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Washington Archive

Washington

Fed to consider final interchange rule June 29

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WASHINGTON (6/22/11)--The Federal Reserve Board Tuesday announced it will consider a final rule to implement a statutory cap on debit card interchange fees at an open meeting on Wednesday, June 29. The Fed agenda item is described as: Proposed Governing Debit Card Interchange Fees, the Fraud Prevention Adjustment, Routing and Exclusivity Restrictions and related matters. All eyes have been on the Fed since the U.S. Senate earlier this month voted against imposing a delay on the fee cap rule, which was ordered by last year’s Dodd-Frank Wall Street Reform Act. Dodd-Frank said the Fed must set a cap that is “reasonable and proportionate” and that exempts issuers with less than $10 billion in assets. Credit unions and other card issuers have objected to the Fed’s draft proposal that would have set the cap at 12 cents per transaction. They have voiced concern that such a low fee does not factor in enough costs and could force debit card issuers to charge fees to consumers for the popular debit card service. The fact that the Fed’s plan has not factored in fraud costs has been a major concern. Dodd-Frank set a July 21 implementation date for the interchange rule. When the Senate failed to pass the bill that would have delayed implementation by a year, the Credit Union National Association (CUNA) promptly sent a letter to all Fed governors to reiterate several recommendations that could help insulate small issuers from the negative impact on their income that many fear will be the result of the Fed's current proposal. Among the actions CUNA President/CEO Bill Cheney suggested:
* Establish a monitoring process under which the card networks would first report to the Board that a two-tiered structure has been established and then report annually on how such a two-tiered system is working, and also provide that information to Congress; * Include all allowable and reasonable costs in setting the cap on interchange fees; and * Revise the proposal regarding routing and exclusivity provisions to consider either exempting small issuers or delay the provisions for up to 24 months for small issuers. (See resource link for full letter.)
Cheney also noted that the Senate clearly acknowledged with its 54-45 vote on the delay bill that there are issues with the debit card interchange fee cap that need to be examined before a rule goes into effect. "The legislation to delay the interchange provisions of the Dodd-Frank Act required 60 votes to pass the Senate, and it is a sore disappointment that the vote fell short of that. However, it is important to note that a majority of senators voted with us on the delay,” Cheney said at the time. He urged credit unions to build on the support and ask their senators to contact the Fed to recommend changes to the draft proposal to minimize negative effects on credit unions and their members. ( Use the second resource link to see CUNA’s 13 points to raise to the Fed. Cheney Letter to the Fed http://www.cuna.org/gov_affairs/download/interchngltr_bernanke_060811.pdf CUNA's 13 Points to Raise to the Fed http://www.cuna.org/download/nn061011.pdf

Inside Washington (06/21/2011)

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* WASHINGTON (6/22/11)--The summer 2011 issue of the Federal Deposit Insurance Corp/’s monthly Supervisory Insights newsletter, released yesterday, takes a look at U.S. Small Business Administration (SBA) guarantee loan programs and how they are “increasingly attractive to institutions looking to expand lending opportunities.” An article titled “SBA Lending: Insights for Lenders and Examiners” reviews the SBA’s most popular lending products, and the associated technical underwriting, servicing and liquidation requirements. The newsletter also features an article on how more banks are entering into deposit relationships with third-party payment processors. “Managing Risks in Third-Party Payment Processor Relationships” identifies “warning signs that may indicate heightened risk in a payment processor relationship, discusses the controls that should be in place to manage this risk, and explains supervisory remedies that may be used when it is determined a financial institution does not have an adequate program to monitor and mitigate the risks” … * WASHINGTON (6/22/11)--Acting Comptroller of Currency John Walsh acknowledged disagreement among U.S. banking agencies about the size of a proposed capital surcharge for the largest U.S. banks. The Office of the Comptroller of the Currency favors a modest surcharge, but other banking agencies are pushing for a higher one, Walsh told the American Banker (June 21). He specifically noted that Federal Deposit Insurance Corp. Chairman Sheila Bair favors a higher capital buffer. Federal Reserve Board Gov. Daniel Tarullo created a stir among bankers earlier this month when he suggested the surcharge could be as high as 7%. Most observers expected the proposal to be around 3%. Walsh said U.S. regulators are currently considering a surcharge between 1% and 3% … * WASHINGTON (6/22/11)--House Republicans have requested more details from the U.S. Treasury Department on Elizabeth Warren’s role in the mortgage foreclosure settlement negotiations. Warren is the White House’s adviser in the establishment of the Consumer Financial Protection Bureau (CFPB). Members of the House Oversight and Financial Services committees have forwarded a letter asking for documents and records related to the CFPB involvement in the negotiations between the state attorneys general and the five largest mortgage servicers (American Banker June 21). The letter requests unredacted copies all communications between the CFPB and the attorneys general, federal agencies and servicers; and any communications between Warren and the attorneys general, federal agencies, servicers or plaintiffs’ attorneys in any class action lawsuit. Last week the watchdog group Judicial Watch released e-mails that detailed some of Warren’s meetings with state and federal agencies …

NCUA Inherited IRA is insured but tax issues can be complicated

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ALEXANDRIA, Va. (6/22/11)--Under the right circumstances, an individual retirement account (IRA) with a designated beneficiary would continue to receive separate federal share insurance coverage after the owner’s death, according to a recent National Credit Union Administration (NCUA) legal opinion letter. NCUA Associate General Counsel Hattie M. Ulan writes in a June 6 letter that NCUA’s regulations provide share insurance coverage for a member’s IRAs up to a maximum of $250,000 that is separate from the member’s other accounts at the same credit union. [12 C.F.R. §745.9-2(c)(1)]. With respect to an inherited IRA, NCUA share insurance coverage will continue up to the $250,000 maximum, separate from the share insurance coverage for other IRAs and accounts owned by the designated beneficiary, if certain conditions are met. Those conditions include:
* The inherited IRA continues to be maintained in the name of the decedent; * The Internal Revenue Code and other applicable tax laws recognize the continued existence of the IRA after the death of the decedent; * The Internal Revenue Code and other applicable tax laws consider the named beneficiary as a qualified designated beneficiary for tax regulatory purposes; and * The inherited IRA is not commingled with other IRAs owned by the designated beneficiary.
Ulan cautioned in her letter, however, that issues related to tax-advantaged savings accounts are governed by the Internal Revenue Code and other applicable tax laws. They include, but are not limited to, the inheritability of an IRA, determination of who and how many individuals can qualify as a designated beneficiary, and account distribution options. “These tax related issues can be complex and are outside the purview of NCUA. We recommend that members fully understand these tax considerations as part of their overall financial planning and account structuring for share insurance purposes,” the NCUA opinion letter states.

Appeals filed in three CU cases on foreclosure notification

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KANSAS CITY, Mo. (6/22/11)--In three cases that hinge on the applicable statute of limitations for a consumer to protest allegedly defective pre-sale Uniform Commercial Code notices in the context a subsequent auto repossession, plaintiffs have filed appeals of a federal court’s recent decisions dismissing their cases. The appeals target decisions by a federal court last month to deny borrowers’ claims that their credit unions, through an agent--the now bankrupt subprime auto broker Centrix Financial--used faulty pre-sale notices that allegedly did not include information required by Missouri’s version of the Uniform Commercial Code. The credit unions later repossessed the vehicles from borrowers who fell behind in payments between November 2004 and January 2005. The plaintiffs filed these lawsuits against the credit unions in November and December 2010. The federal court denied plaintiffs’ claims saying that their suits were not filed within the five-year statute of limitations that the judge said applied to the cases. The plaintiffs argued, however, that a six-year statute of limitations should apply with respect to these claims. The U.S. Court of Appeals for the Eighth Circuit will now decide whether the district court’s decision that a five-year statute of limitations applied was correct. Centrix Financial is not a party in the lawsuit because it is in a Chapter 11 bankruptcy reorganization in Colorado. The cases involved are Moran v. Missouri Central CU, Rashaw v. United Consumers CU, and Knight v. Central Communications CU.

NEW Fed to consider final interchange rule June 29

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WASHINGTON (6/21/11 UPDATED 3:00 p.m. ET)--The Federal Reserve Board today put an end to speculation about when it might issue a final rule to implement a statutory cap on debit card interchange fees and announced the rule will be ready for public comment on Wednesday, June 29. The Fed agenda item is described as: Proposed Governing Debit Card Interchange Fees, the Fraud Prevention Adjustment, Routing and Exclusivity Restrictions and related matters. All eyes have been on the Fed since the Senate voted against imposing a delay on the fee cap rule, which was ordered by last year’s Dodd-Frank Wall Street Reform Act. Dodd-Frank said the Fed must set a cap that is “reasonable and proportionate” and that exempts issuers with less than $10 billion in assets. Credit unions and other card issuers have objected to the Fed’s draft proposal that would have set the cap at 12 cents per transaction. They have voiced concern that such a low fee does not factor in enough costs and could force debit card issuers to charge fees to consumers for the popular debit card service. See the link below to view the Fed’s notice.

Compliance MLOs must register by July 29

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WASHINGTON (6/22/11)--Credit unions and their residential mortgage loan originators (MLOs) have until July 29 to complete initial registration on the Nationwide Mortgage Licensing System & Registry (NMLS) as required by the Secure and Fair Enforcement for Mortgage Licensing Act (SAFE Act). After July 29, any MLO who has not yet registered on the NMLS will be prohibited from originating residential mortgage loans without first meeting this requirement. “There are a number of steps credit unions and their MLOs need to take in order to register on the NMLS,” said Valerie Moss, CUNA director of compliance information. “For example, credit unions need to determine which employees need to register, pick account administrators and set up the institution’s account, gather data to get MLOs properly registered, get MLOs fingerprinted for background checks, etc. So, no credit union should wait until late July to begin this process.” Registered MLOs will obtain a “unique identifier,” which is the identification number associated with the MLO within the NMLS. The unique identifier remains the same, even when the MLO changes employment, moves, or changes his or her name. This identifier tracks the MLO and facilitates public access to the employment history and any disciplinary or enforcement actions that have been initiated against the individual. Once registered, MLOs should start providing their unique identifiers to mortgage applicants as soon as they receive them. However, according to the NMLS, consumer access to the federal registry won’t begin until the initial registration period