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Inside Washington (06/03/2010)

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* WASHINGTON (6/4/10)--Lending to small businesses has been declining, Federal Reserve Board Chairman Ben Bernanke said in a speech this week in Detroit. Outstanding loans to small businesses dropped to $660 billion in the first quarter of this year from $700 billion in the second quarter of 2008. “From the potential borrower’s point of view, particularly a borrower who has been able to obtain loans in the past, these changes may feel like a reduction in the supply of credit; from the lender’s point of view, the problem appears to be a lack of demand from creditworthy borrowers,” Bernanke said. “Although lenders and borrowers may have different perspectives, our collective challenge is to help ensure that creditworthy borrowers have access to credit so that they can expand their businesses or increase payrolls, helping our economy to recover.” The Credit Union National Association (CUNA) and credit unions have lobbied to lift credit unions’ caps on member business lending to 25% from 12.25%. CUNA figures show lifting the cap would bring $10 billion in new credit and create more than 100,000 new jobs ... * WASHINGTON (6/4/10)--Auto lending could experience tighter regulation because of the financial crisis, and financial observers anticipate that this tightening will specifically affect car repossession. Car repossession is governed by state laws, but some financial experts say more oversight of the auto industry could take place through regulatory reform. If there is an “integrated consumer finance regulator, I have no doubt that auto finance, broadly speaking, would be an important area for it to focus its agenda,” said Raj Date, chairman and executive director of the Cambridge Winter Center for Financial Institutions Policy. There were two million self-help repossessions in 2009, some by unlicensed individuals and criminals, said the National Consumer Law Center (American Banker June 3). No license is required to carry out repossessions in 33 states, the center said. The center has proposed that states stop self-help repossession and involve law enforcement authorities. Some also say repossession agents should complete a standard licensing process, the Banker said ...

Lifting MBL cap gives small biz fresh capital NAR

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WASHINGTON (6/4/10)--The National Association of Realtors (NAR) this week continued its recent support of raising the member business lending (MBL) cap for credit unions, telling News Now that “lifting the current cap on credit union business lending will provide fresh capital that small businesses need at no cost to the American taxpayer, which will help contribute to our nation’s economic recovery." "Improving access to capital for small businesses has been widely acknowledged as a critical part of growing the American economy,” the NAR representative added. NAR also testified in favor of lifting the MBL cap beyond the current 12.25%-of-assets threshold before Congress last month and has directly advocated on behalf of credit unions through their own hike-the-hill style program. The U.S. Treasury, Rep. Paul Kanjorski (D-Penn.) and Sen. Mark Udall (D-Colo.) have all proposed separate pieces of legislation aimed at the MBL cap, with the Treasury proposing to lift the cap to as high as 27.5% of a credit union’s total assets. The House and Senate bills each propose lifting the MBL cap to 25% of a credit union’s total assets, and Kanjorski’s bill currently enjoys broad support, with 122 cosponsors. The Credit Union National Association has estimated that lifting the MBL cap to 25% of a credit union's assets would create over 100,000 new jobs and inject over $10 billion in funds into the economy, at no cost to taxpayers. Rep. Barney Frank (D-Mass.) last month indicated that his House Financial Services Committee would hold a vote on MBL legislation "fairly soon."

Interchange efforts increase before next weeks Hill hike

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WASHINGTON (6/4/10)—With the number of responses to the Credit Union National Association's (CUNA) call for grassroots interchange advocacy totaling over 150,000 as of Thursday night, credit unions and credit union leagues also are working to urge their federal lawmakers to block interchange language from a financial regulatory reform package. The House and Senate are currently working toward resolving differences between their respective versions of financial regulatory reform bills. The Senate bill proposes to allow government intervention in setting interchange fees, while the House bill has no interchange language. Among the many leagues working to positively change the financial regulatory reform package are groups from Ohio, Pennsylvania, Michigan, Wisconsin, California and Oklahoma. The Ohio Credit Union League has noted the more than 7,000 contacts with Ohio congressmen and women that have been made by over 2,300 leaders from 91 Ohio credit unions. The Madison Chapter of the Wisconsin Credit Union League last week ran a full-page, open letter to debit card users in the Wisconsin State Journal and has also taken to social networking websites such as Facebook to encourage “friends” to fight the new interchange regulations. The Pennsylvania League has also highlighted the efforts of Hershey FCU, Patriot FCU, American Heritage FCU, Guthrie FCU, Erie FCU, and PSECU, and encouraged its member credit unions to “inundate district offices with letters, phone calls, and faxes” and to oppose interchange changes by directly speaking with their congressional representatives at local appearances. Sen. Richard Durbin’s (D-Ill.) interchange proposal, which would direct the Federal Reserve to issue regulations to govern interchange fees charged for debit card transactions, continues to receive critical press. The Washington Times was among the latest news source to speak against interchange changes, with a Wednesday editorial warning readers that Durbin’s amendment is “aimed at your wallet.” “Inevitably,” the editorial adds, the costs of running debit card programs “will be shifted from merchants to consumers.” CUNA continues to encourage all state credit union leagues to coordinate with their member credit unions to ensure that their D.C.-based representatives are informed of the dangers that interchange legislation poses to credit unions and to promote participation in next week’s Hike the Hill, which will give credit union leagues and employees direct access to their elected representatives.

Foreclosures among next items before Fed consumer advisers

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WASHINGTON (6/4/10)-The Federal Reserve Board announced Thursday that its Consumer Advisory Council (CAC) intends to take up foreclosure issues at its next meeting, on June 17. A Fed announcement said CAC members will discuss loss-mitigation efforts, including the Administration’s Making Home Affordable program, neighborhood stabilization initiatives and challenges, and other issues related to foreclosures. Also on the agenda:
* The Home Mortgage Disclosure Act: In the context of the Fed board’s review of Regulation C, which implements HMDA, CAC members will consider whether revisions to HMDA rules in 2002, which required lenders to report mortgage pricing data, have helped generate useful and accurate information about the mortgage market; the need for additional data and other improvements; and what emerging issues in the mortgage market may warrant additional research; and * The Community Reinvestment Act (CRA): There will be discussion regarding the future of CRA, including possible changes in light of developments in the financial services industry and issues associated with the foreclosure crisis.
The CAC advises the Fed on its responsibilities under the Consumer Credit Protection Act and on other matters in the area of consumer financial services. The group meets three times a year in Washington, D.C. and meetings are open to the public. Alan Cameron, president/CEO of the Idaho Credit Union League, is a representative on the council. His term runs through 2010.

Financial institution assessed 1M penalty for BSA violations

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VIENNA, Va. (6/4/10)—The Financial Crimes Enforcement Network (FinCEN) revealed Thursday that it assessed a $1 million civil money penalty against a savings bank in New Jersey for violating a number of Bank Secrecy Act (BSA) requirements. FinCEN cited Pamrapo Savings Bank, S.L. A., of Bayonne, with a lack of internal controls, unqualified BSA compliance personnel, “relatively non-existent” training, and deficient independent testing. FinCEN said the deficiencies resulted in a “wholly ineffective” BSA compliance program which, in turn, resulted in a failure to file a substantial number of currency transaction and suspicious activity reports in an accurate and timely manner. FinCEN further charged that the bank misled regulators about its attempt to fix the problems. Pamrapo Savings Bank, without admitting or denying the allegations, consented to payment of the civil money penalty, FinCEN said in a release. FinCEN, an arm of the U.S. Treasury Department, was created to enhance U.S. national security, deter and detect criminal activity, and safeguard financial systems from abuse by promoting transparency in the U.S. and international financial systems. “Without an effective (anti-money laundering) program, a financial institution deprives law enforcement of valuable tools made available for investigations under the BSA, and exposes the institution to illicit activity,” said FinCEN Director James H. Freis, Jr. “Information reported to FinCEN can be the tip-off that triggers an investigation or provides significant support to an investigation already underway. This can only happen when a financial institution has an effective anti-money laundering program in place.” FinCEN said the Pamrapo investigation and resulting civil money penalty was part of a coordinated effort with the U.S. Attorney's Office for the District of New Jersey, the Asset Forfeiture and Money Laundering Section of the U.S. Department of Justice, and the Office of Thrift Supervision. FinCEN’s assessment is in addition to forfeiture and civil money penalty actions by the DOJ and OTS, respectively, in March 2010.