilities to limit the cost to taxpayers bailing out the GSEs and shield taxpayers from the growing legal expenses of the two companies. Another bill would require that if the Freddie and Fannie are put into receivership, they would be wound down, and no new entity with taxpayer backing would be established …

2010 NCUSIF audit clean Operating Funds has deficiencies

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ALEXANDRIA, Va. (5/1711)--The National Credit Union Administration (NCUA) announced Monday that its 2010 audited financial reports for its four permanent funds, including the National Credit Union Share Insurance Fund (NCUSIF), received unqualified or “clean” audit opinions. Noting the NCUSIF’s unqualified opinion for its financial condition specifically, NCUA Board Chairman Debbie Matz said, “The fact that independent, outside auditors issued an unqualified opinion with no reportable conditions is a testament to NCUA’s diligent oversight and protection of the share insurance fund for credit unions nationwide.” In addition to the NCUSIF, auditors also certified the financial accuracy of three other NCUA funds: the Operating Fund, the Community Development Revolving Loan Fund, and the Central Liquidity Facility. KPMG LLP completed the audits of all four funds. Expected this summer, the NCUA announcement said, KPMG also will provide its opinion of the financial statements for the Temporary Corporate Credit Union Stabilization Fund. Matz said the agency made the independent reviews of the permanent funds immediately available to the public to "facilitate transparency in our operations." Also in the report, the auditor found a “significant deficiency” regarding the NCUA Operating Fund. The auditor’s concerns are classified as “deficiency,” “significant deficiency” or “material deficiency.” A significant deficiency is a concern that is less severe than a material weakness but “important enough to merit attention by those charged with governance.” Among other things, the auditor found:
* The Operating Fund needs improvement in reporting certain activities. For example, the report cited the inability of management to readily provide documentation related to property, plant and equipment. * Also, for the first three quarters of last year, journal entries were not reviewed and approved by anyone other than the preparer.
As part of the auditor’s report, the NCUA included a response in which it said it would take steps to provide timely documentation and to ensure manual entries are accurate and entered with appropriate safeguards. The Credit Union National Association’s Accounting Task Force will be reviewing the financial statements, as well as the agency’s response, to ensure NCUA addresses all deficiencies satisfactorily without the use of excessive resources. The financial reports can be viewed by using the resource link below.

This week in Congress

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WASHINGTON (5/17/11)—The congressional calendar has taken an unusual turn this week with the Senate in session while the House is on recess. Senate floor time will be used to consider various nominations as well as legislation eliminating tax subsidies for oil and gas companies. There is not much on the calendar this week of specific interest to credit unions, but, more generally, it is possible that the Senate will begin the budget process—though budget votes are not expected this early. Another major bill expected to be considered before the Senate recesses for a Memorial Day District Work Break on May 27 is the reauthorization of the USA Patriot Act. The House returns next Monday and will be in session until June 3. With the House out of session, committee meetings with relevance to credit unions are relatively sparse, noted Ryan Donovan Monday. Donovan is vice president of legislative affairs for the Credit Union National Association (CUNA). The Senate Banking Committee will hold hearings during the week on the Export-Import Bank, the state of the securitization market, and public transportation. On Thursday, the Senate Small Business Committee will hold a hearing on the implementation of the Small Business Jobs Act of 2010. Also on Thursday, the Senate Commerce Committee will hold a hearing on consumer privacy and protection in the mobile marketplace. CUNA, the leagues and credit unions continue to work closely with Senate lawmakers to identify an appropriate time and appropriate vehicle for a vote on Sen. Jon Tester’s interchange amendment. That amendment would delay the Federal Reserve Board’s implementation of a Dodd-Frank Wall Street Reform Act provision that limits the fee debit card issuers can charge merchants for the use of the card system. CUNA’s grassroots action alert has generated approximately 320,000 communications to federal lawmakers urging a delay to “stop, study, and start over” on the interchange provision.

CUNA backs court delay of interchange fee cap

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WASHINGTON (5/17/11)--The Credit Union National Association (CUNA), and its partners in the Electronic Payments Coalition, late last week filed a court document in support of TCF National Bank’s (TCF) lawsuit to block the Federal Reserve Board's implementation of proposed debit card interchange fee cap regulations. The CUNA amicus curiae--or “friend of the court”--brief was submitted in support of TCF’s recent appeal of a ruling by U.S. District Court for the District of South Dakota Judge Lawrence Piersol. Piersol declined to dismiss TCF's suit against the Fed--but also declined to issue an injunction based on the statute. The CUNA brief asks for a reversal of the judge's denial of a preliminary injunction. The TCF suit, filed last October, states that the government cannot write laws that would arbitrarily prevent a given business from recovering its costs sufficiently to avoid losses on its various business operations. TCF charges the interchange cap is just such a law. TCF also alleges that portions of the Dodd-Frank Wall Street Reform Act that would require the Federal Reserve to set restrictions on debit card interchange fees are unconstitutional, and argues that the Fed's implementation plan restricts a financial institution's ability to recover costs associated with providing the debit card service. CUNA’s amicus brief argues, in part, that credit unions and banks--under their legislative and regulatory mandates--serve “established, important public interests.” CUNA notes in its filing that the public interests at issue in this case is the “enablement and innovation of the electronic payments system,” an interest that the federal government both “supports and expects financial institutions to support.” The Fed’s proposed debit card interchange fee cap of seven cents to 12 cents, down from a current average charge of 44 cents, would not only eliminate any return on debit-card products and services, it would also cap the fees at an amount far below any card issuers per transaction cost. This reduction would not only sever the card industry’s ability to foster innovations, it would likely, as CUNA has noted often, force an introduction of new fees to all consumers who are debit card users. CUNA’s partners in filing the brief are the Clearing House Association LLC, American Bankers Association, Consumer Bankers Association, The Financial Services Roundtable, Independent Community Bankers of America, Midsize Bank Coalition of America, and the National Association of Federal Credit Unions. TCF filed its brief on May 2. The Fed’s next brief is due Thursday and TCF will have the option to file an additional reply brief by May 23.

Inside Washington (05/13/2011)

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* (WASHINGTON (5/16/11)--The National Credit Union Administration (NCUA) has taken over leadership at the Federal Financial Institutions Examination Council (FFIEC) for the first time in more than 20 years. Debbie Matz, chairman of the NCUA Board, is now the Chairman of FFIEC for a two-year term. Matz succeeds Sheila C. Bair, chairman of the Federal Deposit Insurance Corporation (FDIC). In the May issue of The NCUA Report, Matz discusses her new role. “By accepting this new role, I am hopeful that NCUA, and by extension, the credit unions that we regulate and insure, will rise to a new level of prominence in the financial services arena. I am confident, the high quality of the NCUA staff and the important role credit unions play in their communities will become more readily apparent to those who monitor and observe the FFIEC’s activities,” Matz wrote. The FFIEC was created by the Federal Financial Institutions Regulatory and Interest Rate Control Act of 1978, which consists of the heads of the National Credit Union Administration, the Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, and the Office of Thrift Supervision, to make recommendations to promote uniformity in the supervision of financial institutions … * (WASHINGTON (5/16/11)--President Obama said banks should consider longer-term mortgage modifications and “in some cases” principal reductions to help struggling home owners, during a CBS Town Hall meeting that aired on Thursday (cnnmoney May 13). In all likelihood, Congress would have to pass laws to force banks to comply with both ideas. The president said the struggling housing market is “the biggest headwind on the economy right now.” In response to a question posed by an underwater homeowner whose three-year mortgage modification will expire in January 2012, Obama said that reducing some mortgage principals would benefit both banks and homeowners … * (WASHINGTON (5/16/11)--Sen. Chris Dodd (D-Conn.), former Chair of the Senate Banking Committee and co-sponsor of the Dodd-Frank Act, said in a speech Wednesday that he thought the provisions related to payment card interchange were such a “complicated area of law” that he didn't think it was appropriate to “oversimplify” the issues (pymnts.com May 12). He therefore didn't include an interchange provision in the original version of the legislation, he said. Dodd, speaking before The Electronic Transactions Association, said was surprised that the Durbin Amendment “flew through” and was “shocked” by the 12-cent limit set by the Federal Reserve. He predicted that the Fed would have to increase the limit. Dodd said the dual standards for larger institutions vs. small credit unions and banks with less than $10 billion in assets is too complicated …

NCUA agenda focuses on exec comp corp. stabilization

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ALEXANDRIA, Va. (5/16/11)--Two items of particular interest to credit unions – so-called “golden parachutes” and indemnification payments and the potential for voluntary prepayment of stabilization fund assessments – are on the agenda for the National Credit Union Administration’s May open meeting. The meeting will take place Thursday at 10:00 A.M. ET. The NCUA’s final rule would implement a prohibition on golden parachute arrangements and indemnification payments in certain circumstances. Under the proposal, indemnification payment limits would only apply to proceedings brought by NCUA or a state regulator where the wrong-doer was assessed a civil money penalty, removed from office or subjected to a cease and desist order. The prohibition would not apply to qualified pension plans, "bona fide" deferred compensation, and some other types of employee benefits and severance agreements, and would not apply to current employment contracts, only to those that are agreed to or renewed after the rules take effect. The golden parachute provisions would apply if the credit union is in insolvent, in conservatorship, has a CAMEL 4 or 5 rating or is otherwise in “troubled condition.” The Credit Union National Association (CUNA) has said that it "cannot support proposals that do not provide proper safeguards for credit union officials who strive to fulfill their duties and serve their credit unions well.” These proposals were released in September of 2010. CUNA following the release said that it was "generally concerned that the scope of the proposal is too far-reaching and will have a chilling effect on the ability of credit unions to attract management personnel and board members." Potential voluntary prepayment of Corporate Credit Union Stabilization Fund assessments will also be covered during the meeting, and CUNA has discussed how this could be achieved with the NCUA after several credit unions told CUNA they would welcome the option of early payments. A proposed rule related to the NCUA’s Community Development Revolving Loan Fund, as well as final rules addressing the accuracy of advertising and insured status notices and the NCUA’s share insurance, are also on the agenda. The NCUA's monthly report on the status of its insurance funds will also be delivered during the meeting. A closed NCUA session will follow the open meeting. Insurance appeals and supervisory matters will be discussed during the closed meeting. For the full NCUA meeting agenda, use the resource link.

CFPB NFIP changes see committee action

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WASHINGTON (5/16/11)--Separate pieces of legislation addressing the Consumer Financial Protection Bureau (CFPB) and the National Flood Insurance Program (NFIP), respectively, moved further forward through Congress late last week. The bills were officially approved on Friday following an early Thursday House Financial Services Committee markup session. Three pieces of CFPB-related legislation were approved by the Committee, and could now move on to the full House at some point. The first, known as the Responsible Consumer Financial Protection Act, would replace the proposed single CFPB director position with a five-person panel. The Consumer Financial Protection Safety and Soundness Improvement Act would strengthen the Financial Stability Oversight Council's (FSOC) review authority over regulations that are issued by the CFPB by replacing a proposed two-thirds voting approval threshold with a simple majority threshold. The third piece of legislation would not, as scheduled, transfer several consumer-related regulatory functions to the CFPB if that agency does not have a director in place when it officially begins its work on July 21. Committee Chairman Rep. Spencer Bachus (R-Ala.) following the vote said that his committee “supports robust consumer protection,” adding, however, that “real oversight and accountability” of government bureaucracies like the CFPB is vital. Credit Union National Association Vice President of Legislative Affairs Ryan Donovan has said that the final fate of the CFPB-related bills is not certain. "We have seen very little appetite in the Senate to consider these types of changes to Dodd-Frank Act," he added. There is a great deal of volatility surrounding the CFPB as it nears its scheduled start date of July 21, with a group of 44 Republican Senators recently saying that they would not confirm any potential CFPB director, "regardless of party affiliation," unless structural changes are made to the bureau. A CFPB leader has not yet been nominated by the White House. The NFIP-related legislation, which was passed out of the Committee during the same early Thursday markup session, would preserve the rights of credit unions to protect their collateral from flood hazards and would clarify that flood insurance purchased by credit unions "would date back to the date the existing policy lapsed or became insufficient in coverage amount, including any premiums or fees incurred during the 45-day notification period." The bill would also extend NFIP reauthorization for an additional 5 years. The NFIP is set to expire on Sept. 30. CUNA has backed these planned changes to the NFIP.

Fryzel Activism educates legislators on CU issues

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ALEXANDRIA, Va. (5/16/11)--National Credit Union Administration (NCUA) Board Member Michael Fryzel last week said that the face-to-face credit union activism that is achieved in meetings with legislators helps “to educate them on the services that credit unions provide.” Credit union/legislator meetings “carry significant importance this year” and the success that is achieved in the meetings “will continue to resonate for years to come,” he added. Fryzel’s remarks were made before the Illinois Credit Union System’s Legislative Conference in Springfield, Ill. The NCUA board member spoke alongside Illinois Department of Financial and Professional Regulation Secretary Brent Adams and others as part of a panel of state and federal regulators. The grassroots strength of credit unions has been demonstrated during the ongoing fight over a potential interchange fee rate cap, with over 315,000 credit union members reaching out to urge their legislators to "stop, study and start over" on interchange regulations since March. Credit union members, state-based leagues, and individual credit unions have helped generate these comments to members of Congress, and many credit union backers met with legislators in their home districts during April's district work period. The Pennsylvania, New York, North Carolina, Delaware, Minnesota, California and Nevada, and Missouri leagues reported significant interaction during that time. Nearly 30,000 Ohio credit union members from more than 50 credit unions across that state have recently stepped up their own grassroots efforts, urging Sen. Sherrod Brown (D-Ohio) via a signed petition to reconsider moving forward with the Fed’s interchange proposal. For more on CUNA's interchange delay efforts, use the resource link.

Inside Washington (05/12/2011)

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* WASHINGTON (5/13/11)--House Democrats made efforts Wednesday to stop a bill that would delay the derivatives provisions of the Dodd-Frank Act. A day before a House Financial Services Committee vote on derivatives legislation, Democrats said the bill would weaken the regulatory reform law American Banker May 12). Rep. Barney Frank (D-Mass.) and other Democrats argued that Republicans were only seeking a delay in the hopes they could kill the new rules if they win in the 2012 elections. The derivatives bill, sponsored by Rep. Frank Lucas (R-Okla.) had been gaining momentum in the House. It passed the House Agriculture Committee by voice vote on May 4. The House Financial Services Committee was scheduled to vote Thursday on the bill and on measures to restructure the Consumer Financial Protection Bureau … * WASHINGTON (5/13/11)--A federal appeals court cited the Dodd-Frank Act in deciding a national bank will not have to comply with a Florida consumer protection statute that limits bank fees American Banker May 12. The 11th Circuit Court of Appeals affirmed a lower court’s decision to dismiss a case claiming JP Morgan Chase Bank was in violation of a state law prohibiting banks from charging check-cashing fees. Chief Judge Joel F. Dubina cited the Dodd-Frank Act, which referred to the Barnett standard established by the Supreme Court in 1996. Under the Barnett standard, state law cannot interfere with the business of banking. A lower court found that Office of Comptroller of Currency rules allow national banks to charge customers non-interest charges and fees. Dubina said the court adopted the reasoning of the Fifth Circuit Court’s decision in Wells Fargo Bank of Texas N.A. v. James, which employed the Barnett standard to determine that OCC rules preempted a similar statute in Texas …

CU rep among 15 new members of SBA panel

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WASHINGTON (5/13/11)—Hutchinson CU’s LeeAnn Marker is one of 15 individuals that were named to the U.S. Small Business Administration’s (SBA) Council on Underserved Communities (CUC) on Thursday. Marker serves as a business advisor at the Hutchinson, Kansas-based credit union. The SBA in a release said that the CUC “will provide input, advice and recommendations on strategies to help strengthen competitiveness and sustainability for small businesses in underserved communities. These strategies will be focused on increasing entrepreneurship and technical assistance, creating new and strengthening existing outreach and training, and raising awareness in underserved communities of SBA programs and services. “ SBA Deputy Administrator Marie Johns said that the CUC "will provide valuable insight and advice into how [the SBA] can ensure that small businesses in these communities throughout the country have access to the tools they need to grow, create jobs and win the future.”

Joint fair value guidance completed released

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WASHINGTON (5/13/11)--The Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) on Thursday released new guidance on fair value measurement and disclosure requirements for International Financial Reporting Standards (IFRSs) and U.S. generally accepted accounting principles (GAAP). FASB in a release said that the requirements do not extend the use of fair value accounting, but provide guidance on how it should be applied where its use is already required or permitted by other standards within IFRSs or US GAAP. IFRS 13, Fair Value Measurement, will improve consistency and reduce complexity by providing, for the first time, a precise definition of fair value and a single source of fair value measurement and disclosure requirements for use across IFRSs, according to the release. FASB’s GAAP update clarifies portions of its existing guidance to better align with portions of IFRS, and “reflects FASB’s consideration of the different characteristics of public and non-public entities and the needs of users of their financial statements.” Many of the new disclosure requirements will not impact non-public entities. The release of this guidance follows more than five years of work related to disclosure requirements and fair value measurements. The harmonization of these requirements is a central part of the accounting regulators’ response to the financial crisis, and FASB Chairman Leslie Seidman said that the update “represents another positive step toward the shared goal of globally converged accounting standards. “Having a consistent meaning of the term ‘fair value’ will improve the consistency of financial information around the world,” she added. FASB and IASB also continue to work on a single standard on accounting for financial instruments and recently extended the timetable for finalizing the standard from the first to the second half of 2011. For more on the joint FASB/IASB release, use the resource link.

NCUA issues prohibition order (05/12/2011)

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ALEXANDRIA, Va. (5/13/11)—The National Credit Union Administration (NCUA) on Thursday prohibited Vicki Lynn Weidenhof, a former employee of Sitka, Alaska-based ALPS FCU, from future work at any federally insured financial institution. Weidenhof was convicted of credit union theft, embezzlement, and misapplication of funds by an officer or employee and was sentenced to 24 months imprisonment and five years of supervised release. She will also pay $187,348 in restitution. Violation of a prohibition order is a felony offense punishable by imprisonment and a fine of up to $1 million. For the full release, use the resource link.

Fed seeks comment on remittance rule changes

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WASHINGTON (5/13/11)--The Federal Reserve Board is seeking comment on a proposal to create new protections for consumers who send "remittance transfers" to recipients located in a foreign country. If finalized as proposed, the rule would apply to virtually all cross-border, consumer-initiated electronic funds transfers other than plastic cards, including international wire transfers and international ACH transfers. The Fed’s proposed rule would require that remittance transfer providers make certain disclosures to senders of remittance transfers, including information about fees and the exchange rate, as applicable, and the amount of currency to be received by the recipient. It also would provide error resolution and cancellation rights for senders of remittance transfers. In addition, the proposal states that Article 4A of the Uniform Commercial Code, the law enacted in virtually all states to regulate wire-transfers between depository institutions, would no longer apply to consumer-initiated international wire transfers if the rule is finalized in its current form. The proposal, being made under the Fed’s Regulation E (Electronic Fund Transfers), is in response to new remittance requirements in the Dodd-Frank Wall Street Reform and Consumer Protection Act, which CUNA work to improve prior to its passage last summer. As a result of CUNA lobbying efforts, international wire transfers initated from accounts at federally insured credit unions would be exempt from many of the cost estimate requirements until at least 2015, and credit union international ACH transfers are proposed to be permanently exempted from those requirements. However, credit union international wire and ACH transfers would not be exempted from some of the error resolution and cancellation requirements. CUNA's Consumer Protection Subcommittee, World Leadership Development Committee, and Payments Subcommittee all will review the proposal and provide input for CUNA's comments to the Fed. A CUNA Comment Call will be posted on CUNA's Regulatory Advocacy website, and CUNA plans to pursue credit unions' concerns about this proposal with both the Federal Reserve and with the U.S. Congress. Comments are due to the Fed by July 20. Use resource link below to view the full proposal and for instructions on how to submit a comment.

Bernanke Good reason for interchange concerns

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WASHINGTON (5/13/11)—Federal Reserve Chairman Ben Bernanke yesterday reiterated that he is not sure that the small institution exemption in pending interchange fee cap regulations would work as planned, adding that there “is good reason to be concerned” about its effectiveness. Appearing before a Senate Banking Committee hearing on the implementation of the Dodd-Frank Wall Street Reform Act, the Fed Chairman, in response to questions from Sen. Jon Tester (D-Mont.), added that the pending interchange cap would affect revenues of smaller issuers and “could result in some smaller [financial institutions] being less profitable or even failing” if the proposed exemption for institutions with under $10 billion in assets does not work. Tester is the author of Credit Union National Association (CUNA)-backed legislation to delay the proposed interchange rules for two years to allow further study. Federal Deposit Insurance Corp. Chairman Sheila Bair later told legislators that the interchange changes would likely result in higher fees for financial services customers, and said that the income cuts for small issuers would cause significant stress for those institutions. Under requirements of the Dodd-Frank Wall Street Reform Act, the Federal Reserve Board has proposed a debit card interchange limit that would top such fees at 12 cents. The law intends to exempt credit unions and other small institutions with assets of $10 billion or less from fee cap. However, the effectiveness of the proposed exemption has been hotly debated, and many analysts agree that the statutory exemption will not work as intended. CUNA supports House and Senate legislation that would delay the implementation of the interchange regulations and order a study of their impact on consumers, financial institutions, and merchants. Bair and Bernanke were joined during the hearing by U.S. Treasury Deputy Secretary Neal Wolin, Securities and Exchange Commission Chairman Mary Schapiro, Commodity Futures Trading Commission Chairman Gary Gensler, and Acting Comptroller of the Currency John Walsh. Bernanke in prepared testimony added that the Fed would further address the separate issue of too-big-to-fail banks by “developing more-stringent prudential standards for large banking organizations” such as “enhanced risk-based capital and leverage requirements, liquidity requirements, and single-counterparty credit limits.” The standards, which Bernanke said are expected to be released for comment this summer, will also require systemically important financial firms to create “living wills.” Bernanke said that the Fed’s goal “is to produce a well-integrated set of rules that meaningfully reduces the probability of failure of our largest, most complex financial firms, and that minimizes the losses to the financial system and the economy if such a firm should fail.”

CUNA Interchange income pays for card security

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WASHINGTON (5/13/11)--In the aftermath of Michaels stores recent consumer data breach, the Credit Union National Association (CUNA) again reminded legislators that it is interchange fees that allow credit unions to cover the costs of dealing with these sorts of mercantile mistakes. The letter was sent to Senators Jon Tester (D-Mont.) and Bob Corker (R-Tenn.), the two original cosponsors of Senate legislation that would delay interchange fee cap implementation by two years. The Fed interchange fee cap regulations would become law on July 21, absent a delay. While a final version of the interchange cap regulations has not yet been issued, it is expected to be released before July 21. Michaels, a nationwide big-box craft store, this week notified customers of data breaches that occurred in 20 states. CUNA noted that while customers will likely have their debit cards reissued, at no cost, as a result, credit unions and other financial institutions, and not the retailer, will pay for the new cards. “What makes it possible for card issuers to cover this cost – as well as the cost of any fraudulent transactions which may occur as a result of the breach – is the interchange revenue merchants pay card issuers as their fair share of the cost of the payments system,” CUNA said. If the Federal Reserve’s proposed interchange fee cap becomes effective as scheduled, consumers will “face new or additional fees to use their debit cards and their personal data will continue to be lost by merchants who bear no responsibility to reimburse those impacted by their data breaches,” CUNA added. The CUNA letter said that the proposed delay will give legislators and regulators the time needed to study the impact of the interchange fee cap on consumers, debit card issuers and merchants, and for Congress to address potential changes to the law as a result of this study. The Conference of State Bank Supervisors (CSBS) and the National Association of State Credit Union Supervisors (NASCUS) also spoke up in support of this delay in their own letter to Congress. The regulators said that the potential economic impact of the cap, along with safety and soundness concerns, were reasons to delay implementation. Placing an artificial limit on interchange fees will “incentivize further consolidation among debit card issuers and potentially drive bank customers and credit union members to alternative products outside of the banking system.” This action could also force credit unions and banks to stop issuing debit cards, as “their costs do not utilize the same economies of scale as larger financial institutions,” the letter added. For the full CUNA letter and the joint NASCUS/CSBS letter, use the resource links.

CUs must pay for NFCC counseling line in July

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WASHINGTON (5/11/11)--The National Foundation for Credit Counseling (NFCC) on Tuesday said that it and various member agencies “can no longer bear the full cost of operating the NFCC CARD Act National Locator Line (NLL)” and would begin charging for the service on July 1. The NLL is a third-party service that provides credit union members and other financial services consumers with a list of local credit counselors. The NLL provides these local counselors after cardholders call a toll-free phone number and input their zip code into the automated NLL system. The caller is then supplied with the name, address, phone number and Web site address of three nonprofit credit counseling agencies that have been approved by a United States bankruptcy trustee or bankruptcy administrator. Credit unions and other financial institutions are required to prominently display on their statements a toll-free number providing cardholders information about accessing debt management services and credit counseling with nonprofit credit counseling agencies. This information has been required since Feb. 22, 2010. The requirement is a result of the Credit Card Accountability Responsibility and Disclosure (CARD) Act of 2009. Creditors are allowed to provide their own toll-free services or to engage with third-party providers. The NFCC and others offered the service for free during the first 14 months following its release, but said that use of the NFCC CARD Act NLL will soon cost a minimum of $80 per month when prepaid for 12 months. The NLL program served over 430 institutions since it started, and many credit unions nationwide are signed on to use this service. "Not only will this information help make consumers aware that help is available, but it will add a layer of protection by directing them to government-approved nonprofit counseling agencies for assistance," NFCC said.

Judge inclined to uphold Vensure conservatorship

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WASHINGTON (5/11/11)--U.S. District Court for the District of Columbia Judge Rosemary Collyer Wednesday said that she is initially inclined to rule in favor of the National Credit Union Administration (NCUA) and let its conservatorship of Vensure FCU stand but will consider an additional written filing by the credit union before making a final ruling. On April 15, the NCUA placed the Mesa-Ariz. credit union into conservatorship after it had failed over time to diversify its business. The NCUA determined the credit union relied solely on income from processing online gambling transactions to survive, and the agency had recommended it build a loan program. Although Vensure took steps to build such a program, it did not have any loans at the time that the U.S. Attorney for the Southern District of New York indicated it would freeze a multi-million dollar online gambling account that was used to cover rejected ACH transactions. The NCUA was concerned, records show, that the credit union could not survive independently if it had to cover rejected ACH transactions from its retained earnings, especially because it did not have any other lines of business that could support its operations. The court convened yesterday to hear arguments regarding a request to the court by Vensure to enjoin the NCUA’s April 15 conservatorship. The credit union has argued, in part, that the NCUA "took possession of the very financial records [the credit union] needs to demonstrate that conservatorship is improper." The case is known as Vensure Federal Credit Union v. National Credit Union Administration. In her comments, Collyer underscored that over the remaining course of the trial her sentiments could change, but she said that the facts presented to date make her currently inclined to uphold the conservatorship and rule that the NCUA was not “arbitrary and capricious” in its action, as the credit union has charged. She said she would allow Vensure one week to file a written response, and would give the NCUA a week after that to reply to the credit union’s filing.

NCUA again expands disaster relief area

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ALEXANDRIA, Va. (5/12/11)--The National Credit Union Administration (NCUA) on Wednesday expanded the scope of its disaster relief policy as severe flooding now threatens parts of Missouri, North Dakota and Minnesota. The agency earlier this week activated its disaster relief policy in Tennessee, Mississippi, Kentucky, Louisiana and Iowa. The National Weather Service on Wednesday issued flood warnings along the majority of the Mississippi river, with those warnings stretching far to the north. The river is expected to continue to rise, and the National Weather Service has predicted that it will crest at 64 feet on May 21. Reuters earlier this week reported that 3 million acres have been inundated in Arkansas, Tennessee, and Mississippi. The NCUA expanded its own policy to mirror recent additions to the list of federally-mandated disaster areas. The agency's disaster relief policy is intended to assist credit unions and their members to deal with potential losses. Under the policy, the agency will, where necessary, encourage credit unions to make loans with special terms and reduced documentation to affected members, reschedule some credit union examinations, guarantee lines of credit for credit unions through the National Credit Union Share Insurance Fund, and make loans to meet the liquidity needs of member credit unions through the Central Liquidity Facility. NCUA examiners will survey credit unions operating in flood- and storm-affected counties and parishes. For more on the NCUA’s disaster relief efforts, see the NCUA’s release and prior News Now coverage.

CUNA backs NFIP amendment ahead of markup

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WASHINGTON (5/12/11)--The Credit Union National Association (CUNA) has backed a National Flood Insurance Plan (NFIP) amendment that would preserve the rights of credit unions to protect their collateral from flood hazards. The amendment is expected to be proposed by Rep. Frank Lucas (R-Okla.) during a House Financial Services Committee markup session scheduled for today. H.R. 1309, the Flood Insurance Reform Act of 2011, is set to be marked up. Several bills that would reform portions of the planned Consumer Financial Protection Bureau are also set to be discussed by the committee. The flood insurance-related amendment would clarify that flood insurance purchased by credit unions “would date back to the date the existing policy lapsed or became insufficient in coverage amount, including any premiums or fees incurred during the 45-day notification period.” Credit unions are currently required to force place flood insurance when a borrower fails to maintain the required coverage during the term of the loan. If the credit union determines that the borrower allowed the flood insurance coverage to lapse, the credit union must notify the borrower that he must obtain the insurance. If the borrower does not provide evidence of insurance coverage within 45 days of the notification, the credit union is required to force place the insurance on the borrower’s behalf and may charge the borrower for the cost of the premiums and fees. For the full letter, use the resource link.

Inside Washington (05/11/2011)

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* WASHINGTON (5/12/11)--Senate Banking Committee Chairman Tim Johnson (D-S.D.) said Tuesday, said he would not negotiate with Republicans over changes to the Consumer Financial Protection Bureau (CFPB) (American Banker May 11). Forty-four GOP senators signed a letter last week vowing to block the nomination of the CFPB director unless changes are made to the agency’s structure. Republicans demanded that the CFPB’s director be replaced with a board, that the bureau be subject to an appropriations process, and that banking regulators have power to override the CFPB. Johnson said the demands were too steep and said the President Obama should make the final decision on the bureau’s structure … * WASHINGTON (5/12/11)--The Federal Deposit Insurance Corp. (FDIC) board will seek comment on new capital and margin requirements for retail futures and options in the foreign exchange (forex) market falling below a certain threshold (American Banker May 11). The measure would affect the retail market for futures and options--those involving individuals with less than $10 million invested, or less than $5 million in certain cases. Banks participating in retail Forex transactions would have to advertise that the transactions are not covered by FDIC insurance. An institution would require a customer to post a margin of 2% for major currencies such as the dollar and 5% for other currencies. The measure wouldn’t apply to foreign currency forwards or spot transactions that banks engage in with business customers to hedge foreign exchange risk. FDIC Chairman Sheila Bair said while the proposal wouldn’t affect many banks at the current time, it is meant to provide a regulatory framework should more banks enter the market in the future … * WASHINGTON (5/12/11)--Eliminating a set asset value to make the money market industry more stable during times of stress was among the topics addressed during a Securities and Exchange Commission Roundtable discussion Tuesday. But some market observers felt such fears were overstated (American Banker May 11). John Hawke, a partner at Arnold & Porter and former Comptroller of the Currency, said money market funds have been successful on a historical basis, and are not susceptible to fluctuations during good and bad markets. Federal Deposit Insurance Corp. Chairman Sheila Bair noted the Reserve Primary Fund fell below to below a dollar per share, nearly causing investors to redeem their holdings. To stop the run, the government initiated a program that would restore a covered fund’s net asset value if it fell below a dollar. Hawke said re-engineering the money market fund industry could have unintended consequences …

CU-filed SARs increased in 2010 with big results

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WASHINGTON (5/12/11)—While the total number of Suspicious Activity Reports (SAR) filed by depository institutions continued to decrease in 2010, the Financial Crimes Enforcement Network (FinCEN) noted that the percentage of filings from credit unions continued to rise, a trend that first started in 2001. Specifically, the number of financial institutions that claimed the National Credit Union Administration (NCUA) as their primary regulator in SAR reports increased by 4% over 2009’s numbers. SARs listing all other regulators decreased, and the total number of SARS filed by financial institutions fell by 3% when compared to 2009’s numbers. Just over nine out of ten financial crimes reported in financial institution-issued SARs were related to some sort of money laundering. Fraud related activities accounted for 26% of SARs filed in 2010, FinCEN said. Fraud related to checks, commercial loans, consumer loans, credit cards, and wire transfer all fell, while the number of debit card and mortgage-related fraud cases increased slightly. Check fraud cases showed the biggest numerical decline, dropping by 12,000 between 2010 and 2009, while commercial loans showed the largest percentage decline: 21%. Reported incidents of money laundering, counterfeiting and terrorist financing also increased during 2010. New York, California and Florida had the highest number of reported incidents. The report also noted an instance in which a credit union’s SARs uncovered a bribery scheme amongst public utilities employees. The credit union’s repeated SAR filings caught the eye of investigators, with a subsequent investigation leading to more than 10 individuals pleading guilty to charges related to soliciting and accepting more than $1 million in kickbacks from a contractor in connection with construction projects, FinCEN said. For the full FinCEN reports, use the resource link.

CUNA to Congress Merchant claims on card discrimination dont hold up

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WASHINGTON (5/11/11)--An argument of the merchants in supporting the coming interchange limits is that they will not discriminate against those who hold debit cards from smaller financial institutions, but the Credit Union National Association (CUNA) and three other bank and credit union trade groups took issue with that claim in a letter yesterday to Rep. Shelley Moore Capito (R-W. Va.), author of the House bill to delay the interchange rules. The financial groups pointed to a news report last week where a prominent technology company boasted that it was developing new “steering services” for merchants to encourage the use of certain cards over others. “This report supports Federal Reserve Board Chairman Ben Bernanke’s testimony before the Senate Banking Committee that the small issuer exemption may not work in the marketplace,” said the letter, signed by CUNA, the American Bankers Association (ABA), the Independent Community Bankers Association of American (ICBAA), and the National Association of Federal Credit Unions (NAFCU). “It is remarkable that the same groups advocating for weakened network operating rules would now hide behind them in their defense of government price controls,” the four trade groups said of the merchants. “Merchants know that enforcing these rules among the millions in their ranks is impossible.” CUNA told Rep. Capito the merchants have no incentive to abide by network antifraud rules because they bear no liability for card fraud. Instead, they focus on verifying identity at the point of sale for checks, where they do have liability risk. The merchants’ disinterest in complying with network anti-fraud rules “gives us no confidence” they’ll comply with anti-discrimination rules designed to protect community bank and CU cardholders. “The merchants opposing your legislation would have Congress, community banks and credit unions rely on their ‘commitment’ that everything will work out fine in the end,” CUNA stated. “Unfortunately, we, and many market experts, do not believe this to be true.” CUNA, ABA, ICBA and NAFCU again called for prompt passage of the legislation to delay the interchange rules from taking effect July 21 to allow for further study of the potential negative effects. A copy of the letter also was sent to all House members and senators.

Cheney on NPR talks of interchange activism

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WASHINGTON (5/11/11)--The grassroots strength of credit unions has been demonstrated during the ongoing fight over a potential interchange fee rate cap, with over 250,000 credit union members reaching out to urge their legislators to “stop, study and start over” on interchange regulations within the past month, Credit Union National Association (CUNA) President/CEO Bill Cheney said in a National Public Radio (NPR) interview. Cheney’s remarks were featured in an NPR Morning Edition story on the massive lobbying efforts that are being waged on both sides of the interchange argument. Under requirements of the Dodd-Frank Wall Street Reform Act, the Federal Reserve Board has proposed a debit card interchange limit that would top such fees at 12 cents. The law intends to exempt credit unions and other small institutions with assets of $10 billion or less from fee cap. However, the effectiveness of the proposed exemption has been hotly debated, and many analysts agree that the statutory exemption will not work as intended. CUNA supports House and Senate legislation that would delay the implementation of the interchange regulations and order a study of their impact on consumers, financial institutions, and merchants. Credit union members, state-based leagues, and individual credit unions have helped generate the aforementioned 250,000 comments to members of Congress, and many credit union backers met with legislators in their home districts during last month’s district work period. CUNA and associated Electronic Payments Coalition partners are also showing consumers the 'domino effect' that pending interchange fee rate cap legislation could have on their own financial situations via a new 30-second ad. (See related April 10 story: Ad shows interchange cap's 'domino' effect) For the full NPR story, use the resource link.

Consider burden of complaints CUNA tells CFPB

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WASHINGTON (5/11/11)--The Credit Union National Association (CUNA) has urged the Consumer Financial Protection Bureau (CFPB) to take steps to ensure that “the number of non-substantive and meritless complaints does not increase” as that agency seeks to streamline the methods through which consumers can alert regulators to improper business practices at various financial institutions. The letter noted that credit unions, due to their member-owned, cooperative structure, are not expecting a sizeable number of complaints to be filed by their members with the CFPB. However, CUNA said, “each complaint a credit union receives—regardless of merit—has a cost to the credit union and in turn its members.” CUNA suggested the CFPB help filter complaints by considering an “answer choice” format for questions in its complaint form, rather than blank text boxes only. The CFPB should also include language on the form encouraging the consumer to first attempt to resolve the issue with the financial institution directly before filing a formal CFPB complaint. Doing so will likely increase the quality of information provided and “save time for all parties involved,” CUNA added. In the event that a credit union receives a complaint, CUNA suggested that they be permitted to respond directly to the member in question rather than having the response filtered through the CFPB. Allowing this modification would reflect the cooperative nature of credit unions “and the fact that many members have direct relationships with the staff of their local credit union and would prefer to receive a response directly from them than from the federal government,” CUNA said. “The option of permitting the credit union to respond directly to the member also allows the credit union to ensure the issue is resolved in a satisfactory manner,” the letter added. For the full letter, use the resource link.

Inside Washington (05/10/2011)

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* WASHINGTON (5/11/11)—State Attorneys General will reportedly offer renewed negotiation terms to the top five mortgage servicers in a bid to settle several servicing-related enforcement actions. A group of state attorneys general and several federal agencies have been negotiating a settlement agreement with the major mortgage servicers which could create a possible loan modification process. As reported in American Banker, the new settlement terms may not include language that would force lenders to reduce a mortgageholders principle owed. However, the new settlement may force servicers to allow mortgageholders that were denied modifications through the U.S. Treasury’s Home Affordable Mortgage Program to reapply for that program. Additional foreclosure documentation may also be required. While the terms of any financial settlement related to the enforcement actions has not been disclosed, the states may use whatever fines are collected to start a so-called "cash for keys" program that would give troubled mortgageholders financial incentives to vacate their homes, speeding the overall foreclosure process. The funds could also be redirected to financial counseling initiatives. Banks have not agreed to the terms, and the overall impact of the settlement on mortgage servicers in general… * WASHINGTON (5/11/11)--Sen. Richard Shelby (R-Ala.) will have a pivotal role in deciding whether President Barack Obama’s nominees for key financial services policy posts are ultimately confirmed. Shelby has previously blocked nominations for the Federal Reserve Board and Federal Housing Finance Agency, and is leading efforts to halt the Consumer Financial Protections nomination until changes are made to the new agency’s make up. (American Banker May 10). Shelby, although part of the minority party in the Senate, holds great influence with Republicans because of his longtime membership in the Senate Banking Committee. Mark Calabria, a former top aide to Shelby and a director of financial regulations studies at the Cato Institute, said Shelby has close to a veto vote. Shelby previously blocked the nominations of Peter Diamond, who won a Nobel Prize for economics last October, whom he called unfit to serve on the Federal Reserve. The White House withdrew its nomination of Joseph Smith to be director of the Federal Housing Finance Agency after Shelby said Smith could be a “lapdog” to the administration … * WASHINGTON (5/11/11)--Members of the Senate Banking Committee sent a letter to regulators demanding an assessment of the economic impact of the Dodd-Frank Act. The letter, sent last week to inspector generals at the Federal Reserve Board, U.S. Treasury Department, Federal Deposit Insurance Corp., and two other agencies, demanded that the inspectors general conduct reviews of economic assessments submitted by each agency and prepare written reports of their findings. On April 15, the inspector general for the Commodity Futures Trading Commission (CFTC) issued a report that found legal formalities in the rulemaking process had “trumped” economic analysis, according to the letter. “We are concerned that these rulemaking issues documented by the CFTC Inspector General's Report are not unique to the CFTC and are impeding the agencies’ ability to understand the economic effects of the proposed rules,” the letter said. The senators have asked for a response from the regulators by June 13 …

OIG Poor oversight worsened Members United issues

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ALEXANDRIA, Va. (5/11/11)--The purchase of “significant holdings" of private-label mortgage-backed securities and a failure to identify and manage risks related to this purchase led to the conservatorship of Members United Corporate CU, the National Credit Union Administration’s (NCUA) Office of Inspector General (OIG) has reported. The OIG in its material loss review of Members United specifically found that the corporate credit union’s executive management and board of directors:
* Did not establish investment sector concentration limits in a timely manner; * May have been overly reliant on credit ratings when purchasing the securities and monitoring its securities portfolio for signs of risk; * Relied on monoline insurers to provide credit enhancement to a portion of the non-agency mortgage-backed securities in the portfolio; * Did not properly identify and monitor credit risk exposure in the underlying mortgage loan collateral of the mortgage-backed securities held in the investment portfolio; and * Relied on the corporate credit union structure to provide financial strength and liquidity.
The OIG said that the executive management and board of Members United overall “failed to recognize the substantial risk they were undertaking with significant investments in complex mortgage-backed securities, with a substantial portion of these securities backed by subprime assets.” The leadership team also “allowed the investments in mortgage-backed products to represent a significant concentration compared to net worth and they failed to impose limits in these securities” and “did not adequately recognize the credit risk associated with the underlying collateral.” The report found that NCUA examiners had noticed subprime-related issues as early as August of 2007, when the corporate held $4.9 billion in mortgage-backed securities, $1.2 billion of which were considered subprime. However, NCUA examiners did not “raise supervisory concerns or issue a document of resolution related to the sub-prime nature of the mortgage-backed securities at that time,” instead waiting until May of 2008. The OIG report said that quicker NCUA action could have resulted in a reduced loss to the NCUA’s Temporary Corporate Credit Union Share Insurance Fund. The NCUA in the report said that it has reacted to these and other subprime-related issues, addressing potential issues through new corporate credit union rules, imposing stronger concentration limits, and prohibiting the purchase of privately issued residential mortgage-backed securities. Members United became known as Members United Bridge Corporate shortly after it was taken into NCUA conservatorship last November. The corporate announced that it was rebranding itself as Alloya Corporate FCU in late April. The renamed corporate will retain the assets, people, processes, products and services of Members United Bridge. For more on the NCUA OIG report, use the resource link.

FDIC announces July 8 as Bairs departure

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WASHINGTON (5/10/11)—Federal Deposit Insurance Corporation (FDIC) Chairman Sheila Bair will officially step down as head of that agency on July 8. The FDIC said that the announcement is consistent with previous statements in which Bair said that she would leave the regulator at the end of her current term. The agency’s July board meeting will be Bair’s final in charge. She took on the role of the FDIC’s 19th chairman in 2006, and saw the agency and the broader banking sector through the recent financial market troubles. Bair previously served as the U.S. Treasury’s assistant secretary for financial institutions and briefly led the Commodity Futures Trading Commission as acting director. The FDIC leader recently publicly questioned whether a proposed exemption that would shield issuers with $10 billion or less in assets from the terms of an interchange fee rate cap. Bair has also chaired the Federal Financial Institutions Examination Council (FFIEC), which earlier this year named National Credit Union Administration (NCUA) Chairman Debbie Matz as its new leader.

NCUA releases loan lease loss webinar agenda

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ALEXANDRIA, Va. (5/10/11)--Allowance for loan and lease losses (ALLL) exam issues and ALLL interagency supervisory policies will be addressed during a May 26 National Credit Union Administration (NCUA) webinar. The free webinar will begin at 2:00 P.M. ET. The NCUA in a release said that the webinar will also cover how to identify and address current ALLL exam issues with qualitative and environmental factor adjustments. Current economic trends will also be addressed during the webinar. NCUA Chief Economist John Worth, Senior Economist Ralph Monaco, and regional problem case officer Elizabeth DiNapoli will take part in the interactive webinar. Participants will have the opportunity to ask questions of the NCUA experts. Noting that credit unions have worked to understand how qualitative and environmental adjustments can better inform their estimates of inherent losses existing in their loan portfolios, the agency said that its presenters would “benchmark best practices in this area.” For more on the webinar, use the resource link.

Cheney urges Congress to continue CDFI funding

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WASHINGTON (5/10/11)--Credit Union National Association President/CEO Bill Cheney has urged House Appropriations Committee leadership to enact the Community Development Financial Institutions (CDFI) Fund’s full $227 million funding level, as proposed in the Obama administration’s fiscal 2012 budget. The request was made in a letter to Rep. JoAnn Emerson (R-Mo.), who heads the House Appropriations subcommittee on financial services, the subcommittee’s ranking member. Rep. Jose Serrano (D-N.Y.) Cheney in the letter called on the legislators to help ensure that the CDFI Fund “is appropriately funded so that it may continue to help credit unions provide financial services to distressed communities.” A continuing resolution that was approved last month would provide the CDFI Fund with $227 million in funds, a $23 million cut from the amount proposed for fiscal 2011. The administration sought $250 million in CDFI funding for FY 2011. The CDFI Fund helps locally based financial institutions offer small business, consumer and home loans in communities and populations that lack access to affordable credit. According to the Treasury Department in January, credit unions represent 13% of the total applicant pool for the 2011 round of the CDFI Fund program. For the full letter, use the resource link.

Southern flooding prompts NCUA response

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ALEXANDRIA, Va. (5/10/11)--Severe flooding continues to threaten areas of Tennessee, Mississippi, Kentucky and Louisiana, and the National Credit Union Administration (NCUA) has responded by activating its disaster relief policy for those areas. The agency also has expanded its disaster relief response in Iowa after more heavy storms there. While press reports yesterday said it appeared the Mississippi River could rest Monday night--earliuer than previously expected--it will take some time for the predicted 48 feet of water to recede. The NCUA’s disaster relief policy is intended to assist credit unions and their members to deal with potential losses caused by disasters, such as this current flooding, which has threatened to match historic highs reached in 1927 when collapsed levees caused widespread flooding. The NCUA noted in a release that the river’s tributaries have been dumping more than twice their normal volume into the Mississippi since April 25. In response, the NCUA noted, President Obama last week declared that a major disaster exists in Louisiana and ordered federal aid to supplement state and local efforts. The president’s actions make federal funding available for the following affected parishes: Avoyelles, Ascension, Assumption, Catahoula, Concordia, East Carroll, Iberia, Iberville, LaSalle, Madison, Pointe Coupee, East Baton Rouge, St. Charles, St. James, St. John, St. Landry, St. Martin, St. Mary, Tensas, Terrebonne, West Baton Rouge, and West Feliciana. Also last week, the president declared that a major disaster exists in Mississippi, Tennessee and Kentucky because of the flooding. In Mississippi, the following counties are affected: Adams, Bolivar, Claiborne, Coahoma, DeSoto, Issaquena, Jefferson, Tunica, Warren, Washington, and Wilkinson. In Tennessee, the following counties are affected: Dyer, Lake, Shelby, and Stewart. In Kentucky, the following counties are affected: Boone, Bracken, Campbell, Carroll, Carter, Fleming, Gallatin, Kenton, Lawrence, Morgan, Nicholas, Oldham, Owen and Washington. Federal assistance is also available on a cost-sharing basis for hazard mitigation measures throughout Kentucky. After severe storms hit Iowa April 9 and10, Obama declared the following counties a disaster area: Buena Vista, Cherokee, Ida, Monona, Pocahontas, and Sac. Under the NCUA’s disaster assistance, the agency will, where necessary:
* Encourage credit unions to make loans with special terms and reduced documentation to affected members; *Reschedule routine examinations of affected credit unions if necessary; *Guarantee lines of credit for credit unions through the National Credit Union Share Insurance Fund; and *Make loans to meet the liquidity needs of member credit unions through the Central Liquidity Facility.
NCUA examiners will survey credit unions operating in flood- and storm-affected counties and parishes. Most credit unions remain open, although some branches affected by the disaster may have curtailed hours or services. During natural disasters, NCUA works with individual state league organizations and state regulators to ensure all federally insured credit unions know of NCUA’s available assistance. The agency’s examiners will therefore remained in close contact with the affected local credit unions to offer advice and assistance. During disaster conditions, NCUA personnel operate under three priorities:
* Ensure the safety of credit union staff; * Keep facilities and operations available to members; and *Provide material and technical assistance, as needed, to affected credit unions.
Federal credit unions may also provide assistance to other credit unions and non-members in the affected areas, under certain conditions:
* A federal credit union may provide services to persons who are members of another credit union under their correspondent services authority. * Emergency financial services for non-members, including check cashing, access to ATM networks, or other services to meet short-term emergency needs of individuals in the areas affected by the storms, can be provided under the authority to engage in charitable activities. *Federal credit unions providing services on a charitable basis may not impose charges for services that exceed their direct costs.
Credit unions and credit union members in Iowa and Louisiana needing help because of these declarations may contact NCUA’s Region IV office in Austin at (512) 342-5600 during normal business hours. Credit unions and their members needing help in Kentucky, Mississippi and Tennessee may contact NCUA’s Region III office in Atlanta at (678) 443-3000.

Dodd-Frank tax reforms on Congressional agenda

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WASHINGTON (5/10/11)—Credit unions will again want to pay particular attention to Senate and House hearings this week. The first relevant hearing of the week will take place on Tuesday when the Senate Banking Committee reviews the final report of the Financial Crisis Inquiry Commission, created by the government in 2009 and charged with investigating the causes of the country’s 2007 financial crisis, the shock waves of which continue. The Senate’s banking panel will again be active on Thursday when it discusses Dodd-Frank Wall Street Reform Act implementation. U.S. Treasury Deputy Secretary Neal Wolin, Federal Reserve Chairman Ben Bernanke, outgoing Federal Deposit Insurance Corp. Chairman Sheila Bair, Securities and Exchange Commission Chairman Mary Schapiro, Commodity Futures Trading Commission Chairman Gary Gensler, and Acting Comptroller of the Currency John Walsh will testify during that hearing. The related housing, transportation and community development subcommittee will discuss national mortgage servicing standards on Thursday. In the House, a Financial Services monetary policy subcommittee will discuss the ties between the Fed and government debt on Wednesday, with the full financial services committee following that with a Thursday markup session on legislation that would alter the composition of the planned Consumer Financial Protection Bureau. Legislation that would extend the implementation deadline for derivatives-related portions of the Dodd-Frank Act and reauthorize the National Flood Insurance Program will also be marked up. The House Ways and Means Committee has also planned a Thursday hearing on tax reform’s potential to aid corporate competition and create jobs. While the House will recess until May 23 at the end of this week, the Senate will remain in session. The Senate’s Small Business Reauthorization bill, which has been on the floor for several weeks, remains pending, and the Credit Union National Association’s (CUNA) Vice President of Legislative Affairs Ryan Donovan said that the outlook for this legislation, as well as the Senate version of legislation that would delay the implementation of an interchange fee rate cap, remains unknown.

Inside Washington (05/09/2011)

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* WASHINGTON (5/10/11)--Republicans are considering multiple strategies to block a recess appointment of the Consumer Financial Protection Bureau director position. A recess appointment was virtually guaranteed when 44 Republican senators last week signed a letter declaring their intention to block any nominee, without several significant changes to the bureau. However, Republican lawmakers are considering tactics to prevent a recess appointment or make it much less appealing to President Barck Obama. Republicans may hold short sessions during which no business is conducted, known as pro forma sessions, which prevent the Senate from being considered in recess. Or, if Obama made a recess appointment for the CFPB director, Republicans could hold up any other financial services nominees. Among the nominations still to be named are the heads of the Federal Deposit Insurance Corp. and Office of the Comptroller of the Currency …

Ad shows interchange caps domino effect

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WASHINGTON (5/10/11)—The Credit Union National Association and associated Electronic Payments Coalition partners are showing consumers the ‘domino effect’ that pending interchange fee rate cap legislation could have on their own financial situations via a new 30-second ad. The ad will continue to run in the Washington, D.C. area until July, and will be seen during Sunday morning political talk shows such as NBC’s Meet the Press and Fox News Sunday. The ad is also airing during weekly nightly news broadcasts and other events. A brief online only version of the ad is also being circulated. The ad was shot with over 5,000 real dominoes and several miniatures. Nothing in the commercial was computer generated. Fellow EPC members the Independent Community Bankers of America, the National Association of Federal Credit Unions, and the American Bankers Association have also sponsored the ad.

Corporates biz plan for United Resources FCU approved

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BAKERSFIELD, Calif. (5/9/11)--The business plan for the United Resources FCU, a new corporate credit union that will survive the Western Bridge Corporate FCU, was approved by the National Credit Union Administration's (NCUA) Office of Corporate Credit Unions, the corporate announced Friday. Western Bridge Corporate submitted the business plan to NCUA on March 28. The notice received from the agency allows for the release of the plan, in final version, to members of Western Bridge and clears the way for distribution of the capital offering materials, expected shortly, said a press release from the corporate. The 80-page business plan projects the launch of a corporate credit union with total assets between $4 billion and $5 billion and a capital ratio goal of 5%. United Resources FCU will offer a complete portfolio of products comprised of payment services, liquidity products including term loans, and short-term investments in compliance with NCUA’s new corporate credit union regulations. “We are very pleased to have received confirmation from NCUA that the business plan is approved and we are clear to move forward with the chartering process,” said Matt Davidson, chairman of the Board, United Resources FCU. The next step in the charter process is to distribute the Private Placement Memorandum to current members of Western Bridge Corporate FCU. Credit unions will have until Aug. 31 to decide whether to invest in the new corporate credit union.

Inside Washington (05/06/2011)

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* WASHINGTON (5/9/11)--Midsize banks that barely meet the $50 billion threshold as systemically important, as defined in the Dodd-Frank Act, will be treated differently than the largest financial institutions, Federal Reserve Chairman Ben Bernanke said Thursday (American Banker May 6). The Fed will use a graduated approach in how it will require banks of all sizes to implement higher capital and liquidity requirements, Bernanke said, adding there will not be a discrete difference in how the Fed treats banks of similar asset sizes. Many in the banking industry have maintained that size alone should not dictate which institutions are considered systemically important. Bernanke's comments indicate that despite the $50 billion threshold, the largest banks will hold more capital and face tougher prudential regulation than those that just meet the standard … * WASHINGTON (5/9/11)--Although there is still doubt whether the Dodd-Frank Act ended “too big to fail” regulators must ensure that discipline is restored to the financial sector, Federal Deposit Insurance Corp. Chairman Sheila Bair said in a speech Thursday. “On one hand, there is concern that new regulations could impose onerous costs on banks and the economy, stifling financial innovation and economic growth,” Bair said. “On the other, there is alarm about the scale and seemingly indiscriminate nature of the government assistance provided to large financial companies during the crisis, and what effects these actions will have on the competitive landscape.” Bair said a major improvement with systemically important financial institutions (SIFI) is the resolution process. When a large, complex financial institution gets into trouble, time is the enemy, she said. A larger financial institution will take longer to assemble a resolution strategy. By requiring detailed resolution plans in advance, and authorizing an on-site FDIC team to conduct pre-resolution planning, the SIFI resolution framework regains the informational advantage that was lacking in the financial crisis, Bair said. “As far-reaching as these changes are, their ultimate effectiveness will still depend on the willingness of the FDIC and the Federal Reserve to actively use their authority to require organizational changes that promote the ability to resolve SIFIs,” she added … * WASHINGTON (5/9/11)--Federal Reserve Board Chairman Ben Bernanke said Thursday new regulatory reform rules resulting from the Dodd-Frank Act will make the financial system safer and less susceptible to risk (American Banker May 6). New risk retention requirements, tougher underwriting standards, and rules on off-balance sheet accounting have corrected many problems that led to the financial crisis, Bernanke said. Regulators must be aware of changes within the financial system and guard against new risks they present, he said, adding he was confident regulators now have mechanisms to adapt to any future shocks the financial system would experience …

NCUA issues prohibition order

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ALEXANDRIA, Va. (5/9/11)—The National Credit Union Administration (NCUA) last week prohibited Rhett Rowe, a former employee of Boulder, Colo.-based Premier Members FCU, from future work at any federally insured financial institution. Rowe agreed to the NCUA’s cease and desist order and will pay $9,306 in restitution to the credit union. Violation of a prohibition order is a felony offense punishable by imprisonment and a fine of up to $1 million. For the full release, use the resource link.

GAO CFPB regulators must add to mortgage oversight

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WASHINGTON (5/9/11)—Noting that federal oversight of servicers’ foreclosure activities “has been limited and fragmented,” the U.S. Government Accountability Office (GAO) last week called on the developing Consumer Financial Protection Bureau (CFPB) and fellow regulators to create plans for mortgage servicer oversight. Focus on foreclosure related activities has increased with the recent news of loan and foreclosure documentation issues in several mortgage servicers. As a result, the GAO was tasked with studying past servicer oversight, current and future oversight plans, and the potential impact of those oversight plans. The GAO found that while authorities had the right to examine foreclosure activities, those activities were not looked into, as regulators did not believe that foreclosure practices posed a risk to safety and soundness. The report suggested that the Comptroller of the Currency, the Federal Reserve, the Office of Thrift Supervision, the Federal Deposit Insurance Corporation, and the CFPB all “develop and coordinate plans to provide ongoing oversight and establish clear goals, roles, and timelines for overseeing mortgage servicers under their respective jurisdiction.” These regulators should also create national standards for mortgage servicing and foreclosure practices, the GAO said. That agency also called on regulators to “assess the risks of potential litigation or repurchases due to improper mortgage loan transfer documentation on institutions under their jurisdiction and require that the institutions take action to mitigate the risks, if warranted.” Although credit unions have seen some increases in foreclosure-related activity due to the overall decline in the economy, the majority of credit unions were much more careful in their lending activities, and did not originate toxic mortgages nor engage in the subprime mortgage market. For more on the GAO report, use the resource link.

Myers to head NCUA Small CU Office

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ALEXANDRIA, Va. (5/6/11)--Community development credit union expert William Myers will bring “extensive knowledge of issues affecting small credit unions, proven expertise in community development, and demonstrated strategic leadership skills” to the National Credit Union Administration’s (NCUA) Office of Small Credit Union Initiatives (OSCUI) when he takes over that office as director on June 6. NCUA Chairman Debbie Matz in a Thursday release added that Myers is “nationally recognized for his exceptional and creative work supporting small credit unions throughout the country.” Myers, who hails from Ithaca, N.Y., founded Alternatives FCU in 1979 and grew that credit union to one that held $50 million in assets from 8700 low-income members in his eight years as leader. Myers was also involved in the Credit Union National Association’s 2000 Renaissance Commission, a group that explored credit unions’ role in the 21st century. More recently, Myers served as the interim CEO at Santa Cruz Community CU. He has also served as a senior fellow at the nonprofit Aspen Institute, where he consulted on credit union economic development. The incoming OSCUI director has also owned and moderated the Community Development Banking list for 17 years. The OSCUI administers the NCUA’s Community Development Revolving Loan Program and aids small credit union development and member service. For the full NCUA release, use the resource link.

SBAAgility team up for preparedness webinar

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WASHINGTON (5/6/11)--Agility Recovery Solutions and the U.S. Small Business Administration will present a joint webinar, entitled “Protecting Your Business This Hurricane Season,” on May 17 at 2:00 P.M. ET. The webinar will be hosted by Weather Services International Senior Meteorologist Ben Papandrea and Agility Recovery Solutions Vice President Paul Sullivan. Papandrea will reveal his 2011 hurricane forecast, and Sullivan will cover best practices for disaster preparedness. Sullivan’s presentation will give tips on protecting small businesses, customers and employees. The webinar will also feature a question and answer session. Agility is a Credit Union National Association strategic alliance provider. To register, use the resource link.

44 GOP senators call for increased CFPB accountability

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WASHINGTON (5/6/11)—A group of 44 Republican senators in a Thursday letter to President Barack Obama said that they would not confirm any potential Consumer Financial Protection Bureau (CFPB) director, “regardless of party affiliation,” unless structural changes are made to the bureau. Among the modifications suggested by the legislators are replacing a single CFPB director with a multiple-member board, subjecting the CFPB’s funding to the congressional appropriations process, and establishing “a safety-and-soundness check for the prudential financial regulators.” The senators said that the CFPB director “will have a profound influence on the future of our economy and job creation,” and added that they want to ensure that this influence is not used for political purposes. The House Financial Services subcommittee on financial institutions and consumer credit addressed some of the senators’ CFPB concerns on Wednesday, approving a trio of bills that it maintains would "strengthen consumer protection and bring transparency, oversight and accountability" to the CFPB. As reported in March, Elizabeth Warren, the Obama administration official tasked with setting up the CFPB, appreared before a House Financial Services subcommittee to defend the CFPB against complaints that it lacks transparency. She said the new consumer protection bureau is the nation’s most accountable financial regulator, the only one, she has noted, the rules if which can be overruled by a group of other agencies. The approved by the subcommittee are:
* H.R. 1315, which would modify the voting procedure of the Financial Stability Oversight Council when voting to stay or set aside rules finalized by the CFPB; * H.R. 1121, which would replace the single CFPB director with a five-member Consumer Financial Protection Commission; and * H.R. 1667, which would delay the transfer of consumer protection functions to the CFPB if a director is not in place by the July 21 start up date.
The three bills are scheduled to come up for a vote in the full House Financial Services Committee on May 12.

Separate CU scrutiny needed for TILA-RESPA form CUNA

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WASHINGTON (5/6/11)--The Credit Union National Association (CUNA) underscored the credit union difference in a recent comment letter submitted to the Office of Management and Budget (OMB) and the Consumer Financial Protection Bureau (CFPB). The CFPB transition team is seeking OMB approval to conduct a study to gain consumer and mortgage industry perspectives on a draft form that combines mortgage disclosures under the Truth in Lending Act (TILA) and the Real Estate Settlement Procedures Act (RESPA). The combined form is required under the Dodd-Frank Actand and is intended to reduce mortgage lender regulatory burden and make mortgage disclosures less confusing to consumers. CFPB has proposed to conduct one-on-one interviews regarding its draft version of the combined TILA-RESPA form with consumers and representatives of mortgage lenders and mortgage brokers. CUNA urged, however, that the CFPB outreach include a separate interview panel comprised solely of credit union lending professional. CUNA wrote that credit unions--as not-for-profit cooperatives organized to promote thrift and make loans to members at reasonable rates of interest--are different from for-profit banks and non-depository mortgage lenders, as well as different from mortgage brokers. CUNA also recommended that once the proposed impact study is completed and changes are made to the draft form, a revised draft of the mortgage disclosure form should be subject to additional CFPB outreach to credit unions and other small financial institutions. This subsequent review should be conducted under provisions of Dodd-Frank that made the CFPB subject to the Small Business Regulatory Enforcement Fairness Act (SBREFA) panel outreach process. A SBREFA panel, comprised of one representative each from CFPB, OMB, and the U.S. Small Business Administration’s Office of Advocacy, is required by Dodd-Frank to solicit input from small entity stakeholders prior to the issuance of a CFPB proposed rule that would impact a significant number of credit unions and community banks. The panel is charged with making recommendation to CFPB on how to reduce regulatory burden on small entities. See the resource link below for the Comment Letter.

Inside Washington (05/05/2011)

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* WASHINGTON (5/6/11)--Sens. Carl Levin (D-Mich.), chairman of the permanent subcommittee on investigations, and Tom Coburn (R-Okla.) formally referred an investigative report that found Goldman Sachs Group Inc. misled clients about mortgage-linked securities to the Justice Department and the Securities and Exchange Commission (SEC), Levin said in an interview Tuesday (American Banker May 5). The 600-page report is the product of more than two years of work by the subcommittee. It includes 19 new recommendations to curb Wall Street excesses and conflicts of interest. In an April blog post, Levin said he expects many of those recommendations to be opposed by the financial services industry. The report found Wall Street firms guilty of “reckless risk-taking and rampant conflict of interest,” Levin wrote in the blog. James Cox, a professor at the Duke University School of Law, said he was doubtful that the examinations by the agencies will lead to new claims against Goldman, which last year paid $550 million to settle SEC claims related to its marketing of collateralized debt obligations …

Two FCUs placed into conservatorship by NCUA

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ALEXANDRIA, Va. (5/4/11)--Noting it would work with both financial institutions to “resolve issues” affecting safety and soundness, the National Credit Union Administration announced yesterday that it had placed two federal credit unions into conservatorship: Valued Members, of Jackson, Miss., and Hmong American, of St. Paul, Minn. Both credit unions remain open and operating, although services of Hmong American have moved to a new location. The NCUA, in its announcements, noted that a decision to conserve a credit union enables the institution to continue regular operations “with expert management in place, correcting previous service and operational weaknesses.” It also enables members to continue their business with their credit union. Valued Members, chartered in 1957 and serving Leake County, the underserved community of Madison County, and a number of employee groups in and around Jackson, has approximately $9 million in assets and 2,030 members. Hmong American FCU's new location is 56 East Sixth Street, Suite 314, St. Paul, MN 55101. Credit union members and others may continue to reach the credit union at 651-228-0455. Valued Members and Hmong American are, respectively, the fourth and fifth federally insured credit unions placed into conservatorship in 2011. The agency has posted on each credit union’s website an electronic frequently-asked-questions (FAQ) document to help members with information on the conservatorship. Use the link below to see one of the FAQ sites.

Cheney editorial CUs need help in data theft dealings

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WASHINGTON (5/5/11)—While credit unions stand ready to help their members deal with the aftereffects of data breaches and other security issues, they must also be able to afford the cost of helping their members, Credit Union National Association (CUNA) President/CEO Bill Cheney said in a recent Huffington Post editorial. Cheney's editorial noted that credit unions are issuing new debit cards and working with their members following a recent security breach that compromised the credit card numbers and other personal information of 77 million users of Sony's online gaming platform PlayStation Network. However, Cheney said, “contrary to what some might think, the expense for taking this action is not and will not be reimbursed by Sony. “When all is said and done, credit unions and banks will have spent millions on what appears to be a major security failure caused by Sony's inability to protect its consumer data,” Cheney said. Credit unions and banks rely on interchange revenue to cover the cost of debit program administration, “including in these circumstances, reacting to a merchant data breach,” and Cheney said that fraud protection and other debit-related costs would not be covered by the 12 cent per transaction fee that has been proposed by the Federal Reserve’s interchange fee cap regulation. This gap is another reason why members of Congress should support Senate legislation that would delay the implementation of new interchange rules and require further study of the impact that those rules could have on consumers, financial institutions, and merchants. Cheney added that a proposed exemption for institutions with $10 billion or less in assets woud not work, and said that the Fed’s proposed rule would “affect all debit-card-issuing credit unions and other financial institutions. “Data breaches such as the one we learned about last week will only exacerbate the problem for credit unions because the proposal and the underlying legislation would not allow these costs to be taken into consideration in terms of our ability to collect interchange revenue,” he said. For the full op-ed, use the resource link.

CUNA backs intent of subcommittees CFPB actions

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WASHINGTON (5/5/11)--As a House subcommittee voted on a series of bills addressing the Consumer Financial Protection Bureau (CFPB), the Credit Union National Association (CUNA) submitted a statement for the markup session’s record in support of the goal of achieving rules that balance consumer protection and the safety and soundness of institutions providing financial services.” The House Financial Services subcommittee on financial institutions and consumer credit on Wednesday approved a trio of bills that it said would “strengthen consumer protection and bring transparency, oversight and accountability” to the CFPB. The three bills, H.R. 1315, H.R. 1121, and H.R. 1667, will face a full committee vote on May 12. H.R. 1315, the Consumer Financial Protection Safety and Soundness Improvement Act, would modify the voting procedure of the Financial Stability Oversight Council (FSOC) when voting to stay or set aside rules finalized by the CFPB by reducing the threshold for the Council to take action from a two-thirds vote of the Council to a majority vote of the Council, excluding the Director of the Bureau. CUNA said that such a move helps to “balance consumer protection with safety and soundness concerns.” The legislation also changes the conditions under which the FSOC can stay or set aside CFPB regulations by striking the requirement that the regulation or provision subject to petition by an FSOC member “would put the safety and soundness of the United States banking system or the stability of the financial system of the United States at risk” and replacing it with a requirement that the regulation subject to petition be “inconsistent with the safe and sound operation of United States financial institutions.” CUNA suggested that the statute should allow financial regulators to review CFPB regulation in the context of overall regulatory burden. “We could support legislation to expand the conditions that must be met in order for the [FSOC] to override a regulation if the [FSOC] determines a new rule would be unreasonably burdensome for financial institutions and the burden to financial institutions outweighs the benefit to consumers,” CUNA said. H.R. 1121 would replace the single CFPB director with a five member Consumer Financial Protection Commission, a move which CUNA has said that it could support if the potential panel included a member with credit union experience. H.R. 1667 would delay the transfer of consumer protection functions to the CFPB if a “confirmed and accountable director” is not in place by the July 21 transfer date. Subcommittee Chairman Rep. Shelly Moore Capito (R-W.Va.) and House Financial Services Committee Chairman Rep. Spencer Bachus (R-Ala.) called the three legislative actions “common sense” measures. For the CUNA release, use the resource link.

NCUA should revisit interchange cost estimates CUNA

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ALEXANDRIA, Va. (5/5/11)—The Credit Union National Association (CUNA) backed the National Credit Union Administration’s (NCUA) request that the Federal Reserve consider “the unique circumstances of smaller credit unions" and grant some interchange fee cap relief to smaller issuers, but also noted that it found the agency’s estimates of debit card transaction costs for larger issuers, as detailed in a Wednesday letter to the Federal Reserve, to be “incredibly understated.” The NCUA yesterday provided additional information about some of the costs associated with and income produced by debit card transactions for credit unions of different sizes when it released results of a survey of 296 credit unions. The survey, which was included in the agency’s letter to the Fed, estimated that credit unions with over $1 billion in assets spend a median amount of two cents per debit card transaction while taking in a median gross income total of 38 cents per transaction. CUNA challenged this conclusion, saying that “significant, essential” internal and/or indirect costs such as labor, equipment, overhead and fraud prevention are not included in this estimate. CUNA also noted that the agency did not include many of the direct costs that the Fed included in its own interchange fee analysis. “Basic amounts paid to third parties for clearing, settlement and authorization amount to far more than the values reported by NCUA in the letter,” CUNA said. It is inconceivable that the median cost at the largest credit unions--those with a median asset size of $1.6 billion--is only a third to a sixth of the average cost at banks with more than $10 billion in assets, CUNA added. “We question the methods used to derive these numbers and urge NCUA to revisit and revise them as soon as possible,” CUNA said. Overall, the NCUA’s analysis found that the smaller the credit union is, the more likely it is that that credit union would lose money on debit card transactions. The NCUA again asked the Fed to ensure that a planned interchange fee cap exemption for credit unions with under $10 billion in assets will work as planned. The NCUA's analysis found that "direct costs per transaction do not fall below the proposed cap until credit unions reach $100 million to $500 million in assets." Credit unions with $10 million or less in assets pay a median cost of 31 cents per debit transaction. Credit unions with $50 million to $100 million in assets pay a median cost of 19 cents per transaction. The NCUA said that these costs "significantly exceed the maximums allowed under the proposed rule," which could set the interchange fee cap at a maximum of 12 cents per transaction. The NCUA acknowledged its cost analysis "likely understates costs for debit card transactions" and was limited to a portion of the total costs of providing debit services. It excluded all "labor, facilities, equipment and other overhead costs," and it appears NCUA considered only a subset of the fees that credit unions pay to third parties in the provision of debit services. For the full letter, use the resource link.

Inside Washington (05/04/2011)

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* WASHINGTON (5/5/11)--Narrowing the scope of commercial banking would help offset risk in the financial system, Thomas Hoenig, the president of the Federal Reserve Bank of Kansas City, said Tuesday (American Banker May 4). Hoenig acknowledged it would be nearly impossible to eliminating all risk in the banking system. Hoenig, speaking at the Independent Community Bankers Association conference, said regional and community banks were just as important to the financial systems as the big banks. Limiting the breadth of activities banks could perform would help level the playing field between large and small institutions, Hoenig said. He noted that credit default swaps or structured investment vehicles were generated by commercial banking industry and created more leverage in financial system … * WASHINGTON (5/5/11)--A House Financial Services subcommittee on Tuesday approved a bill to create a market covered bonds in the U.S. The bill, approved by a voice vote of the capital markets dubcommittee, was reintroduced by Rep. Scott Garrett (R-N.J.), who said the legislation will generate increased liquidity and help U.S. financial institutions better compete against their overseas competitors. “With our economy still recovering from the financial crisis and the need to unlock credit at an all-time high, facilitating the development of a covered bond market in the U.S. makes perfect sense,” Garrett said. Covered bonds have been used in Europe for centuries to help provide additional funding options for the issuing institutions and are a major source of liquidity for many European nations’ mortgage markets. The purpose of the U.S. Covered Bond Act of 2011 is to create a legislative framework for the development of a covered bond market in the U.S., he said in a news release … * WASHINGTON (5/5/11)--The Federal Deposit Insurance Corp. (FDIC) on Tuesday closed on a sale of securities as part of a securitization backed by about $394.3 million of performing commercial and multi-family mortgages from 13 failed banks. The securities were purchased by an affiliate of LNR Partners LLC. The FDIC described the sale as a pilot transaction, which marked the first time the agency has sold commercial mortgage loans in a securitization since the beginning of the recent financial crisis. The sale consisted of three securities. The highest-quality, or senior, securities included 80% of the assets, and were at a fixed rate of 1.84%. They are expected to have an average life of 2.6 years. Mezzanine certificates totaled $39.4 million, about 10% of the capital structure, sold at a fixed-rate coupon of 5% and are expected to have an average life of 6.5 years. The subordinate class also totaled $39.4 million and represented the most junior 10% of the capital structure. They sold at a fixed-rate coupon of 5% and are expected to have an average life of 7.1 years. The mezzanine and subordinate certificates are not guaranteed by the FDIC … * WASHINGTON (5/5/11)--The Special Foreclosure Edition of Supervisory Insights, released Wednesday by the Federal Deposit Insurance Corp. (FDIC), highlights lessons learned from an interagency horizontal review of the 14 largest residential mortgage servicers. This review resulted in consent orders for all entities reviewed. FDIC reviews of state nonmember banks have not identified instances of “robo-signing” or other serious deficiencies in mortgage servicing operations. The special edition provides examples, derived from the lessons learned, of effective residential mortgage servicing practices. Supervisory Insights provides a forum for discussing how bank regulation and policy are put into practice in the field, sharing best practices, and communicating about the emerging issues that bank supervisors face. The journal is available on the FDIC’s web site … * WASHINGTON (5/4/11)--The Office of the Comptroller of the Currency (OCC) announced Wednesday that David K. Wilson will become Senior Deputy Comptroller for Bank Supervision Policy and Chief National Bank Examiner on July 1, succeeding retiring Tim Long. In this post Wilson will chair the OCC’s Committee on Bank Supervision, direct the formulation of policies and procedures for supervision and examination of national banks, and serve as member of the agency’s Executive Committee …

30000 Ohio CU members urge interchange action

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WASHINGTON (5/4/11)--Nearly 30,000 Ohio credit union members this week stepped up their efforts to urge a delay of a government-set debit card interchange fee cap. They signed a petition asking Sen. Sherrod Brown (D-Ohio) to stop, study and start over on interchange regulations. The Ohio Credit Union League said that the petition was signed by members of more than 50 credit unions throughout the state. An additional 7,000 pro-interchange delay emails, letters and phone calls have made their way to Ohio legislators, and credit union representatives met with several of those same legislators during the just-completed two week district work period. Darrick Weeks, chief operations officer of Fairborn, Ohio-based Wright-Patt CU said in a league release that the response that Ohio credit unions are seeing from their members “proves their desire to see Congress stop, study, and start over." Members, leagues, and credit unions nationwide have made similar efforts over the last two weeks, and Credit Union National Association (CUNA) Senior Vice President of Legislative Affairs John Magill said that credit union supporters must not “ease up" if they want to ensure that the momentum that interchange implementation delay legislation has gained in recent weeks will continue to build. Under requirements of the Dodd-Frank Wall Street Reform Act, the Federal Reserve Board has proposed a debit card interchange limit that would top such fees at 12 cents. The law intends to exempt credit unions and other small institutions with assets of $10 billion or less from fee cap. However, the effectiveness of the proposed exemption has been hotly debated, and many analysts agree that the statutory exemption will not work as intended. CUNA supports House and Senate legislation that would delay the implementation of the interchange regulations and order a study of their impact on consumers, financial institutions, and merchants. CUNA earlier this week also noted in a comment letter to the Fed that that agency has the authority to delay portions of the interchange proposal that would address exclusivity arrangements and routing restrictions. CUNA suggested that these provisions could be delayed by up to 24 months. (See related May 3 story: Fed can delay some interchange provisions: CUNA.)

CUNA NCUA credit-rating changes could harm CUs

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

Inside Washington (05/03/2011)

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

CFPB tax hearings on tap as Congress returns

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WASHINGTON (5/3/11)--As Congress restarts after its two-week district work period, credit unions will want to watch a Wednesday House Financial Services subcommittee on financial institutions and consumer credit hearing for clues on potential changes to the structure of the Consumer Financial Protection Bureau (CFPB). The subcommittee will mark up H.R. 1121, the Responsible Consumer Financial Protection Act; H.R. 1315, the Consumer Financial Protection Safety and Soundness Improvement Act; and other legislation related to the date for transfer of functions to the CFPB if the bureau does not have a director in place. The CFPB is scheduled to take over a host of financial regulatory activities on July 21. H.R. 1121 would replace the proposed single CFPB director position with a five-person panel. H.R. 1315 would replace the proposed two-thirds voting approval threshold with a simple majority threshold. Doing so would strengthen the Financial Stability Oversight Council’s (FSOC) review authority over regulations that are issued by the CFPB. The Credit Union National Association (CUNA) has said that credit unions should be adequately represented if the single director position is expanded to a five-person panel. CUNA also suggested that the FSOC could set aside CFPB rules if it determines that a new rule would be unreasonably burdensome for financial institutions and the burden to financial institutions outweighs the benefit to consumers. CUNA Vice President of Legislative Affairs Ryan Donovan said that while the CFPB-related bills will likely pass out of the subcommittee, and could be marked up in full committee, their final fate is not certain. “We have seen very little appetite in the Senate to consider these types of changes to Dodd-Frank Act,” he added. A Senate Finance Committee hearing, entitled “Is the Distribution of Tax Burdens and Tax Benefit Equitable?,” is scheduled for 10 a.m. ET, and the Senate Banking Committee will hold confirmation hearings for several Treasury department nominees at that same time. The House Financial Services subcommittee on capital markets and government sponsored enterprises will also mark up legislation related to capital formation, data collection, covered bonds, access to capital, and market stabilization, among other topics, at 10 a.m. ET.

Fed can delay some interchange provisions CUNA

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WASHINGTON (5/3/11)--Credit Union National Association (CUNA) President/CEO Bill Cheney Monday said the Federal Reserve Board has the authority to delay portions of pending statutory changes to debit card interchange rules, and he urged the Fed to use that authority. Cheney contacted Fed Chairman Ben Bernanke by letter. The letter was also sent to all other Fed board members and the agency's general counsel. Cheney called on the Fed to enact a delay of as long as 24 months on portions of the its interchange proposal that would address exclusivity arrangements and routing restrictions. Under requirements of the Dodd-Frank Wall Street Reform Act, the Fed has proposed a debit card interchange limit that would top such fees at 12 cents. The law intends to exempt credit unions and other small institutions with assets of $10 billion or less from fee cap. However, the effectiveness of the proposed exemption has been hotly debated, and many analysts agree that the statutory exemption will not work as intended. While rules that would set an artificial cap on the amount that large issuers may receive for each individual debit card transaction are required by law to take effect on July 21, Congress said the Fed had to write rules on the exclusivity and routing provisions by July 21. It did not provide a specific effective date for the routing and exclusivity provisions. “Delaying the effective date of these provisions would not undermine merchants’ ability to pay lower fees to large issuers. Such a delay would, however, allow time for the exemption to work for small issuers, as Congress intended, without any group of issuers or the federal government being harmed as a result of compliance with the routing and exclusivity provisions,” the letter adds. Cheney noted that “there is little clarity” on the impact that portions of the interchange proposal that address routing and exclusivity will have on the financial marketplace. The letter added that “there is a significant likelihood” that these provisions will undermine the exemption for small issuers. “There are also concerns about the effects of these provisions on government debit card programs,” Cheney added. Separate House and Senate bills would delay implementation of the new interchange rules and would order a study of the impact a debit card interchange fee cap would have on consumers, financial institutions, and merchants. In the House, Rep. Shelley Moore Capito's (R-W.Va.) H.R. 1081 has 84 co-sponsors. The Senate version of interchange delay legislation (S. 575), introduced by Sen. Jon Tester (D-Mont.) and Bob Corker (R-Tenn.), has 16 co-sponsors. CUNA continues to back both of these pieces of legislation, and credit unions and leagues nationwide have called on legislators to support an interchange delay in recent in-district meetings. Credit union members and other supporters have also directly contacted their respective members of Congress via e-mail, with over 200,000 of them reaching their legislators through CUNA’s CapWiz program.

Inside Washington (05/02/2011)

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* ALEXANDRIA, Va. (5/3/11)--The National Credit Union Administration (NCUA) Board Chairman Debbie Matz activated the agency’s disaster relief policy to assist credit unions and their members in rebuilding and recovering areas in Tennessee and additional counties in Mississippi severely damaged by last week’s tornadoes. Yesterday’s announcement builds on Saturday’s decision by NCUA to provide disaster assistance in Alabama, Georgia and Mississippi. President Barack H. Obama has now declared that a major disaster exists in Tennessee and ordered federal aid to supplement state and local recovery efforts. The president’s actions make federal funding available for these affected Tennessee counties: Cheatham, Davidson, Hickman and Williamson. Four additional counties in Mississippi were added to the list of those announced Saturday. Mississippi’s Chickasaw, Choctaw, Neshoba and Webster counties also can access federal emergency assistance programs. Under the agency’s disaster assistance policy, NCUA will, where necessary encourage credit unions to make loans with special terms and reduced documentation to affected members; reschedule routine examinations of affected credit unions if necessary; guarantee lines of credit for credit unions through the National Credit Union Share Insurance Fund; and make loans to meet the liquidity needs of member credit unions through the central liquidity facility … * WASHINGTON (5/3/11)--John Munn, director of the Nebraska Department of Banking and Finance since 2005, will again chair the Federal Financial Institutions Examination Council's (FFIEC) State Liaison Committee (SLC), the FFIEC announced Monday. Munn’s most recent term as chairman is set to continue until April 30, 2012. He has served as chairman since he was elected to a partial term in 2008. The FFIEC also announced that Charles Vice, commissioner of the Kentucky Department of Financial Institutions, will continue to serve on the SLC through April 30, 2013. Vice’s previous two-year term was set to expire this year. The SLC is a five-member panel of state financial regulatory agencies that works to encourage "the application of uniform examination principles and standards by state and federal agencies" and allows state regulators to "participate in the development of those principles and standards." Texas Credit Union Commissioner Harold Feeney was one of three SLC members to be re-appointed last month. Doug Foster, commissioner of the Texas Department of Savings and Mortgage Lending, and Massachusetts Division of Banks Commissioner David Cotney also serve on the SLC. SLC members serve two-year terms. National Credit Union Administration (NCUA) Chairman Debbie Matz last month agreed to assume leadership of the FFIEC for a two-year term. Matz is the first NCUA leader to take charge of the FFIEC in more than 20 years. Matz has said she will work to restore "the responsibility and accountability in our financial system" during her term as FFIEC leader ... * WASHINGTON (5/3/11)--An insurance firm has launched a new product providing additional coverage to executives and directors at financial companies whose personal assets are now at greater risk as a result of expanded Federal Deposit Insurance Corporation (FDIC) authority as provided under the Dodd-Frank Act. The firm, Marsh USA Inc., has created a new form of insurance protection designed to cover the costs associated with an FDIC receivership action. Under Dodd-Frank, the FDIC was given authority to become the receiver of a wider range of struggling financial companies. Under this authority, the FDIC can conduct investigations, recoup executive compensation, repudiate personal services contract and sue directors and officers of financial companies in receivership. The FDIC has the authority to repudiate contracts that it determines to be “burdensome,” including compensation agreements. The regulator can also recoup compensation received during the previous two years by any current or former senior executive or director that it deems “substantially responsible for the failed condition” of the company …

CUNAs Ryan Donovan named a top lobbyist

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WASHINGTON (5/3/11)-- CEO Update newsletter has named Credit Union National Association Vice President of Legislative Affairs Ryan Donovan one of 2011’s top lobbyists. CEO Update is a widely read, twice-monthly print publication for executives in the association and nonprofit fields. The CEO Update special edition “highlights those who deftly employed the tradecraft of association lobbying--whether identifying issues of concern before their impact is widely known, energizing members for visits to the Hill, winning the information war, forming coalitions, marshaling experts, wearing out shoe leather or simply being a good judge of people.” Donovan was extensively quoted in a story on the ongoing fight over interchange fee cap legislation, in which he notes that credit unions and banking interests have worked together to build momentum for an amendment that would delay the implementation of proposed interchange fee cap rules for up to two years. While the need to focus only on one aspect of the overall Dodd-Frank Act gave retailers a “terrific advantage,” during consideration of the Dodd-Frank Act, Donovan said that his ability to explain complicated financial issues in ways that “members of Congress and their staffs can understand” has helped credit unions refocus the debate on the unintended consequences of the debit interchange regulations. The CEO Update item notes that staying aware of the issues, framing policy debates, and building coalitions are all central to lobbying success.

Matz Regulation leadership outreach key to CUs

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ALEXANDRIA, Va. (5/3/11)--“Effective regulation, effective volunteer leadership, and effective outreach” are core elements of a strong credit union system, National Credit Union Administration (NCUA) Chairman Debbie Matz said in a Monday address before the Credit Union National Association’s Volunteer Institute in St. Thomas, Virgin Islands. Effective regulation, according to Matz, allows the NCUA to protect member investments in the National Credit Union Share Insurance Fund. “Whenever a credit union is taking chances that threaten to cause serious losses, we are doing everything in our power to prevent those losses before they impact all federally insured credit unions,” Matz said, adding that “responsiveness to regulation is not enough to keep credit unions strong.” Effective volunteer leadership helps credit unions be responsive ”to credit union members and communities at large.” The agency through its recently released rules addressing credit union board members’ fiduciary duties is “clarifying and codifying the skills volunteer leaders need.” The agency is providing 34 free workshops and creating online course materials to educate volunteers. These materials will be made available before July 27, the date by which credit unions will be expected to institute financial education programs. These programs will need to sufficiently educate board members on how to understand balance sheets and income statements, and can cover other finance-related skills. “The most successful credit unions in the days ahead will not only be those with effective leadership, but also those that conduct effective outreach,” Matz added. To continue to be viable, credit unions must attract members that are younger than the current peak borrowers' age of 44. Credit unions must adapt to current and emerging technologies and enhance mobile access if they want to attract these younger consumers, Matz said. “If you can take your traditional member service and marry it with today’s cutting-edge technology, then you’ll have unlimited potential for a more prosperous tomorrow,” she said. For the full NCUA release, use the resource link.

CU disaster assistance activated for tornado areas

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ALEXANDRIA, Va. and Madison, Wis. (5/2/11)—In response to the devastation caused by deadly tornados last week, the National Credit Union Administration (NCUA) has activated its disaster relief policy and the National Credit Union Foundation (NCUF) has activated the online disaster relief system CUAid.coop. President Barack Obama has declared a major disaster exists in several southeastern states and he ordered federal aid to supplement state and local recovery efforts. The president’s actions make federal funding available for affected areas in Alabama, Georgia and Mississippi. Additional jurisdictions may receive designation after the completion of further assessments. (See relate4d story: CUs pick up the pieces in tornadoes' aftermath.) Under the NCUA disaster relief policy, the agency will, where necessary:
* Encourage credit unions to make loans with special terms and reduced documentation to affected members; *Reschedule routine examinations of affected credit unions if necessary; * Guarantee lines of credit for credit unions through the National Credit Union Share Insurance Fund; and *Make loans to meet the liquidity needs of member credit unions through the Central Liquidity Facility.
After natural disasters, the NCUA works with individual state league organizations and state regulators to ensure all federally insured credit unions know of NCUA’s available assistance, the agency said. The agency added that its examiners have remained in close contact with the affected local credit unions to offer advice and assistance. Credit unions and credit union members needing help in the southeast because of this week’s storms may contact NCUA’s Region III office in Atlanta at 678-443-3000 during normal business hours. (Use the resource link to see the NCUA’s entire statement.) Also announced over the weekend, the NCUF’s CUAid, which enables credit union employees, volunteers, and members, as well as credit unions and state credit union foundations across the country to contribute directly to support other credit union people, prepared to coordinate donations. The secure online tool links the entire credit union system to raise money for disaster relief; prior to the April tornados, the aid system most recently was used after the earthquakes in Haiti early last year. “We encourage credit union leaders all across the country to use CUAid.coop as a channel to collect donations from their employees, volunteers, and members,” said NCUF Executive Director Bucky Sebastian. Use the resource link below for donations.