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Washington Archive

Washington

Fryzel proposes an NCUA Consumer Protection Office

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ALEXANDRIA, Va. (7/1/09)--National Credit Union Administration (NCUA) Chairman Michael E. Fryzel will propose the creation of an NCUA Consumer Protection Office in the 2010 Agency Budget. "The new office will consolidate existing consumer protection functions already administered by NCUA and would create a liaison relationship with relevant external parties, such as the Consumer Financial Protection Agency (CFPA), if that proposed entity becomes a reality," Fryzel said Tuesday afternoon. President Barack Obama's recently released Financial Regulatory Reform proposal, called for the creation of the CFPA to protect consumers and investors from financial abuses. The proposed CFPA would have broad jurisdiction over credit, savings and payment products. "While NCUA has always placed a high priority on the enforcement of consumer regulations, and credit unions themselves have a strong track record of pro-consumer conduct, it is important that the highest level of compliance with these essential laws be maintained at all times," Fryzel said. Creating a dedicated Consumer Protection Office "will make NCUA supervision of consumer protections even more efficient and effective, and will further underscore the priority of this function," the chairman added.

Mica Treasury eager to discuss CU issues

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WASHINGTON (7/1/09)--Credit Union National Association President/CEO Dan Mica Tuesday met with Treasury Secretary Timothy Geithner to discuss some of the pressing issues currently of great interest to credit unions--including member business lending and alternative capital--and to ensure that credit unions would have a “place at the table” as the Obama administration and Congress move forward with their restructuring of the financial regulatory system.
Click for video CUNA President/CEO Dan Mica met with Treasury Secretary Tim Geithner Tuesday to discuss credit union regulatory needs. Click for a video summary of the meeting. (Photo provided by CUNA)
Mica and other CUNA representatives, including Chief Economist Bill Hampel, Vice President of Legislative Affairs Ryan Donovan, and Executive Vice President/General Counsel Eric Richard, discussed CUNA’s views regarding the general plans for regulatory restructuring and the Obama administration’s proposed Consumer Financial Protection Agency during the meeting. Geithner also showed an “intense interest” in the credit union-specific issues of member business lending and alternative capital, telling Mica that he looked forward to working with CUNA to address these and other issues. Overall, Geithner indicated that the Treasury recognizes the need to receive input from credit unions and a number of other outside sources as it works to correct some of the perceived deficiencies in the current financial regulatory structure. Mica said that CUNA would oppose any regulatory changes that would be redundant or would add an unneeded layer of additional regulatory complexity, adding that CUNA would favor easing some of the regulatory burden on credit unions. Mica told Geithner that CUNA is willing to discuss the administration’s proposed consumer financial protection agency in “good faith” as it is developed, provided that legislation would meet the needs of credit unions. (See related story: Obama admin delivers consumer protection plan) While some members of Congress have signaled their intent to keep the National Credit Union Administration (NCUA) independent, a position that CUNA also supports, Mica told Geithner that allowing the NCUA to remain independent would mean little if the NCUA was only afforded “a second-class existence.” For a video summary of the meeting, click on the photo.

Obama admin delivers consumer protection plan

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WASHINGTON (7/1/09)--The Obama administration on Tuesday revealed its full plan for a proposed Consumer Financial Protection Agency by delivering 152 pages of draft legislation to Congress. In a statement, President Obama said the planned agency would ban “the most unfair practices,” and added that “enforcement” would “be the rule, not the exception.” The legislation, as currently constructed, would transfer all consumer financial protection functions and authorities of the National Credit Union Administration (NCUA) to the proposed new agency. More generally, House Financial Services Committee Chair Rep. Barney Frank (D-Mass.) has repeatedly indicated that the NCUA would maintain its full independence under any resulting regulatory regime. In a Tuesday statement that followed the administration’s release, Frank said that while he welcomed the Obama administration’s legislative blueprint for the agency, “the committee will, of course, exercise its own judgment on the specifics.” The House Financial Services Committee began its discussion of the proposed Consumer Financial Protection Agency last week, and the committee is scheduled to continue the discussion once it has returned from the Independence Day district work period. Frank previously has said that the committee would begin marking up related legislation in July, and Tuesday added that his group would “draft and approve a bill in committee before the August recess.” Frank has indicated that while the final regulatory reform legislation would take the form of one all-encompassing bill, each piece of that legislation will be discussed and marked up separately by his committee.

Loan modifications delinquencies foreclosures up

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WASHINGTON (7/1/09)--The Office of the Comptroller of the Currency (OCC) and the Office of Thrift Supervision (OTS) reported increases in loan modifications, foreclosures, and the number of loan delinquencies in their mortgage metrics report for the first quarter of 2009. In the press release, Comptroller of the Currency John Dugan said that while he is “very concerned about the rise in delinquent mortgages and foreclosure actions, the shift in emphasis by servicers to more sustainable, payment-reducing modifications is a positive step that should show significant benefits in the coming months.” Loan servicers implemented over 185,000 loan modifications during the quarter, a 55% increase from the prior quarter and up 172% from the corresponding period in 2008, the release said. Over half of these loan modifications lowered both principal and interest payments for their homeowners, the agencies said. While modifications have helped some homeowners avoid foreclosure, the foreclosure process was unavoidable for others. The agencies reported a 22% rise in in-process foreclosures during the quarter. The first quarter foreclosure total of 844,389 represented a 73% increase from the amount reported during the corresponding period of 2008. So-called “seriously delinquent” mortgages -- those that are more than 60 days overdue -- also rose, with prime mortgages representing two-thirds of that total. The report, which detailed the status of $6 trillion in funds spread over 34 million mortgage loans, did not reflect the impact of the recently implemented Making Home Affordable or Hope for Homeowners programs.

Inside Washington (06/30/2009)

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* WASHINGTON (7/1/09)--Reps. Travis Childers (D-Miss.) and Gary Miller (R-Calif.) on Tuesday introduced legislation that would direct the Federal Housing Finance Agency to suspend for 18 months its Home Mortgage Valuation Code of Conduct, a code that prevents loan officers and brokers from requesting appraisals themselves. A mortgage broker group has alleged that the legislation, which became effective on May 1 of this year, delays mortgage closings and harms brokers’ business overall, National Mortgage News reported. * WASHINGTON (7/1/09)--Donna J. Gambrell, Director of the Treasury’s Community Development Financial Institutions (CDFI) Fund will later today award $8 million in financial aid and $3.6 million in technical assistance funds to CDFIs that serve the Native American, Alaska Native, and Native Hawaiian communities. The announcement is scheduled to take place at the Lakota Trade Center, a Kyle, South Dakota-based CDFI recipient that aids local businesses and entrepreneurs… * WASHINGTON (7/1/09)--The Federal Reserve Board’s supervisory role over financial institutions that participate in discount window borrowing is not very different from the role of a systemic risk regulator, according to Eric Rosengren, president/CEO of the Federal Reserve Bank of Boston (American Banker June 30). Rosengren commented on the Fed’s powers during a risk regulation summit in Brussels, saying it might be logical for the Fed to assume the role of discount window operator. A macroprudential supervisor should be attuned to changes in leverage, asset-liability mix or underwriting standards, Rosengren added. His comments came after congressional leaders expressed doubt about giving the Fed systemic risk responsibilities under President Barack Obama’s financial regulatory restructuring plan ... * WASHINGTON (7/1/09)--Henry Paulson, former Treasury Secretary, is scheduled to testify July 16 regarding the government’s role in a Bank of America/Merrill Lynch deal. Paulson should be ready to discuss when federal officials knew of losses at Merrill Lynch and their decision to give $20 billion in rescue money to Bank of America in January, Reps. Dennis Kucinich (D-Ohio) and Edolphus Towns (D-N.Y.) said in a letter. The hearing will be held by the House Committee on Oversight and Government Reform. Paulson will be the third to testify in hearings regarding the Bank of America and Merrill Lynch deal (American Banker June 30). Federal Reserve Board Chairman Ben Bernanke and Bank of America CFEO Kenneth Lewis have been scrutinized by lawmakers this month for completing the deal, even though Merrill suffered significant losses shortly before Bank of America acquired the firm ...

Inside Washington (06/29/2009)

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* WASHINGTON (6/30/09)--President Barack Obama’s proposal for financial regulatory reform would expand the Federal Reserve Board’s umbrella supervisory powers by removing restrictions that prevent the Fed from examining, requiring reports from or enforcing higher capital limits at big banks (American Banker June 29). The Obama administration argues that the restrictions prevented the Fed from using its supervisory powers. Financial industry observers disagree, saying the Fed did not use the powers it had. The Fed fought for supervisory powers in the 1990s and was allowed to examine financial holding company and bank subsidiaries. But the Fed had to rely on information from the institution’s regulator, observers said. Gil Schwartz, former Fed lawyer, said he doesn’t remember the Fed saying it couldn’t obtain the information. He doesn’t sympathize with those who say the Fed could have done more if it had more information. Obama pointed to the Gramm-Leach-Bliley Act as a cause of the financial crisis, but Schwartz said under Gramm-Leach-Bliley, the Fed could have forced a holding company to sell a subsidiary because of safety and soundness concerns ... * WASHINGTON (6/30/09)--The Treasury has released more information for banks that want to return Troubled Asset Relief Program (TARP) funds in regards to repaying warrants. A bank wishing to repay a warrant must submit an offer of fair market value within 15 days of repayment. The Treasury would have 10 days to accept the offer (American Banker June 29). If the offer is rejected, Treasury and the bank would select independent appraisers to value the warrants. If the appraisers do not agree on a price, a third appraiser may be hired to establish fair market value. If a bank chooses not to repurchase the warrant, the Treasury could dispose of the warrant however it wants to over time ...

Treasury program awards 17.M to CDCUs

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WASHINGTON (6/30/09)--Treasury Secretary Tim Geithner on Monday joined Rep. Jose Serrano (D-N.Y.) and Community Development Financial Institutions (CDFI) Fund Director Donna Gambrell to announce the disbursement of $90 million in CDFI program recovery act awards to 59 CDFIs that work in underserved communities. Over $17 million of the $90 million in award money was granted to nine credit unions. They are:
  • Alternatives FCU, Ithaca, N.Y.;
  • ASI FCU, Harahan, La.;
  • Brooklyn Cooperative FCU, Brooklyn, N.Y.;
  • Communicating Arts CU, Detroit, Mich.;
  • First Legacy Community CU, Charlotte, N.C.;
  • Latino Community CU, Durham, N.C.;
  • Mendo Lake CU, Ukiah, Calif.
  • Opportunities CU, Burlington, Vt.; and
  • Santa Cruz Community CU, Santa Cruz, Calif.
In comments accompanying the press release, Geithner said the $90 million in funding provided by the recovery act awards “will help generate capital for small businesses, mortgage loans for homebuyers, and funding for affordable housing projects and other facilities in communities across the country.” The CDFI Fund awards were announced at New York-based Point Community Development Corp., an organization that works to promote the arts and local business in portions of the South Bronx area of New York City. Point Community currently receives financial support from a local CDFI, according to the Treasury release. Washington State’s Express CU, Seattle, and The Union CU, Spokane, as well as Waipahu, Hawaii-based Kunia FCU each received around $100,000 in funds when the CDFI Fund awarded technical assistance grants in April of this year. The CDFI Fund is expected to announce a further $50 million in 2009 annual appropriations by the end of September.

Supreme Court ruling could impact FCUs says Mica

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WASHINGTON (6/30/09)--Credit Union National Association President/CEO Dan Mica said Monday that the Supreme Court’s opinion in Cuomo v. Clearing House Association LLC could “leave the door open wider for state attorneys general to bring consumer protection lawsuits against federally chartered institutions, including credit unions.” However, Mica added, these types of lawsuits by state attorneys general are seldom brought against credit unions due to their “good record on consumer protection issues.” The Supreme Court decision, which was handed down on Monday, was written by Justice Antonin Scalia and signed by justices John Paul Stevens, David Souter, Ruth Bader Ginsberg, and Stephen G. Breyer. The decision ruled that federal banking regulations do not preempt the rights of state attorneys general to enforce otherwise non-preempted state consumer protection laws using the court system. According to Mica, this Supreme Court opinion, which holds that the National Bank Act does not preempt the ability of state authorities to sue national banks, “has more to do with who may sue federal institutions than with what subjects are preempted by federal law.” The portions of the National Bank Act that were referenced in the opinion are broader than similar portions of the Federal Credit Union Act, and the National Credit Union Administration’s determinations on preemption should stand up if they are challenged in court, Mica said. The case relates to a 2005 investigation conducted by former New York Governor and Attorney General Eliot Spitzer, who asked Citigroup, Wells Fargo and Co., and JP Morgan Chase and Co. to provide him with data so he could determine if they engaged in discriminatory lending practices. A group of large national banks attempted to block Spitzer’s probe by claiming that the existing federal regulatory structure prevented state authorities from taking their own independent actions. The Office of the Comptroller of the Currency argued that its examination "visitorial powers" preempted Spitzer's ability to enforce the state fair lending laws in question as they pertain to national banks. The Supreme Court upheld a lower court's ruling that the National Bank Act's "visitorial powers" clause preempted Spitzer's ability to use administrative subpoena powers to obtain national bank lending information, but ruled that state attorneys general may bring lawsuits to enforce consumer protection laws that are not otherwise preempted. Spitzer threatened to sue the banks after they refused to give him the data.

NASCUS Keep CU reg independence

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WASHINGTON (6/30/09)--The National Association of State Credit Union Supervisors (NASCUS) has asked Congress and the Obama administration to ensure that the dual charter credit union system, which “provides diversity, competition and innovation in the credit union regulatory structure,” is maintained under the pending restructured financial regulatory regime. While NASCUS President/CEO Mary Martha Fortney praised the Obama administration for recognizing the value of dual chartering, the importance of state-level consumer protection and the need for a separate credit union regulator, NASCUS in a press release offered a series of core principles that it said should be followed during the coming regulatory debate. The first of these principles is the recognition and affirmation of the “distinct roles” of “a state chartering authority and a share deposit insurer.” Cooperation between state and federal regulators and share deposit insurance systems should also be affirmed, NASCUS said. Legislators should also ensure that states and state credit union regulators maintain their supervisory and regulatory authority over state-chartered credit unions, and consumer protection statutes and regulations should be allowed to be created, implemented, and enforced “without the threat of federal preemption,” the release added. NASCUS also asked decision makers to “support total capital reform for credit unions” and “allow credit unions to access supplemental capital.”

Inside Washington (06/26/2009)

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* WASHINGTON (6/29/09)--The Supreme Court is slated to announce Monday its decision on a banking preemption case, Cuomo v. Clearing House Association LLC. The court will decide if the Comptroller of the Currency has the sole power to enforce laws, even state statutes, over national banks. The decision will be made as President Barack Obama pushes for eliminating preemption to strengthen consumer protection at banks (American Banker June 26). The case is related to a 2005 investigation conducted by former New York Attorney General Eliot Spitzer, who asked Citigroup, Wells Fargo and Co., and JP Morgan Chase and Co. to provide him with data so he could determine if they engaged in discrimination. The banks did not give him the data, so Spitzer threatened to sue them. The agency said they did not have to give up the data because of visitorial powers. Current New York Attorney General Andrew Cuomo, who took on the case after Spitzer, argued that a federal preemption does not prevent a state from prosecuting its laws (News Now April 28) ... * WASHINGTON (6/29/09)--The Office of the Comptroller of the Currency, Board of Governors of the Federal Reserve System, Federal Deposit Insurance Corporation, and Office of Thrift Supervision Friday invited public comment on an interim final rule that provides that mortgage loans modified under the U.S. Department of the Treasury's Making Home Affordable Program (MHAP) will retain the risk weight applicable before modification. On March 4, the Treasury announced guidelines under the MHAP to promote sustainable loan modifications for homeowners at risk of losing their homes to foreclosure. The interim final rule would provide a common interagency capital treatment for mortgage loans modified under MHAP. For example, mortgage loans risk weighted at 50% prior to modification would remain at 50% after modification provided they continue to meet other applicable criteria ... * WASHINGTON (6/29/09)--Uncertainty surrounding Federal Reserve Board Chairman Ben Bernanke’s role in Bank of America’s acquisition of Merrill Lynch and Co. could affect whether the government will give the central bank more power under a financial system revamp plan, according to financial industry observers. Lawmakers have expressed that they do not want to give the Fed more power until Bernanke’s role in the Bank of America deal is clarified (American Banker June 26). A hearing by the House Oversight and Government Reform Committee last week focused on whether giving the Fed more power is a good idea. Republicans on the committee leaked e-mails Wednesday that suggest the Fed left out the Securities and Exchange Commission (SEC) and the Office of the Comptroller of the Currency when it decided how the Merrill deal should be completed. The Fed’s cover-up of information raises questions about how it can work collaboratively with its partners in the federal government, said Rep. Darrell Issa (R-Calif.). Rep. Edolphus Towns, House Oversight and Government Reform Committee chair, said there are too many “sweetheart deals” and regulatory reform must ensure the agencies cooperate. Bernanke has said it wasn’t as important to keep the SEC informed about the Merrill deal because it does not supervise Bank of America. Bernanke’s role in the Bank of America deal is especially important because his term as Fed chief expires in January. It is not known whether President Barack Obama intends to reappoint him ...

House members urge opposition to interchange caps

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WASHINGTON (6/29/09)--Congressmen James Sensenbrenner Jr. (R-Wis.) and Jason Chaffetz (R-Utah) in a Friday letter urged their republican colleagues not to cosponsor legislation that would allow merchants to renegotiate interchange fees with financial institutions. The letter came in response to an earlier communiqué in which Rep. Bill Shuster (R-Penn.) asked his fellow republicans to cosponsor H.R. 2695, "The Credit Card Fair Fee Act," which was introduced by Rep. John Conyers, Jr. (D-Mich.) in early June. This legislation would allow merchants to negotiate credit card transaction fees with financial institutions via an antitrust exemption. The bill is currently awaiting committee-level action. In the letter, the congressmen asked their colleagues to “resist the temptation to mediate every perceived problem or concern with the market, particularly when there are adequate legal remedies already available.” The legislation proposed in the Conyers/Durbin bill would also “hurt consumer, small banks, and credit unions,” the release added. Credit Union National Association (CUNA) President/CEO Dan Mica thanked Reps. Sensenbrenner and Chaffetz for “taking this step and recognizing how important interchange is to card-issuing credit unions.” CUNA recently asked Congress to resist moving on any potential interchange fee legislation until the Government Accountability Office can complete its study of interchange fees, as directed by the recently passed Credit Cardholders Bill of Rights Act of 2009. Members of the Arkansas Credit Union League also discussed the interchange fee issue with their state’s elected representatives during a hike the hill session held earlier this month.

Congress will resume reg reform debate after July 4 break

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WASHINGTON (6/29/09)--Following the Independence Day district work period, Congress is expected to resume its work on financial regulatory restructuring with House Financial Services Committee hearings on the role of the Federal Reserve, derivatives, and general testimony from financiers and leading academics tentatively scheduled for the coming weeks. The committee has not yet published witness lists for these hearings. The committee began discussion of the regulatory reforms this past week, with Troubled Asset Relief Program oversight panel chair Elizabeth Warren saying that the creation of the proposed consumer financial protection agency would undeniably "help fix the broken credit market." During the hearing, Warren spoke in favor of so-called "plain vanilla" financial products and disclosures that could ultimately result in cheaper compliance costs for lenders and fewer oversight responsibilities for regulators. It is widely reported that U.S. Treasury Secretary Timothy Geithner could soon release further details on a proposed consumer protection agency. Congress also held hearings on integrating improvements to financial literacy and education into the larger financial regulatory reform package during the week. House Financial Services chair Rep. Barney Frank (D-Mass.) last week said that the committee would continue to discuss consumer protections following the district work period, adding that related legislation should be marked up in late July. While Frank said that the final regulatory reform legislation would take the form of one all-encompassing bill, each piece of that legislation will be discussed and marked up separately by his committee.

Fryzel Mica commemorate 75 years of CUs

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ALEXANDRIA, Va. (6/29/09)--National Credit Union Administration Chairman Michael Fryzel commemorated the 75th anniversary of the signing of the Federal Credit Union Act by giving “recognition and thanks to the millions of American consumers who have made the credit union industry a success.” In a statement released Friday, Fryzel said that the “founders of the credit union movement could not have known the heights that these institutions would enable their members to reach.” Those founders would also “draw tremendous satisfaction” from the knowledge that credit unions continue to meet Edward Filene’s mission of demonstrating “the practicality of the brotherhood of man,” he added. Credit Union National Association President / CEO Dan Mica also commented on the anniversary, saying that credit unions continue to follow the path set for them in the aftermath of the Great Depression, as they “are playing a vital role in helping the nation’s consumers recover from this latest economic storm.” “The focus and purpose of credit unions remains the same today as it was 75 years ago -- to improve the financial well-being of their members, now more than 90 million strong,” and CUNA strives to “ensure an operating environment for all credit unions in which they may continue to effectively and completely serve their members,” he added.

SBA Patriot project lends over 300M to US combat vets

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WASHINGTON (6/29/09)--The U.S. Small Business Administration (SBA) on Friday announced that it has backed over $315 million in funds for 3,750 loans to the military community in the two years following the launch of its Patriot Express Pilot Loan Initiative. Since June 2007, credit unions and other lenders have submitted applications for funds under the Patriot Express program, which features a streamlined loan product based on the agency's SBA Express Program, but with enhanced guaranty and interest rate features. The loans may be used for most business purposes and have been approved in all 50 states, the District of Columbia, the U.S. Virgin Islands, Puerto Rico and Guam. They currently range from $5,000 to $375,000 in individual loan amounts, but can be approved for up to $500,000. SBA Administrator Karen Mills said that the program, which provides veterans the “critical access to capital” that “helps them grow their businesses and create good paying jobs in their communities,” is a program that the SBA takes “seriously.”

NEFE to Congress Fin Lit should be part of reg reforms

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WASHINGTON (6/26/09)--Improvements to financial literacy and education could be a part of the larger financial regulatory reform package that is currently up for debate, and the National Endowment for Financial Education (NEFE) gave its input on that issue in Thursday testimony before the House Financial Services Committee’s subcommittee on financial institutions and consumer credit. In prepared remarks, NEFE official Brent Neiser said that his organization supports including financial literacy as part of the coming financial reforms. As a start, Neiser suggested that the concept of being “financially literate” should be well defined, and that definition should be tailored to fit the various stages of one’s life. Setting clear, well-defined standards, as recommended by the President’s Advisory Council on Financial Literacy, would “create a consistent framework for public and private financial education efforts,” Neiser said. Basic concepts that are central to “financial understanding, capability, and literacy” like thrift, investment diversification, and the correct use of credit could be communicated through a “nationwide social marketing campaign,” he added. These marketing campaigns should be “culturally and circumstantially relevant and age-appropriate” and should also consider the needs of “underserved audiences.” Neiser seconded the financial literacy advisory council’s suggestion for a nationwide “financial check-up,” saying that such a check-up would “allow Americans to assess their own financial knowledge and provide links to trustworthy sources of information to fill any gaps.” The Jump$tart Coalition for Personal Financial Literacy also supported financial literacy improvements, with executive director Laura Levine advocating the introduction of personal finance education in “early elementary school years, while students are forming their behaviors and beliefs.” Financial education should be continued in later grades and should follow a number of best practices, including accuracy, availability, accessibility, and “objectivity in content and tone,” Levine added. The Credit Union National Association's Financial Literacy Task Force found that credit union’s have been strong backers of financial literacy efforts, with nearly 80% of credit unions with assets of $10 million or more offering financial education to adults or youth in 2008.

Inside Washington (06/25/2009)

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* WASHINGTON (6/26/09)--Small businesses seeking expansion will be able to refinance existing loans to purchase real estate and other fixed assets as a result of permanent changes to the Small Business Administration’s (SBA) 504 loan program. The 504 loan program can be used to purchase business real estate or fixed assets, such as heavy equipment or machinery, and expand current development projects. Borrowers are eligible for refinancing if: the debt being financed was incurred to acquire land, construct a building or purchase equipment; the debt is collateralized by fixed asset; the debt was incurred for the business’ benefit; the new financing provides a substantial benefit to the borrower; and the borrower has been current on all payments of existing debt for one year prior to the date of refinancing ... * WASHINGTON (6/26/09)--The Securities and Exchange Commission Wednesday met to discuss new regulations to improve the resilience and safety of money market mutual funds (American Banker June 25). The agency is considering possible changes to include imposing new liquidity requirements, strong investment requirements and shortened maturity limits ... * WASHINGTON (6/26/09)--During a hearing Thursday in front of the House Financial Services Committee, Department of Housing and Urban Development (HUD) Secretary Shaun Donovan emphasized the need for preservating affordable housing (RTTNews June 25). There are fewer than three units available for every four very-low income households, and only half the number of units needed is available for those in poverty, he told the committee. HUD is exploring an agreement to enter into longer term Section 8 contracts, Donovan added. The House Financial Services Committee’s Thursday hearing was titled, “Legislative Options for Preserving Federally and State-Assisted Affordable Housing and Preventing the Displacement of Low-Income, Elderly and Disabled Tenants.” Donovan was the only scheduled witness ...

Committee still eyeing FFELP subsidy cut

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WASHINGTON (6/26/09)—A plan to eliminate the Department of Education's Federal Family Education Loans Program (FFELP) by cutting off its federal subsidy has temporarily been placed on the back burner, but the House Education, Labor and Pensions Committee intends soon to vote on a bill to do just that. According to a committee source, the education panel could possibly markup a FFLEP bill sometime during the first two weeks of July. There had been speculation that the committee would take up the bill this week, but a crowded congressional schedule bumped its consideration back. Notably, healthcare reform has been dominating attention. The Obama administration’s fiscal year 2010 budget took aim to reduce certain entitlement spending and estimated that eliminating the subsidies provided under FFELP could save over $4 billion, annually. The administration has said it favors direct student lending by the government and would use some of the $4 billion to provide need-based Pell Grants to low-income students. The FFELP subsidy was cut back under President George W. Bush, but credit unions have continued to offer the loans, with little or no profit, as a service to their members, according to Phil Drager, Credit Union National Association (CUNA) senior legislative representative. CUNA has previously warned that the elimination of FFELP could jeopardize student lending at more than 1,000 credit unions throughout the country, and may end student lending by credit unions altogether. As CUNA noted in a letter to the top members of the House Education Committee, credit unions that specialize in student lending provide a high quality service for their student members, and can provide much needed and individualized assistance if difficulties arise with regard to loan repayments. The elimination of FFELP will remove this valuable option for students. Drager said Thursday that CUNA "continues to meet with key members of Congress to explain the importance of the FFELP and the critical role credit unions play in the program." Both houses of Congress will take a one-week Independence Day District Work Break, and when federal lawmakers return to session, there will be just five, issues-crowded weeks left in the summer session.

May mortgage rates remain steady FHFA says

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WASHINGTON (6/26/09)--In its most recent report, the Federal Housing Finance Agency (FHFA) said that interest rates on conventional 30-year mortgages below the conforming limit of $417,000 increased slightly in May, rising to an average of 4.88 percent. Conventional 15-year mortgages decreased by 4 basis points over the same time period, resulting in an average interest rate of 4.71 percent. Contract rates on all mortgages fell by 1 basis point during May, for a total of 4.87 percent. The effective interest rate fell by a similar margin, dropping to 4.95 percent. The FHFA also recorded a reduced loan-to-price ratio average of 74.2 percent. That average stood at 75.1 percent at the end of the previous month. However, the average amount of mortgage loans increased by just over $4,000, for a total of $221,000 during May, with those loans being purchased for an average term of 28.3 years. Initial fees and charges made up 0.58 percent of the balances of those loans, and 44 percent of so-called “purchase-money mortgage loans” that were originated in May were “no-point” mortgages, the FHFA said.

Subcommittee votes CDFI boost max CLF borrowing

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WASHINGTON (6/26/09)—Under a House Appropriations subcommittee financial services spending bill, no cap would be placed on the National Credit Union Administration’s (NCUA’s) Central Liquidity Facility (CLF) borrowing authority. According to the NCUA, this would mean the CLF would maintain its maximum, approximately $40 billion, borrowing authority through fiscal year 2010. Also approved by the subcommittee on financial services and general government, according to Credit Union National Association Senior Legislative Representative John Hildreth, the U.S. Treasury Department’s Community Development Financial Institutions (CDFI) funds would get a substantial bump up in its funding. The subcommittee voted Thursday to increase the CDFI fund to $243.6 million, up from $107 million appropriated for FY 2009. Hildreth also noted that the U.S. Small Business Administration’s business loan account would be increased to $236 million from $141 million in the subcommittee bill. However, Hildreth warned, it is early days in the appropriation process. Treasury’s CDFI Fund helps locally based financial institutions offer small business, consumer and home loans in communities and populations that lack access to affordable credit. CDFIs are financial intermediaries such as certain credit unions, banks, loan funds, venture capital funds, corporation-based lenders and microenterprise development loan funds. Credit unions interested in CDFI certification should note there is one remaining date in the Treasury’s series of free conference calls on the subject. An upcoming session is scheduled for July 16, 2 p.m. EST. To access the conference calls, participants must call (202) 927-2255 and enter in the pin number 315646. No prior registration is necessary.

Consumer protection agency could fix credit woes says Warren

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WASHINGTON (6/25/09)--In remarks delivered during a Wednesday House Financial Services Committee hearing, Elizabeth Warren, current chair of Congress’s Troubled Asset Relief Program oversight panel, said that the creation of the proposed consumer financial protection agency would undeniably “help fix the broken credit market.” The consumer protection agency would not be meant to rescue consumers that have willfully overextended their credit or have purchased a home that they cannot afford. Rather, Warren said, “this is about people who get trapped by credit agreements themselves.” Warren said that many consumers do not understand the terms of many of their consumer loans and other finance-related products, including credit scores. Credit unions and small banks may offer financial products that are better for consumers than those offered by larger banks, but smaller financial institutions with smaller advertising budgets often lose out when consumers lack the proper tools to compare those products, Warren said. Though some of the gathered representatives and panelists said that the proposed consumer financial protection agency would lead to duplicative and unneeded regulations, Warren said that getting so-called “plain vanilla” financial products and disclosures that “automatically passed regulatory muster” would result in cheaper compliance costs for lenders and fewer oversight responsibilities for regulators. According to Warren, creating this new separate regulator will help smaller financial institutions that did not cause the problem “but are now being forced to pay for it” by lowering the “direct cost of compliance” through streamlined financial regulations that protect consumers while lessening the burden on all financial institutions. The agency could also level the playing field between large and small financial institutions by helping create the “appropriate financial market” where many of the “cleaner” and “better” products offered to consumers win out over more complicated, riskier financial products, she added. House Financial Services chair Rep. Barney Frank (D-Mass.) said that the committee would continue to discuss the creation of the new consumer protection agency once it has returned from the Independence Day district work period. The committee should begin marking up related legislation in July, Frank added. While Frank said that the final regulatory reform legislation would take the form of one all-encompassing bill, each piece of that legislation will be discussed and marked up separately by his committee.

NCUA What corporate reform could look like

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ALEXANDRIA, Va. (6/25/09)--The National Credit Union Administration (NCUA) will begin developing new rules for corporate credit unions this summer with a projected completion date of spring of 2010, moderator and Office of Corporate Credit Union official Scott Hunt said during the NCUA’s webinar on its corporate credit union stabilization plan. During the webinar, Hunt said that the NCUA will lay out a potential framework for corporate credit unions, and those corporate credit unions will then decide which services they would prefer to offer within that framework. Member credit unions could then decide which corporate credit union they wish to support. The NCUA board should issue its proposed rules for corporates this fall, according to Hunt. Hunt said that he does not expect the NCUA to dictate the structure that corporate credit unions must take on. However, he added, the new NCUA rules could lead to some corporate credit union consolidations. Hunt noted that the "slow run" on corporate credit union shares has abated, as deposit patterns now look to be following seasonal norms. Cash assets have also increased, and the corporates are reestablishing external lines of liquidity. Western Corporate FCU (WesCorp), which reported $7.6 billion in losses for its 2008 fiscal year, has a capital deficit of $3.5 billion and had its independent audit completed on May 19th. The NCUA also reported that U.S. Central now has $960 million in capital and that a comprehensive audit of U.S. Central’s financial situation should be completed by July 10th. Addressing the liquidity of the corporates, Hunt said that both US Central FCU and WesCorp were in “stable but tenuous” condition. External lenders are also starting to lend to the corporates again, as that the NCUA’s recent actions have effectively stabilized the corporate credit union system. However, Hunt said, natural person credit unions still need to continue to invest in the corporate credit union system, as the NCUA could be forced to sell some or all of U.S. Central's and WesCorp’s mortgage-backed securities portfolios if those institutions do not have adequate funds available to hold those securities to maturity. The Credit Union National Association will soon provide an audio archive of the NCUA webinar.

Space Coast merger with Eastern Financial Fla. okayed

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ALEXANDRIA, Va. (6/25/09)--The National Credit Union Administration (NCUA) on Wednesday announced that Melbourne, Fla.-based Space Coast CU will merge Miramar, Fla.’s Eastern Financial Florida CU into its operations. The NCUA has monitored the operation of Eastern Financial following it’s entry into conservatorship in April of this year. The NCUA had always intended to sell Eastern Financial or merge it’s operations with another credit union, and Space Coast, which currently holds $1.7 billion in assets from over 160,000 members, will now serve Eastern Financial’s 200,000 members. Space Coast announced the merger in April, but the NCUA did not confirm or deny any planned merger at that time. The merger is the second in a week, as $42 million-in-assets Community Trust CU merged with $333.4 million-in-assets Self-Help FCU of Durham, N.C. earlier this week.

Inside Washington (06/24/2009)

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* WASHINGTON (6/25/09)--The federal bank and thrift regulatory agencies Wednesday proposed a change to their rules that implement the Community Reinvestment Act (CRA), a revision that would require the agencies to consider low-cost education loans provided to low-income borrowers when assessing a financial institution’s record of meeting community credit needs. The proposal was issued jointly by the Comptroller of the Currency, Board of Governors of the Federal Reserve System, Federal Deposit Insurance Corporation, and Office of Thrift Supervision. It incorporates provisions of the recently enacted Higher Education Opportunity Act, which revised the CRA. The agencies will accept comment for 30 days after the proposal is published in the Federal Register… * WASHINGTON (6/25/09)--President Barack Obama commended Federal Reserve Board Chairman Ben Bernanke for doing a “fine job” responding to the nation’s economic crisis (Dow Jones June 24.) Obama said Tuesday that the Fed is well-suited for oversight of systemic financial risks. However, the president declined to comment on whether he would reappoint Bernanke as chairman. Financial industry observers have speculated on Bernanke’s future at the Fed due to its handling of the financial crisis ... * WASHINGTON (6/25/09)--A plan by the Obama administration to revamp the nation’s financial regulatory system is being questioned by financial industry observers based on whether the plan would resolve the problem of financial institutions being slated as “too big to fail” (American Banker June 24). Observers say that tougher standards for companies perceived as “too large to fail” should be implemented now as opposed to after the reform bill is enacted. Regulators need to be held accountable, and if the wording is “too vague it’s very hard to hold them accountable,” said Dean Baker, co-director of the Center for Economic and Policy Research. Under President Barack Obama’s plan, financial regulators would decide which institutions are Tier 1 financial holding companies and would also set capital, leverage and liquidity requirements ...

Effective dates set on new NCUA rules

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WASHINGTON (6/25/09)—The effective dates of two recently adopted National Credit Union Administration (NCUA) rules have been published in the June 24 Federal Register: one addresses operating fees, the other second lien modifications. Effective Jan. 1, 2010, the NCUA has amended its rule on the assessment of operating fees by permitting federal credit unions to subtract investments made under the Credit Union System Investment Program (CU SIP) and the Credit Union Homeowners Affordability Relief Program (CU HARP) from their total assets. The Credit Union National Association had argued that the change would remove a disincentive to credit union participations in the CU SIP or CU HARP programs. The programs are designed to add liquidity to the corporate credit unions system. CU HARP makes advances for a maximum term of one year, renewable for one year. CU SIP is designed to complement CU HARP by enabling the NCUA’s Central Liquidity Facility to lend to credit unions to invest in NCUSIF guaranteed notes, the proceeds of which will be used to retire external system debt. Another rule adopted at the last NCUA open board meeting, one amending lending rules to create a limited exception to the 20-year maturity limit on second mortgage loans, became effective upon publication on June 24. Written comment will be accepted through Aug. 24. The rule change is intended to enable federal credit unions participating in the U.S. Department of the Treasury's Making Home Affordable Program to modify a second mortgage loan, beyond 20 years, to match the term of a modified first mortgage loan. Use the resource link below to access the NCUA rules.

Mica on Bloomberg Consumers seek CU safety

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WASHINGTON (6/25/09)—Credit unions for 100 years have served as a “flight to safety” for consumers in tough times, Credit Union National Association President/CEO Dan Mica told Bloomberg News. In an interview that reflected remarks he has made at CUNA’s
Click for video CUNA President/CEO Dan Mica was interviewed about the 100th anniversary of the first credit union on Bloomberg TV. Click for member-only video. (Photo provided by CUNA)
America’s Credit Union Conference in Boston this week, Mica told a national television audience that credit unions are currently experiencing a “flood of growth” from those who are seeking safe and sound financial products. Credit unions are marking their hundredth anniversary of service in the United States this year. During the Bloomberg interview, Mica underscored the difference between member-owned credit unions and banks that owe allegiance to their stockholders in the form of profits from customers. He also reiterated that deposits in federally insured credit unions are covered up to $250,000, and that credit unions are strictly regulated by the federal government. Mica also took the opportunity to highlight the strength, safety and soundness of the credit union system and to explain the difference between natural-person credit unions and their corporate counterparts. When questioned, Mica explained that two large corporate credit unions recently had difficulties due to tough and changing economic conditions, but noted the problems have been dealt with within the credit union system, under the oversight of both the U.S. Congress and federal regulators. Use the resource link below to view Mica interview posted on Youtube.

Inside Washington (06/23/2009)

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* WASHINGTON (6/24/09)--The Federal Deposit Insurance Corp. (FDIC) has proposed extending coverage for non interest-bearing deposits, according to an FDIC financial institution letter released Tuesday. The FDIC proposed several options for the future of the Transaction Account Guarantee (TAG) program, which is a component of the FDIC’s Temporary Liquidity Guarantee Program. One option is extending TAG to June 30, 2010, with an increase in annual fees from 10 basis points to 25 basis points during the extension period. The agency also proposed allowing an insured depository institution (IDI) participating in TAG to opt out of the extension by Oct. 31. IDIs that choose this option would notify their customers that as of Jan. 1, deposits in qualifying non interest-bearing transaction accounts would not be covered by the FDIC beyond standard deposit insurance limits. A third alternative would result in no change to FDIC’s current regulation, and the FDIC’s guarantee for deposits held in qualifying non interest-bearing transaction accounts would expire Dec. 31 ...

iNY Timesi op-ed touts CU credit cards

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WASHINGTON (6/24/09)--Though many traditional banks have chafed at recent changes to credit card regulations, saying that they are too restrictive and would ultimately hurt consumers, a New York Times op-ed said that these fears are “largely unfounded,” as credit unions have long been able to turn a profit under these same conditions without charging high fees and/or penalties to their members. In the op-ed, published on Tuesday, the writers said that recent studies found that credit union credit cards generally offered “lower annual fees and longer grace periods” than cards from traditional banks. “Credit union fees for exceeding the credit limit are on average just half those of other issuers,” the op-ed added. Additionally, the study found that very few credit unions raise interest rates if a credit union member fails to pay their credit card payment on time. Kiplinger.com also praised credit union cards in a recently published feature, recommending that customers that are looking for a “hardworking portfolio of credit cards” look to credit unions and community banks for their consumer loans. The op-ed also sought to dispel the belief that the corporate income tax exemption for federal credit unions gave them a substantial edge when competing with bank-managed credit accounts, saying that credit union lending practices meant that they would still “make profits” if they were taxed, “they would just retain less of them.” Overall, according to the op-ed, the consumer loan model that is used by credit unions is “absolutely” feasible for traditional banks, and “credit union cards are a great test case for how regular cards will perform under the new law.” Additionally, the evidence collected shows that “the credit card act is likely to bring about moderate, and even positive, changes” in credit card policies.

Fannie Freddie 1st quarter loan mods jump

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WASHINGTON (6/24/09)—Loan modifications for the first quarter of 2009 were up 50% at Fannie Mae and Freddie Mac, according to the Federal Housing Finance Agency (FHFA), which regulates the government-sponsored enterprises (GSEs). The first quarter results were too early in the year to reflect the Obama administration's loan modification program, the Home Affordable Modification, which was still in development in March. Fannie and Freddie both have significant roles in the administration plan. Of the 50% increase in modifications, FHFA Director James Lockhart said, “The use of serious loan modifications by Fannie Mae and Freddie Mac has risen dramatically. As a result, more homeowners are seeing payments significantly reduced and fewer people will lose their homes.” The following were among the agency’s reported findings, as of March 31, regarding the GSEs’ 30 million residential mortgages:
* Modifications represented 43% of all completed foreclosure prevention actions in the first quarter of 2009, up from 33% in the prior quarter; * Modifications with more than 20% reduction in monthly payments rose from 2% in the first quarter of last year to 52% in the first quarter of this year; * Approximately 87,000 actions were completed actions to prevent foreclosure- including modifications, forbearance, repayment plans and other measures. That represented about a 20% over-quarter increase and about a doubling from the year earlier; * Home retention actions – actions that result in a borrower keeping his or her home – accounted for 90% of these actions completed during the first quarter consistent with the proportions of foreclosure prevention actions completed over the past year; and * The percentage of Enterprises’ mortgage loans that were at least two payments past due (60-plus-days delinquent) was 3.6%, which the FHFA compared to 6.1 % for VA loans, 10.2% for FHA loans and 9.2% for the industry average.

House holds hearing on consumer protections

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WASHINGTON (6/24/09)--Rep. William Delahunt (D-Mass.) will join a number of academics and industry insiders when he testifies at a House Financial Services Committee hearing on consumer protection today. The hearing, entitled “Regulatory Restructuring: Enhancing Consumer Financial Products Regulation,” will be the first of many upcoming hearings to address the Obama Administration’s financial regulatory restructuring proposal. The hearing is set to begin at 10 a.m. in the Rayburn House Office Building. Delahunt will testify alone during the opening panel discussion, with two grouped discussion panels to follow. The committee will take up further discussion of financial regulatory reform both this week and following the July 4 district work period, with hearings on the Federal Reserve and derivatives among the scheduled topics. The House Financial Services Committee’s subcommittee on financial institutions and consumer credit will discuss the role that financial literacy could play in the proposed Consumer Financial Protection Agency at a Thursday hearing. Topics covered by this discussion will also include how “transparent, consumer friendly products” can be implemented by the new regulatory agency. In statements accompanying a release on the subcommittee's hearing, subcommittee chair Rep. Luis V. Gutierrez (D-Ill.) said that financial literacy is “vital” to consumers, adding that consumers cannot stop worrying about fraudulent or misleading business practices “just because Congress has outlawed some of the most predatory mortgage and credit card practices.” The Financial Services Committee is expected to begin its markup of legislation in late July, which could be presented to the full House of Representatives beginning in September. For the full witness list, use the resource link.

NCUA covers corporate CU concerns in letter webinar

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ALEXANDRIA, Va. (6/24/09)--In the "first of many communications" with stakeholders, the National Credit Union Administration (NCUA) in a letter published on Tuesday outlined the "benefits and requirements" of its recently enacted corporate credit union stabilization fund. The letter also described "the actions taken to implement the legislation" and summarized how those actions will affect the National Credit Union Share Insurance Fund capitalization deposit and future premium assessments. The NCUA will publicly answer questions related to this letter in July. The content of the letter will also be discussed in greater detail during the NCUA's interactive seminar on the corporate credit union stabilization plan, which begins today at 1 p.m. Registration for credit union representatives that still wish to participate will remain open until 12:45 p.m. NCUA Examination and Insurance Director Melinda Love and Office of Corporate Credit Union official Scott Hunt will moderate the two hour webinar, which is expected to include discussion of recent board decisions related to the creation of the temporary corporate credit union stabilization fund. The NCUA staff will also discuss the possible impact that this fund could have on credit unions, and give a general update on the status of corporate credit unions. Audience members will also have an opportunity to have their questions directly answered by NCUA staff. The Credit Union National Association will also stream the webinar live for all attendees of the America's Credit Union Conference & Expo, which ends today. A registration link and a link to the NCUA letter can be found at the bottom of the page.

Inside Washington (06/22/2009)

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* WASHINGTON (6/23/09)--The biggest flaw in the Obama administration’s plan to revamp the financial regulatory system may be that it doesn’t compel those overseeing the industry to use their power when problems come up, according to financial industry observers (American Banker June 22). Under the plan, federal regulators would have more power over systemically important institutions, but the plan does not say which institutions are considered important or how they should be resolved. Observers also expressed concerns that a consumer protection council to be created under the plan would have broad powers for the first few years after the financial crisis ends, but wouldn’t compel regulators to keep strict standards after the crisis has ended. Giving regulators more power is insufficient, said Sen. Richard Shelby (R-Ala.) A lot of regulators who had power didn’t use it during the crisis, he said. President Barack Obama’s plan may need an item that prevents regulators from forgetting that what goes up during economic prosperity may come down, said Gerard Comizio, partner at Paul, Hastings, Janofsky and Walker. However, Obama’s plan would create a system of checks and balances, so one regulator can be more aggressive if another pulls back, he added ... * WASHINGTON (6/23/09)--Ellen Lazar has been appointed senior adviser for consumer policy to Federal Deposit Insurance Corp. Chairman Sheila Bair. Lazar will advise the chairman on issues relating to the agency’s consumer policy and programs. Lazar was a partner at Venture Philanthropy Partners, a philanthropic organization that invests in nonprofit institutions. She previously served as senior vice president for Housing and Community Initiatives at the Fannie Mae Foundation where she was responsible for grantmaking and management of the foundation’s national, regional and Washington, D.C., offices. She also has served as executive director of the Neighborhood Reinvestment Corp. and director of the Community Development Financial Institutions Fund ...

CUNA thanks president for NCUA independence

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WASHINGTON (6/23/09)--Credit Union National Association (CUNA) President/CEO Dan Mica on Monday thanked President Barack Obama for allowing the National Credit Union Administration (NCUA) to maintain its independence under the administration’s recently proposed plan for financial regulatory reorganization. In a letter to the president, Mica said that CUNA applauded the administration for “avoiding a consolidated regulatory scheme that would supervise for-profit banks and not-for-profit credit unions in a similar manner.” Maintaining the independence of the NCUA is “one of the most significant objectives of the credit union system,” Mica added. While he acknowledged that there are still “many questions to be addressed and a number of details to be determined” regarding the administration’s proposed Consumer Financial Protection Agency, Mica said that CUNA is not simply dismissing the need for the agency. Rather, he said, CUNA is carefully reviewing the provisions for the agency. CUNA is eagerly awaiting congressional review and looks forward to discussing how “the new agency can replace and simplify regulatory requirements that interfere with credit unions' capabilities to serve their members,” Mica said.

Allison confirmed for Treasury Financial Stability post

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WASHINGTON (6/23/09)--Herbert Allison, the former Fannie Mae CEO who was nominated to run the Troubled Asset Relief Program, was confirmed last week by the U.S. Senate. As Assistant Secretary for Financial Stability, Allison is now responsible for developing and coordinating Treasury's policies on legislative and regulatory issues affecting financial stability, including overseeing the Troubled Asset Relief Program (TARP). Allison is also Counselor to Treasury Secretary Timothy Geithner. "Herb Allison has extraordinary experience strengthening American financial institutions and has demonstrated great leadership in recent months at Fannie Mae. We are pleased to have him guiding the administration's financial stability efforts here at Treasury," Geithner said when announcing the confirmation. Most recently prior to this appointment, Allison served as president/CEO of Fannie Mae. He began his career at Merrill Lynch, serving many roles over the years, which led to his ultimate election as president/COO and board member.

Fryzel NCUA committed to corporate system improvements

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ALEXANDRIA, Va. (6/23/09)--In statements released today on the National Credit Union Administration’s Web site, NCUA Chairman Michael Fryzel said that new rules governing corporate credit unions should “not only reflect the lessons learned from the current situation, but also enable NCUA, and the industry, to avoid future problems.” Speaking before the Florida CU League’s yearly convention late last week, Fryzel added that he is committed to ensuring that future corporate reforms would be “more effective at understanding and mitigating risk, while at the same time recognizing that corporates can play a useful and important role in facilitating credit union service to members.” “This rulemaking process will entail hard work, honest dialogue and difficult decisions,” Fryzel said. However, he is “confident” that the rulemaking process would result in a “better corporate network.” The NCUA recently addressed other issues in the corporate credit union system by approving the corporate credit union stabilization plan at its monthly board meeting, which was held last Thursday. During the meeting, the NCUA board agreed to immediately borrow $1 billion of the total $6 billion offered by the U.S. Treasury to shore up the corporate credit union system. The $1 billion in borrowed funds would be used to "secure the re-assignment" of the National Credit Union Share Insurance Fund's (NCUSIF) capital note at U.S. Central Federal Credit Union. This would result in a $1 billion increase to the NCUSIF's equity, the NCUA said. (See related story: New corp stabilization plan implemented by NCUA June 19.)

Frank advocates expanded powers for CUs

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BOSTON, Mass.(6/23/09)--Credit unions should be given expanded powers, House Financial Services Committee Chairman Barney Frank told Massachusetts Credit Union League members on Monday. Speaking before a meeting held in conjunction with the Credit Union National Association’s America's Credit Union Conference, Frank said that credit unions have not been singled out for negative treatment under financial regulatory reform because they “were zero part of the current financial upheaval." According to Frank, the “good news” for credit unions is that "there is no news," as Congress is currently busy taking care of the problems created by other financial institutions. While Congress is expected to be occupied with financial regulatory reform through the end of this year, Frank said that he plans to begin a review of credit union powers early next year. Frank also commended CUNA President/CEO Dan Mica and MA/NH/RI League President Dan Egan for their leadership on behalf of the credit union movement, adding that both Mica and Egan are working to pursue credit union interests with Frank.

Reg restructuring debate to begin this week

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WASHINGTON (6/23/09)--Congress will begin its final week before the Independence Day district work period by holding a House Financial Services Committee hearing on “Regulatory Restructuring: Enhancing Consumer Financial Products Regulation.” The House will follow up that hearing, which is scheduled for Wednesday, with plenty more hearings on the Obama administration’s plan for financial regulatory restructuring throughout the summer, as House Financial Services Committee chair Rep. Barney Frank (D-Mass.) announced a tentative schedule for discussion of the reform plans late last week. First on the committee’s agenda, following the July 4 district work period, is a July 9 domestic monetary policy subcommittee hearing on the Federal Reserve's role. The committee will also hold a hearing on derivatives on July 10 and will hear general testimony from financial industry experts and academics on July 13. "The debate over this issue is going to consume the House Financial Services Committee this summer," said Ryan Donovan, vice president for legislative affairs at the Credit Union National Association. While the House of Representatives is not expected to consider financial restructuring legislation until September at the earliest, the Financial Services Committee is expected to begin its markup of legislation in late July, according to the schedule. Frank is also expected to reschedule House testimony by U.S. Treasury Secretary Timothy Geithner, which was delayed last week due to conflicts with the voting schedule. In other discussions scheduled for this week, the full House Financial Services Committee will again convene to discuss options for maintaining federal and state-assisted affordable housing. The House Financial Services subcommittee on financial institutions and consumer credit will also hold a hearing on improving financial literacy on Thursday. The House Appropriations Committee subcommittee on financial services has planned a mark-up session for Thursday as well.

Fed seeks new CAC nominees

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WASHINGTON (6/23/09)--The Federal Reserve Board on Monday announced that it is seeking nominations to fill its Consumer Advisory Council (CAC), which will represent the “interests of consumers, communities, and the financial services industry.” The Fed’s Consumer Advocacy Council, which advises the Federal Reserve Board on the exercise of its responsibilities under myriad consumer financial protections, is composed of 30 members, with each member serving three-year terms. Terms for 10 of the CAC’s 30 members will expire on December 31 of this year. According to the release, potential nominees must have “familiarity with consumer financial services, community development and reinvestment, and consumer protection regulations.” Nominations must be submitted by August 28. To read the Fed request for nominations, use the resource link.

Inside Washington (06/19/2009)

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* WASHINGTON (6/22/09)--Credit Union National Association (CUNA) President/CEO Dan Mica presented Jean Chatzky, NBC “Today Show” financial editor, with the Consumer Federation of America’s (CFA) 2009 Betty Furness Consumer Media Services Award at CFA’s 39th annual awards dinner in Washington, D.C., Wednesday. Mica underscored Chatzky’s passion for financial education, her ability to explain complex topics and to reach tens of millions of consumer via “The Today Show” and through regular appearances on “The Oprah Winfrey Show,” “Larry King Live,” satellite radio, newspaper columns and magazine articles. From left are Chatzky, Mica, CFA Executive Director Stephen Brobeck and Federal Deposit Insurance Corp. Chairman Sheila Bair, who received CFA’s public service award. CUNA is a charter member of the CFA board. (Photo provided by CUNA) ... * WASHINGTON (6/22/09)--Federal Reserve Board advisory panel members disagreed at a meeting Thursday on how credit card companies should be allowed to create terms in light of new credit card legislation, the Credit CARD Bill of Rights Act, signed earlier this year by President Barack Obama. The legislation aims to crack down on abusive card practices. Given the new rules, credit card company representatives said if they can’t adjust rates on existing balances, they would have to set competitive rates based on an individual’s credit score to mitigate the revenues they receive from defaulting customers (American Banker June 19). They also said they could charge accountholders more fees. Consumer advocates said the companies should not be able to earn revenues through fees. Penalty fees are for guiding conduct and should not be used for companies to earn profit, said Thomas James, senior assistant attorney general for the Illinois Attorney General Office’s consumer fraud bureau. Senate Banking Committee Chairman Christopher Dodd (D-Conn.) warned banks earlier this month against gouging consumers with deceptive or excessive checking account fees (Reuters June 4 via News Now) ... * WASHINGTON (6/22/09)--Senators expressed skepticism at giving the Federal Reserve Board more power under President Barack Obama’s plan to overhaul the financial regulatory system (The New York Times June 19). Senate Banking Committee Chairman said in a hearing last week with Treasury Secretary Timothy Geithner that he was open to giving the Fed more power, but likened the situation to a parent giving a child a bigger car after crashing the family station wagon. Sen. Richard Shelby (R-Ala.) said he thought the Fed had enough responsibilities. Sen. Jim Bunning (R-Ky.) said the Obama plan puts “a lot of faith” in the Fed’s ability to prevent another financial crisis. However, if the Fed and other regulators had done their jobs and saw what banks and other firms did earlier in the decade, the mess could have been prevented, he said ... * WASHINGTON (6/22/09)--Even some who support giving the Federal Reserve Board more authority under the Obama administration’s regulatory revamp plan have noted concerns about what would happen if the Fed’s powers were to be widened (American Banker June 19). If the Fed was granted more power, it would be blamed for things that go wrong, according to Douglas Landy, former Federal Reserve Bank of New York lawyer. There have to be realistic expectations of what it means to be a systemic risk regulator, added Randall Kroszner, former Fed governor. Other observers expressed concern over the Fed losing its independence. Under Obama’s plan, the Fed would be responsible for the financial system, holding companies and all large financial companies. Increasing the Fed’s powers also may mean that the central bank will have to be more involved with Congress, noted Treasury Secretary Timothy Geithner at a hearing Tuesday. However, even if its powers were broadened, the Fed would still have to obtain written permission from the Treasury before it can use emergency lending powers ...

Bachus backs CUs as Congress reforms regs

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WASHINGTON (6/22/09)--The National Credit Union Administration (NCUA) and credit unions in general should expect support from both sides of the aisle as debate on financial regulatory restructuring moves forward this year, with ranking House Financial Services Committee member Rep. Spencer Bachus (R-Al.) lending his continued support to the mission of credit unions. In a recent letter to Credit Union National Association (CUNA) President / CEO Dan Mica, Bachus said that he and other House Republicans would seek CUNA’s input to ensure that the “shared goals of charter preservation and credit union independence are achieved” as they develop their alternative plan for regulatory reform. Though the exact details have not been released yet, the republican plan would look to limit future financial bailouts and reform the Federal Reserve, Fannie Mae, Freddie Mac, and credit rating agencies. Calling credit unions “an integral part of our financial system,” Bachus also reaffirmed CUNA’s belief that credit unions did little to contribute to the current economic crisis. The NCUA would maintain its safety and soundness authority over credit unions under the U.S. Treasury's blueprint for financial regulatory reform.

House resolution salutes 75 years of FCU Act

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WASHINGTON (6/22/09)--Praising credit unions for exemplifying the “American values of thrift, self help, and volunteerism,” a trio of house Democrats this week introduced a resolution celebrating the 75th anniversary of the enactment of the Federal Credit Union Act. The resolution, which was co-signed by Reps. John Larson (D-Ct.), Paul Kanjorski (D-Pa.) and Jim Himes (D-Ct.), cited the “instrumental role” that credit unions played in helping Americans recover following the great depression as well as the valuable service that credit unions continue to provide in the face of today’s economic challenges. The resolution, which is currently in the House Committee on Financial Services, also supported credit unions for their continued commitment to the core philosophy of “people helping people.” This Friday, June 26, will mark 75 years from the date that President Franklin Roosevelt signed the Federal Credit Union Act, which enabled credit unions nationwide to organize under a federal charter.

House hearings address aspects of reform

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WASHINGTON (6/22/09)—The House Financial Services Committee and its financial institutions subcommittee have announced hearings this week addressing aspects of the Obama administration’s new regulatory restructuring plan. On Wednesday, members of House Financial Services will explore “Regulatory Restructuring: Enhancing Consumer Financial Products Regulation.” On Thursday the subcommittee on financial institutions and consumer credit will take the focus to “Improving Consumer Financial Literacy under the New Regulatory System.” Also on Thursday, the full committee will take a look at legislative options that could help preserve federal- and state-assisted affordable housing. The panel intends to specifically zero in on preventing the displacement of low-income, elderly and disabled tenants. Witnesses will be announced this week.

Reg reform on August agendas

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WASHINGTON (6/22/09)—House Financial Services Chairman Barney Frank (D-Mass.) and Senate Banking Chairman Christopher Dodd (D-Conn.) both noted their projected timing last week to address the Obama administration plan for a financial regulatory revamp. (CongressDaily June 19) Frank said his goal is to wrap up the summer by having his panel vote on a still-to-be-drafted bill by the last week of July. That would, thereby, place House consideration of the measure after the August recess. Dodd said a companion bill in the Senate would have to wait until the fall as he fills in for Health, Education, Labor and Pensions Committee Chairman Edward Kennedy (D-Mass.) on health care negotiations. House Financial Services, however, announced hearings to take up certain aspects of the regulatory reform bill this week. (See related story: House hearings address aspects of reform.)

NCUA amends mortgage loan investment rules

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ALEXANDRIA, Va. (6/19/09)--Federal credit unions that take part in the U.S. Treasury’s home loan modification program will be allowed to modify second mortgage loans to match the terms of modified first mortgages after the National Credit Union Administration (NCUA) on Thursday voted unanimously to relax some existing lending rules. Although the Treasury recently added a second lien program to its Making Home Affordable (MHA) program, many credit unions could not participate in this program due to NCUA lending rules that “impose a 20-year maturity limit on second mortgage loans that are secured by the member-borrower’s primary residence,” according to a NCUA board action memorandum. As a reaction to this circumstance, the NCUA issued an interim final rule that is limited in scope and will allow credit unions to participate in the MHA's second lien program. Under the final rule, credit unions will be able to modify a second mortgage to match the term of a modified first mortgage--even if it is extended beyond 20 years. The NCUA currently allows credit unions to extend first mortgage loans to as long as 40 years. NCUA Vice Chairman Rodney Hood supported the measure, adding that he gives his full backing to “anything that keeps people in their homes.” The interim final rule will become effective immediately upon publication in the Federal Register. However, the NCUA will accept public comment on the rule and could revise the final rule, if necessary. The board also unanimously supported a recommendation to amend its rules to allow federal credit unions to exclude investments in the Credit Union System Investment Program (CU SIP) and Credit Union Homeowners Affordability Relief Program (CU HARP) from their total assets. Federal credit unions currently use their total assets to calculate their operating fees. This rule is final, and will be effective beginning on Jan. 10, 2010.

Inside Washington (06/18/2009)

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* WASHINGTON (6/19/09)--Under President Barack Obama’s plan for regulatory reform, national banks would be required to comply with consumer protection laws in all 50 states. The plan would allow states to be stricter than the federal government on consumer protection, and state law enforcement agencies could enforce the laws and federal standards against federally and state-chartered institutions (American Banker June 18). Obama’s pre-emption proposal comes as the U.S. Supreme Court decides on the case of Cuomo v. Clearinghouse Association LLC, which will determine whether the Office of the Comptroller of the Currency (OCC) can enforce laws--even state laws--against national banks. The case involves a 2005 investigation by then-New York Attorney General Eliot Spitzer, who requested data from banks to see if they engaged in discriminatory practices. The OCC argued it had visitorial powers, or powers to inspect an entity. The Supreme Court will decide the case this month ... * WASHINGTON (6/19/09)--President Barack Obama’s plan to reshape the financial regulatory system has parts that could be enacted--including creating a consumer protection agency, allowing the government to take over systemically important institutions, eliminating the Office of Thrift Supervision (OTS) and regulating derivatives (American Banker June 18). However, other parts of the plan may not pan out--including eliminating thrift and specialty charters, scaling back national banks’ pre-emption powers and giving the Federal Reserve Board the power to oversee risks in the financial system. House Financial Services Committee Chairman Barney Frank (D-Mass.) said he doesn’t support eliminating the thrift charter. Lawmakers have supported combining the OTS and the Office of the Comptroller of the Currency. However, they have said they want to ensure the charter isn’t used to “play games with,” Frank said, adding that eliminating the charter would be a mistake ...

NCUA registration now open for corporate webinar

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Alexandria, Va. (6/19/09)--Credit Unions that wish to participate in the National Credit Union Administration’s (NCUA) June 24 webinar on its recently implemented corporate credit union stabilization plan may register for the webcast starting today. (See related story: New corp stabilization plan implemented by NCUA.) During the two hour webinar, NCUA Examination and Insurance Director Melinda Love and Office of Corporate Credit Union official Scott Hunt will discuss recent board decisions related to the creation of the temporary corporate credit union stabilization fund and the possible impact that this fund could have on credit unions. The NCUA staff will also give participating credit unions a general corporate credit union update. The webinar will also allow credit union officials direct access to NCUA staff. The audience may submit their questions via the internet, and the NCUA will try to answer as many questions as time allows. Registration for the event will remain open until 12:45 p.m. on June 24. The Credit Union National Association will also stream the webinar live for all attendees of the Americas Credit Union Conference & Expo, which begins this Sunday in Boston, Mass. To register, use the resource link.

High Desert members now served by Alaska USA

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ALEXANDRIA, Va. (6/19/09)--The National Credit Union Administration (NCUA) Thursday approved Alaska USA FCU’s purchase of certain assets and assumption of shares and certain liabilities of High Desert FCU of Apple Valley, Calif. Alaska USA, headquartered in Anchorage, Alaska, will provide uninterrupted service to High Desert members. The NCUA noted in its announcement that it has been overseeing the operations of High Desert since Oct., 16, 2008, when the agency board placed the credit union into conservatorship. The action was taken to protect member assets while addressing operational issues within High Desert. While ensuring safety and soundness, the NCUA said it has been operating the credit union with the goal of continuing credit union service to members through a merger with or purchase by another credit union. Alaska USA FCU was chartered in 1948, is a full-service, $3.9 billion-asset, federally chartered credit union, and has with more than 350,000 members located throughout the United States. Alaska USA has 52 branches in Alaska and Washington and serves its members through over 5,600 shared service center locations nationwide. Founded in 1951, High Desert originally was chartered to serve George Air Force Base in Victorville, Calif., and now serves the residents of San Bernardino County. It has assets of $102 million and serves over 11,000 members.

Frank issues tentative reg restructure hearings schedule

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WASHINGTON (6/19/09)--One day after the Obama Administration released its comprehensive financial regulatory reform proposal to the public, House Financial Services Committee Chair Rep. Barney Frank (D-Mass.) began the reform process in earnest, announcing a tentative schedule for future discussion on the issues. The first of many hearings will begin on the morning of June 24 as the Committee hosts a hearing on consumer issues. The Committee will reconvene after its July 4 district work period by holding a July 9 domestic monetary policy subcommittee hearing on the Federal Reserve’s role. Frank has speculatively scheduled additional hearings on financial regulation restructuring throughout July, beginning with a committee hearing on derivatives set for July 10 and general testimony from financial industry experts and academics on July 13. Markup of the possible regulatory legislation could start in late July, according to the schedule. However, according to the release, additional hearings and committee meetings should continue once the Congress returns to Washington in September. Treasury Secretary Timothy Geithner’s scheduled appearance before the committee, which was scheduled for Thursday, was postponed until a later date due to floor votes.

Assets in CAMEL 45s a growing concern

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ALEXANDRIA, Va. (6/19/09)--There are currently 301 CAMEL 4 and 5 credit unions, which represents an increase of approximately 19% compared to May 2008, according to the National Credit Union Administration’s (NCUA’s) monthly insurance fund report. CAMEL 4 and 5 credit union shares currently represent 3.99% of total
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shares insured by the National Credit Union Share Insurance Fund (NCUSIF), an increase from 1.31% for May 2008. NCUA CFO Mary Ann Woodson reported the numbers at the NCUA open meeting Thursday as part of her regular monthly report to the board. Board member Gigi Hyland and Vice Chairman Rodney Hood both voiced concern about possible implications to the insurance fund if the trend were to continue. “Is there a point in time when we start to worry and take certain actions,” Hyland said, adding that staff should begin assessing how the agency should measure that. The NCUSIF’s equity level was at 1.30% as of May 31 and is expected to remain at that level through the rest of the year, according to agency staff. Although the NCUA documents show the NCUSIF ratio continuing at 1.30% for the rest of the year, Woodson said that it will really be closer to 1.20%. She added that that she will revise the numbers now that the board had taken action to implement the Corporate Stabilization Plan. The May numbers show the NCUSIF had budgeted $20 million for natural-person credit union insurance losses in May, although such losses were limited to $10 million for the month. Total year-to-date losses from natural person credit unions is now at $176.5 million, and losses stemming from corporate credit unions remains unchanged at $4.977 billion for the year. Use the resource link below to access the NCUSIF monthly report.

New corp stabilization plan implemented by NCUA

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ALEXANDRIA, Va. (6/19/09)--The National Credit Union Administration (NCUA) will immediately borrow $1 billion of the total $6 billion offered by the U.S. Treasury to shore up the corporate credit union system after the board at its monthly meeting voted to implement the temporary corporate credit union stabilization fund. Commending the board for its work, Credit Union National Association (CUNA) President/CEO Dan Mica said that the board’s action is “precisely what was needed to inaugurate the use of the Temporary Corporate Credit Union Stabilization Fund.”
Click to view larger image NCUA Director of the Office of Examination and Insurance Melinda Love faces Chairman Michael Fryzel (center) as she presents a staff document detailing a proposal to implement the new Temporary Corporate Credit Union Stabilization Fund. Key NCUA staff members also concentrate on the presentation. They include Sarah Vega, chief of staff and senior policy advisor (far right), General Counsel Bob Fenner, and Executive Director David Marquis. (CUNA Photo)
During the meeting, NCUA officials said that the board should examine the impact that the extra $1 billion in corporate credit union funding has on the system before borrowing further money from the Treasury. Taking the full $6 billion in available funding would limit the availability of future Treasury funding, Office of Examination and Insurance Director Melinda Love said. The $1 billion in borrowed funds would be used to “secure the re-assignment” of the National Credit Union Share Insurance Fund’s (NCUSIF) capital note at U.S. Central Federal Credit Union. This so-called “re-assignment” would increase the NCUSIF’s equity by $1 billion, according to an NCUA memorandum. Under the plan, credit unions will also see their earnings recovered from the NCUSIF returned to them, for a total equal to 0.69 percent of their insured shares at the end of 2008. These earnings will then be used to recapitalize the NCUSIF. Related accounting issues were also discussed during the meeting, with the NCUA determining that any costs and liabilities related to corporate credit unions stabilization that were previously borne by the share insurance fund will be transferred to the stabilization fund. Credit unions’ one percent deposits in the NCUSIF will no longer be accounted for as impairments under the plan. CUNA believes that credit unions will not be required to provide restatements of their prior financial statements. Rather, many credit unions will record a gain in the second quarter equal to the impairment charge they recorded in the first quarter, allowing them to reflect no impairment charges on their year-to-date income statements. The stabilization fund will also allow the NCUA to reduce its share insurance premium, which was expected to be assessed in September of this year, to an estimated 15 basis point charge. The NCUA previously announced that there would be a 30 basis point charge assessed in September. However, the NCUA said that the exact amount of the premium would depend on a number of factors, including insured share growth and insurance losses at natural person credit unions. The NCUA will soon provide further details on how these actions will affect credit union financial reporting, with the goal of allowing credit unions to accurately account for the affects on their mid-year call reports, which are due in late July. The NCUA staff has been working with accounting practitioners on the specifics of how credit unions will account for these changes, and details will be forthcoming from the Agency and accounting professions in the next few weeks. The NCUA will also give credit unions direct access to NCUA board members during an interactive webinar set for June 24. Credit unions that would like to participate in this webinar may register at the NCUA's Web site starting today. (See related story: NCUA opens registration for June 24 webinar.) “Rather than taking a significant hit to earnings and capital this year based on estimates of future losses, credit unions will now be able to pay for those losses on a timetable much more closely aligned to when and if they actually occur,” Mica added.

Treasury wants NCUA independent (06/18/2009)

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WASHINGTON (6/18/09)—The U.S. Treasury’s report on financial regulatory reform, released to the public on Wednesday, would allow the National Credit Union Administration (NCUA) to maintain its safety and soundness authority over credit unions.
In front of an executive mansion gate, CUNA President/CEO Dan Mica answers a reporter’s question on the Obama administration’s financial regulatory restructuring plan directly after Mica left the president’s briefing at the White House. Mica says CUNA will "take a very close look at the details surrounding this proposal" and will “represent credit unions throughout the reform process." (CUNA Photo)
This confirms what Treasury officials told Credit Union National Association (CUNA) President/CEO Dan Mica and other senior CUNA staff last week. Noting that the ongoing economic uncertainty provides an “opportunity for restructuring that will genuinely produce improved regulation,” NCUA Chair Michael Fryzel said that the Obama administration's proposal “merits serious consideration.” The continued independence of the NCUA and the proposal’s plan to create a consumer protection council will “serve to ultimately improve the safe and sound operations of the U.S. financial system,” he added. CUNA Senior Vice President of Legislative Affairs John Magill said that the report's lack of recommendation for substantive changes in the safety and soundness of regulations for credit unions affirms that "credit unions were not the cause of nor a contributor to the financial crisis." "I am not sure they could be clearer in their intent that NCUA remain an independent regulator than to say at least twice in the document," Magill said. But he also advised credit unions that the administration's proposal would not be "the last word on regulatory restructuring." Magill noted, "Congress is going to have its say over the next weeks and months, and we will continue to monitor this very closely." Ryan Donovan, vice president of legislative affairs for CUNA, said that the potential consolidation of some existing regulations could reduce costs and lessen the regulatory complexity faced by many
Click for videoDan Mica on intial reactions to the Financial Regulatory Reform proposal. Click for video. (Photo provided by CUNA)
credit unions. However, CUNA has not fully analyzed these proposals, and an official statement on these portions of the Treasury proposal has not yet been released. CUNA will also solicit input from its member institutions in the coming days, and and will work to ensure that any of the resulting regulations are not duplicative, Donovan added. To help launch what is sure to be a thorough vetting of the plan's intricacies, the Senate Banking Committee and the House Financial Services Committee have scheduled Treasury Secretary Timothy Geithner to appear before them in separate hearings today to discuss the Obama plan. Following an afternoon briefing at the White House, CUNA President and CEO Dan Mica said that while CUNA is “grateful” for the administration’s decision to grant continued independence to the NCUA, CUNA will “take a very close look at the details surrounding this proposal” and will represent credit unions throughout the reform process “after discussing the proposal fully” with CUNA members. CUNA's Governmental Affairs Committee is scheduled to review aspects of the proposal later today. For video of Mica’s statement following the White House briefing, use the resource link.

Regulators to discuss corp. stabilization today

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WASHINGTON (6/18/09)--One of the top items up for discussion at today’s meeting of the National Credit Union Administration (NCUA) is the recently passed corporate credit union stabilization plan, which increases the NCUA’s borrowing authority to $6 billion and will allow credit unions to spread their National Credit Union Share Insurance Fund (NCUSIF) replenishment charges over an eight-year period. The board will also discuss how credit unions that have already expensed their NCUSIF costs can recover or reverse those expenses. A final rule on operating fees and an interim rule on exceptions to the maturity limit on second mortgages are also topics for today’s board meeting. Credit unions may register for this event on the NCUA Web site beginning on June 19. The NCUA will discuss the corporate stabilization issues in an interactive webinar, and credit union representatives who wish to participate may register through the NCUA Web site starting on June 19. The seminar, which is scheduled for 1 pm on June 24, will begin one hour after the Credit Union National Association’s (CUNA) Americas Credit Union Conference & Expo ends, and CUNA will stream the webinar live for all attendees who wish to take part in the discussion.

NCUA describes FCUs investment advice authority

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ALEXANDRIA, Va. (6/18/09)—In a recent National Credit Union Administration (NCUA) legal opinion letter, the agency addressed a query regarding whether federal credit unions can offer investment advice services. NCUA Associate General Counsel Sheila Albin wrote that an employee of such an institution cannot provide investment advice that would subject the employee or the federal credit union to federal or state securities laws. However, she added, the credit union may establish a shared employee arrangement with a third-party registered investment adviser so that an employee can act as an employee of a third-party registered investment adviser. Also, Albin stated, a credit union may also act as a finder or offer investment adviser services through a credit union service organization (CUSO). The NCUA opinion further noted that firms and individuals offering advisory account services must be registered as Registered Investment Advisers,” and that while banks have an exemption from the requirement, federal credit unions do not. To read the complete letter, use the resource link below.

Inside Washington (06/17/2009)

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* WASHINGTON (6/18/09)--Rep. Luis Gutierrez (D-Ill.) has introduced legislation that would change how the Federal Deposit Insurance Corp. can charge assessments. Currently, the FDIC bases the assessments on domestic deposits. Gutierrez’s bill would require the FDIC to charge premiums based on an institution’s assets (American Banker June 17). The bill would retain the increased deposit insurance limit of $250,000 per account. Gutierrez said his legislation aims to end the idea that some institutions are “too big to fail.” The congressman, who chairs the House Financial Services financial institutions subcommittee, said the legislation could be added to the Financial Services Committee’s regulatory restructuring plan ... * WASHINGTON (6/18/09)--A watchdog report released Tuesday by the U.S. Treasury Office of the Inspector General indicates that the Office of Thrift Supervision (OTS) was too lenient in dealing with Downey Financial Corp. The Newport Beach, Calif.-based savings and loan failed in November after significant mortgage losses. The report said the OTS issued warnings from 2002 to 2005 about Downey’s adjustable rate mortgages, but did not order Downey to limit its exposure to them (Reuters June 16). The OTS should have been more “forceful” and limited the mortgages’ concentrations at Downey, according to the report. It also said OTS agrees with the inspector’s recommendations ... * WASHINGTON (6/18/09)--Reverse mortgage lenders say they are preparing for a pullback in the industry as stricter eligibility requirements loom. Shaun Donovan, Department of Housing and Urban Development (HUD) secretary, said the government may need to be tougher on slowing the growth of reserve mortgage loans as home prices drop. Reverse mortgages could be the next subprime mortgage product, said Comptroller of the Currency John Dugan said in a speech at a banking industry conference (American Banker June 16). If HUD changes eligibility requirements, fewer borrowers will qualify for the loans, according to David Cesario, executive vice president of 1st Reverse Financial Services LLC. Last year, a housing bill capped origination fees on the loans at 2% for the first $200,000 and 1% for the balance beyond that amount. Congress approved a higher limit in February--$625,000--which expanded eligibility requirements. That figure is an increase from $417,000. HUD has asked Congress for $798 million to boost its loss reserves for the Federal Housing Administration’s Home Equity Conversion Mortgage program. The program allows borrowers age 62 and older to convert their home equity into monthly payments or a line of credit. The loan is repaid when the home is sold ...

Hyland rejects No future for small CUs

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WASHINGTON (6/18/09)--The National Credit Union Administration (NCUA) is planning to update a supervisory letter to ensure that its examiners understand the unique situations that low-income credit unions and community development credit unions (CDCUs) face, NCUA Board Member Gigi Hyland said in a recent interview with National Federation of Community Development Credit Unions President/CEO Cliff Rosenthal. The NCUA is also focusing on training its examiners to ensure that they “have a better understanding of the uniqueness of low-income designated credit unions” and fully understand how best to examine their financial status. Though current NCUA guidelines mandate that Prompt Corrective Actions (PCAs) must be taken against CDCU’s with a net worth below 6%, Hyland said that some changes in accounting that are triggered by the extended deadlines provided under the corporate stabilization proposal could help some credit unions avoid undertaking a net worth restoration plan. Hyland also encouraged examiners to sympathize with the situation that credit unions are facing, adding that credit unions that may be in trouble should be given “more time” than they would be afforded under an “immediate or six month requirement” to “get back up to the appropriate levels.” Credit unions should also advocate for their own positions through “specific dialogues” about their “sustainability” and their own plans going forward. While more pressing issues, such as the corporate credit union situation, have kept this part of the overall Community Development Revolving Loan Fund discussion off of the board’s agenda, Hyland said that the NCUA could see if there is any impetus “to address this issue from a regulatory standpoint” when a new agency chairman is in place. Deborah Matz has been nominated by the Obama administration for that position, but a date for a confirmation hearing has not yet been set. Hyland said that a recently released legal opinion from NCUA staff concluded that the board could use funds from its $16 million CDRLF as a source of secondary capital for struggling CDCUs. If this CDRLF issue returns to the fore, Hyland said that one issue the board would have to grapple with is whether or not Congress intended the CDRLF to be used for something more than loans to credit unions serving low-income communities. More generally, Hyland said that future NCUA discussions could address the overall structure of the share insurance fund and whether or not that fund should “be a deposit based fund or a premium based fund” similar to that of the Federal Deposit Insurance Corporation. The NCUA could also debate whether a separate share insurance fund for the corporates is needed, and look into exactly who uses corporates and what they use them for, she added.

Treasury wants NCUA independent

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WASHINGTON (6/18/09)—The U.S. Treasury’s report on financial regulatory reform, released to the public on Wednesday, would allow the National Credit Union Administration (NCUA) to maintain its safety and soundness authority over credit unions.
In front of an executive mansion gate, CUNA President/CEO Dan Mica answers a reporter’s question on the Obama administration’s financial regulatory restructuring plan directly after Mica left the president’s briefing at the White House. Mica says CUNA will "take a very close look at the details surrounding this proposal" and will “represent credit unions throughout the reform process." (CUNA Photo)
This confirms what Treasury officials told Credit Union National Association (CUNA) President/CEO Dan Mica and other senior CUNA staff last week. Noting that the ongoing economic uncertainty provides an “opportunity for restructuring that will genuinely produce improved regulation,” NCUA Chair Michael Fryzel said that the Obama administration's proposal “merits serious consideration.” The continued independence of the NCUA and the proposal’s plan to create a consumer protection council will “serve to ultimately improve the safe and sound operations of the U.S. financial system,” he added. CUNA Senior Vice President of Legislative Affairs John Magill said that the report's lack of recommendation for substantive changes in the safety and soundness of regulations for credit unions affirms that "credit unions were not the cause of nor a contributor to the financial crisis." "I am not sure they could be clearer in their intent that NCUA remain an independent regulator than to say at least twice in the document," Magill said. But he also advised credit unions that the administration's proposal would not be "the last word on regulatory restructuring." Magill noted, "Congress is going to have its say over the next weeks and months, and we will continue to monitor this very closely." Ryan Donovan, vice president of legislative affairs for CUNA, said that the potential consolidation of some existing regulations could reduce costs and lessen the regulatory complexity faced by many
Click for videoDan Mica on intial reactions to the Financial Regulatory Reform proposal. Click for video. (Photo provided by CUNA)
credit unions. However, CUNA has not fully analyzed these proposals, and an official statement on these portions of the Treasury proposal has not yet been released. CUNA will also solicit input from its member institutions in the coming days, and and will work to ensure that any of the resulting regulations are not duplicative, Donovan added. To help launch what is sure to be a thorough vetting of the plan's intricacies, the Senate Banking Committee and the House Financial Services Committee have scheduled Treasury Secretary Timothy Geithner to appear before them in separate hearings today to discuss the Obama plan. Following an afternoon briefing at the White House, CUNA President and CEO Dan Mica said that while CUNA is “grateful” for the administration’s decision to grant continued independence to the NCUA, CUNA will “take a very close look at the details surrounding this proposal” and will represent credit unions throughout the reform process “after discussing the proposal fully” with CUNA members. CUNA's Governmental Affairs Committee is scheduled to review aspects of the proposal later today. For video of Mica’s statement following the White House briefing, use the resource link.

Inside Washington (06/16/2009)

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* WASHINGTON (6/17/09)--The Arkansas Credit Union League and credit union representatives traveled to Washington, D.C., to hike Capitol Hill June 10 and meet with Arkansas Reps. Marion Berry (D), Vic Snyder (D), John Boozman (R) and Mike Ross (D).
Click to view larger image Click for larger view
The group also met with the staff of Sens. Mark Pryor (D) and Blanche Lincoln (D). During the meetings, the group discussed member business lending, the corporate structure of credit unions and interchange fees with their delegates. The event began with a legislative briefing at Credit Union House with Credit Union National Association (CUNA) Director of Federal Legislative Affairs Michele Johnson, followed by a reception with the Arkansas delegation at Credit Union House. From left, front row are: Reta Kahley, Arkansas league president; Gina Williams, CEO of UARK FCU; Joyce Judy, CEO of Arkansas Employee FCU; Landon Splawn; Carolyn Ashcraft; Windy Campbell, CEO of Electric Coop CU; and Claudetta Harrod. From left, back row are: Snyder; Boozman; Dwayne Ashcraft, CEO of Arkansas Superior FCU; Ross; Jan Hanna, CEO of Northwest Arkansas FCU; and Ron Harrod, Arkansas league lobbyist. (Photo provided by Credit Union House) ... * WASHINGTON (6/17/09)--On Monday, the Treasury released a proposal that would require loan originators to retain 5% of a loan’s credit risk when selling the loan into secondary markets (American Banker June 16). The proposal, which is part of the Obama administration’s broader restructuring plan expected to be released today, also would forbid loan originators from transferring the risk they are required to retain. House Financial Services Committee Chairman Barney Frank (D-Mass.) circulated a similar measure that passed the House May 7, but Frank’s measure would apply only to certain subprime loans and would allow regulators to lower the mandatory 5% mark ... * WASHINGTON (6/17/09)--Without the Federal Reserve Bank’s emergency lending powers, the nation would have seen a much more severe outcome in the current financial crisis, according to Fed Gov. Elizabeth Duke. She spoke at a recent Women in Housing and Finance meeting. Events involving “specific institutions” came up quickly and the Fed had to act quickly, she said. It would have been preferable if another government agency had the funding and authority to help, but nobody else acted, she said. Duke’s comments were made after Republican and Democratic leaders suggested scaling down the Fed’s authority. A plan by Republican lawmakers unveiled last week would prevent the Fed from lending to individual institutions. Barney Frank (D-Mass.), chair of the House Financial Services Committee, said the Fed’s powers should be re-evaluated ...

Compliance What goes into FACTA readiness

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WASHINGTON (6/17/09)--This month’s Compliance Challenge gives credit unions guidance on how best to comply with the Fair and Accurate Credit Transaction Act (FACTA) accuracy regulations. FACTA’s accuracy and integrity and direct dispute provisions, contained in Section 312 of the Act, were approved for activation by the National Credit Union Association, the Federal Trade Commission, and other various banking agencies earlier this year, and require financial institutions to create policies and procedures to ensure the “accuracy” and “integrity” of information provided to credit bureaus. These regulations should become effective during the third quarter of 2010. For credit unions, these regulations define “accurate” information as information that reflects the overall state of the account, including balances and customer performance. Information that has been substantiated by the provider’s records, is provided in a way that limits the potential for the information to be incorrectly reflected in consumer reports, and provides the most central details of the consumer’s creditworthiness would be considered to have “integrity,” according to the regulations. For more information on FACTA, use the resource links below.

Information-sharing protections reviewed by FinCEN

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WASHINGTON (6/17/09)--The Financial Crimes Enforcement Network (FinCEN) in recent guidance said that financial institutions that take part in an information sharing list created by section 314(b) of the USA Patriot Act would be protected from any liabilities that may result from the sharing of certain information with other financial institutions. These institutions would be protected from liability by safe harbor provisions of Section 314(b) of the Act. However, FinCEN said, the information shared must be related to transactions that the financial institution “suspects may involve the proceeds of one or more specified unlawful activities,” including “money laundering or terrorist activity.” The financial institution must also ensure that both it and the institution it is sharing the information with have notified FinCEN of the exchange. Both institutions must also obey any restrictions governing the use of the information. For FinCEN’s release, use the resource link.

Wait for report info CUNA says of interchange issue

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WASHINGTON (6/17/09)--The Credit Union National Association has asked Congress to oppose any action on potential interchange fee legislation that could disrupt the consumer lending market and would ultimately harm consumers. In a letter delivered to members of Congress on Tuesday, CUNA said that H.R. 2695, “The Credit Card Fair Fee Act,” would “unfairly disrupt a functioning marketplace by giving merchants an enormous competitive advantage over card-issuing credit unions in interchange negotiations.” The legislation, introduced by Rep. John Conyers, Jr. (D-Mich.) earlier this month, would allow merchants to negotiate credit card transaction fees with financial institutions via an antitrust exemption. Granting this sort of leverage to retailers would limit the availability of credit, and could result in higher fees for those that do qualify for lines of credit. A number of credit unions would also be forced out of the credit card market altogether if interchange fees are “artificially” lowered, CUNA added. The bill is currently awaiting action from the House Judiciary Committee. Another piece of related legislation, H.R. 2382, “The Credit Card Interchange Fees Act,” would aim to limit unfair practices in electronic payment systems. According to CUNA, this legislation could allow merchants to reject credit union customers in favor of other payment systems. Retailers could also steer their consumers toward preferred forms of payment. H.R. 2382 has been referred to the House Financial Services Committee. CUNA has asked that any legislation addressing interchange fees be delayed until the Government Accountability Office can complete its study of interchange fees, as directed by the recently passed Credit Cardholders Bill of Rights Act of 2009. To see the full text of the letter, use the resource link.

NCUA to address writedowns in corp stabilization discussion

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WASHINGTON (6/16/09)--Among the items for discussion at the National Credit Union Administration (NCUA) board ’s Thursday meeting will be how credit unions that have already expensed their National Credit Union Share Insurance Fund (NCUSIF) costs associated with NCUA's corporate stabilization efforts can recover or reverse those expenses. The NCUA in an April memo said that credit unions should book the write down of their NCUSIF deposits as an impairment as of March 31. NCUA also said that credit unions could potentially delay reporting those impairments if the delay was consistent with generally accepted accounting principles. However, this determination was prior to the passage of H.R. 2351, which will direct credit unions to spread their NCUSIF costs over a seven or eight-year period. The NCUA will likely discuss its corporate credit union stabilization plan in greater detail at the June 18 meeting, and is expected to present related guidance to credit unions during an interactive webinar on June 24. The board will also discuss a final rule on operating fees and an interim rule on exceptions to the maturity limit on second mortgages during this week’s meeting.

Reg restructuring plans outlined by Geithner Summers

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WASHINGTON (6/16/09)--Treasury Secretary Timothy Geithner and National Economic Council Director Lawrence Summers in a Monday op-ed in The Washington Post said that the Obama administration’s upcoming financial regulatory reform plan would offer enhanced protections to investors and consolidate some aspects of the financial oversight process under a council of multiple regulators. The administration representatives said the plan, set for release on Wednesday, seeks to impose new reporting standards on creators of asset-backed securities, and would require the creators of any securities to maintain a financial stake in that asset. Regulations covering futures would also be harmonized with those covering securities. Oversight of so-called “over the counter” derivatives would also be strengthened. The regulatory reforms would increase the existing capital and liquidity requirements for financial institutions and cluster existing regulators together to, under the supervision of the Federal Reserve, oversee larger interconnected financial firms. Capital and liquidity requirements for larger firms would also be higher under the plan. Additionally, the reforms would create new guidelines to help the government resolve any future failures of large financial institutions without bailing them out or simply letting them collapse. The U.S.-based regulators would also work alongside their foreign counterparts to strengthen financial regulations throughout the world’s markets.

Inside Washington (06/15/2009)

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* WASHINGTON (6/16/09)—House Minority Leader John Boehner (R-Ohio) and about two dozen other House Republicans are asking President Obama to identify what he will do with the $68 billion of rescue money that large banks and thrifts are expected to pay back to the U.S. Treasury Department’s financial rescue fund. In their letter to the chief executive, the House members asked whether the returned Troubled Asset Relief Program funds would be applied toward the federal debt, and they urged Obama to do so. (American Banker June 15)… * WASHINGTON (6/16/09)--The Office of Thrift Supervision received mixed reviews from the U.S. Treasury Department’s Inspector General (IG) for its actions in addressing PFF Bank and Trust. The IG agreed with the thrift regulator’s own assessment that more could have been done to limit PFF’s concentration of constructions loan. The Treasury assessment also said more could have been done to force the $3.7 billion-asset thrift to increase its capital level. On the other hand, the IG report said OTS’ delay in taking formal action against the thrift, while an investor considered a takeover, was appropriate. (American Banker June 15)… * WASHINGTON (6/16/09)--The Federal Reserve’s use of advanced emergency powers may have helped stave off the worst of the financial crisis, but House Republicans would look to reduce the Fed's future emergency authority by limiting its ability to intervene in a company’s affairs under “exigent” circumstances (American Banker June 15). Some have accused the Fed of acting irresponsibly and without accountability, and legislators, including House Financial Services Chair Barney Frank (D-Mass.), have said that some of the Fed’s current powers should be restricted. A new regulatory council to regulate systematically important institutions could address some of the issues and entities that the Fed is currently overseeing. Potential legislation could also require that Congress, the Treasury, or other regulators approve any emergency actions before they are undertaken, but some have said that such a move would only politicize the process of financial intervention…

Fryzel NCUA will remain independent

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PINEHURST, N.C. (6/16/09)—Chairman Michael Fryzel of the National Credit Union Administration (NCUA) said his agency believes the U.S. Congress and Obama administration will allow the agency to remain the independent federal regulator of credit unions, no matter what other reform plans are unveiled Wednesday. “That is the indication I have had to date,” Fryzel said Monday. Fryzel’s remarks were featured in a North Carolina CU League video, taped after the chairman’s remarks to the league’s 74th annual meeting. Fryzel also spoke to the credit union movement’s continued strength despite the country’s economic challenges. He said credit unions will continue to be “safe and sound under one regulator.” He added that the credit union federal share insurance fund also will remain separate, and will not be “co-mingled with other funds.” When asked what challenges credit unions can face cooperatively in the upcoming months, Fryzel said it is important for credit unions to work together to continue to support the corporate credit unions. He encouraged credit unions to “take an active part” in a plan to restructure the corporates to make them “strong into the future.” He said they should “continue to support their members, continue to work with regulator and the trades” so ultimately “once we get out of this difficult economy credit unions can again move forward to achieve goals they’ve never seen before.” “Credit unions have helped for 100 years and will do it for another hundred years” Fryzel declared. U.S. Treasury Secretary Timothy Geithner is expected to announce the administration’s plan for broad financial regulatory reforms on Wednesday. (See related story: Reg restructuring plans outlined by Geithner, Summers.) Use the resource link below to access NCCUL videos.

Geithner faces Congress after reg plan unveiling

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WASHINGTON (6/16/09)--Though the balance of this week's congressional schedule looks to be filled with appropriations-related discussions, Treasury Secretary Timothy Geithner will discuss the Obama administration's official plan for financial regulatory restructuring before the Senate Banking Committee and the House Financial Services Committee in separate hearings scheduled for Thursday. The Credit Union National Association (CUNA) has been meeting with administration and congressional officials on the regulatory plan, which is expected to frame debate on Capitol Hill as it moves forward. Legislators, including House Financial Services Committee Chairman Barney Frank (D-Mass.), have said that the National Credit Union Administration (NCUA) would maintain its independence in spite of the coming regulatory changes. NCUA Chair Michael Fryzel has also said that the NCUA will likely retain its independence under any future financial regulatory legislation. (See related story: Fryzel: NCUA will remain independent.) Other noteworthy hearings include a Tuesday hearing on systemic risk and insurance before the House Subcommittee on capital markets, insurance and government sponsored enterprises and a Thursday joint hearing between the House Financial Services Committee subcommittee on domestic monetary policy and the Ways and Means Subcommittee on select revenue measures on barriers to full minority participation in the new markets tax credit program. Healthcare reform also remains a topic of discussion, ensuring that Congress will stay busy in the lead up to its two-week independence day district work period, which begins on June 29.

Inside Washington (06/12/2009)

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* WASHINGTON (6/15/09)--The Obama administration is expected to detail its regulatory revamp Wednesday, and lawmakers have outlined their ideas for restructuring the financial regulatory system. House Financial Services Chairman Barney Frank (D-Mass.) said he supports his Republican counterparts on limiting the Federal Reserve Board’s emergency powers, restricting credit agencies’ roles, and dissolving the Office of Thrift Supervision. Senate Banking Committee Chairman Christopher Dodd (D-Conn.) has expressed commitment to create an independent consumer protection agency to oversee credit and bank products. The regulator should be included in a proposed systemic risk council, he said. Republicans have proposed taking away much of the Fed’s authority and putting bank oversight under one regulator. Instead of a risk council, Republicans also said they want a “market stability and capital adequacy board” (American Banker June 12). Democrats have said they want a resolution process for systemically significant financial institutions. The Treasury has indicated the Federal Deposit Insurance Corp. should handle the resolution process, but Frank said the decision would include other regulators ... * WASHINGTON (6/15/09)--The inspector general for the Troubled Asset Relief Program and the Congressional Oversight Panel, who are acting as watchdogs for the federal bailout, said they have begun estimating stock warrant values as banks return capital to the government. The estimates aim to ensure the amount on the returns is appropriate (American Banker June 12). Neil Barofsky, special inspector general, and Elizabeth Warren, the panel’s chairman, said they also plan to audit the warrant sale process. The audit seeks to examine the Treasury’s process to value the warrants for repurchase ... * WASHINGTON (6/15/09)--On Thursday, Bank of America Corp. CEO Kenneth Lewis was questioned about his company’s acquisition of Merrill Lynch and Co. last fall (American Banker June 12). During a House Oversight and Government Reform Committee hearing, Lawmakers tried to determine whether Lewis followed through with the deal after former Treasury Secretary Henry Paulson told him that Federal Reserve Board Chairman Ben Bernanke would fire him and his board if the purchase was not completed. Lewis had been hesitant about the deal because of losses Merrill suffered. Lewis said he was not concerned with the threat, but the fact that the Fed would threaten a bank he said was in good standing. Committee Chairman Rep. Edolphus Towns (D-N.Y.) said lawmakers should look at the Fed’s role in the Merrill deal as the government works on financial regulatory reform. It appeared as though regulators were making up their own rules, and more transparency and accountability is needed, he said ... * WASHINGTON (6/15/09)--Roger T. Cole, director of the Division of Banking Supervision and Regulation at the Federal Reserve Board, will retire Aug. 1 after 30 years of service. Cole has served as division director since September 2006. He joined the board's staff in 1979 as a senior financial analyst. Cole was appointed to the Board's official staff in 1988 and was promoted to associate director in 1997 and senior associate director in 2001 ...

Agency guidance on corp. CU stabilization expected

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ALEXANDRIA, Va. (6/15/09)--The National Credit Union Administration (NCUA) is expected to discuss its recently passed corporate credit union stabilization plan at its upcoming board meeting, scheduled for June 18. The NCUA will present its guidance on the corporate stabilization plan and will allow participating credit unions direct access to NCUA staff during a June 24 webinar. The board will also address Section 701.26 of its rules and regulations by discussing a final rule related to operating fees. An interim rule regarding NCUA’s Section 701.21(f), Exception to the Maturity Limit on Second Mortgages, will also be discussed during the open portion of the meeting. The NCUA will also examine its monthly report on the status of the National Credit Union Share Insurance Fund.

FTC disclosure changes should defer to NCUA CUNA

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WASHINGTON (6/15/09)—The Credit Union National Association (CUNA) said recently that for non-federally insured credit unions, the Federal Trade Commission should defer to the National Credit Union Administration (NCUA) rule on share insurance signs for shared branching. In February, the NCUA did away with a complicated requirement that shared branches must display a sign listing each federally insured credit union served by the teller along with a statement that only these credit unions are federally insured. The new rule replaces the required list of federally insured credit unions with a statement that not all of the credit unions served by the teller are federally insured and members should contact their credit union for more information. The FTC’s has proposed a rule that would require all financial institutions—including credit unions--that lack federal deposit or share insurance to provide enhanced disclosures to their members or customers through both signage and the distribution of written disclosures. These rules implement provisions of the Federal Deposit Insurance Corporation Improvement Act, as amended in 2006 by the Financial Services Regulatory Relief Act. Under the rule, the FTC would also require financial institutions to obtain signed copies of a disclosure that acknowledges their financial insurance status from all members and customers. At the moment, these disclosures will be collected from all members or customers that joined after Oct. 13, 2006. CUNA, in a recent comment letter to the FTC, urged that existing credit union members be exempted . Forcing existing members to sign these disclosures would not only be a difficult task to complete, but would be a “public relations nightmare” for credit unions. The FTC should also delay the effective date of these new rules to 9 months after the rules is issued to allow the time needed to create the new disclosures and train staff members. Federally insured credit unions are covered by the NCUA National Credit Union Share Insurance Fund. CUNA estimates that around 200 state-chartered credit unions do not currently have federal share insurance, instead opting for private insurance, which must meet these new FTC requirements. For CUNA’s full comment letter, use the resource link below.

CU members dont face risks of stockholders NCUA reminds

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WASHINGTON (6/15/09)--Members of federally chartered credit unions do not face the same level of risks faced by shareholders in for-profit corporations or individuals taking part in a business partnership, National Credit Union Administration (NCUA) Associate General Counsel Sheila Albin said in a recently released legal opinion letter. The assurance came in response to a query about the differences between the benefits of credit union membership and ownership of shares of a for-profit entity. According to Albin, FCU members, who “invest in and become members of” their credit unions by starting savings, checking, and share certificate accounts have several protections that are not afforded to average corporate shareholders. They include National Credit Union Share Insurance Fund backing of up to $250,000 in total shares that are held in qualifying accounts. Members will also maintain the value of their shares if their FCU “becomes insolvent or is liquidated,” the letter added. Members would also be entitled to a pro-rata share of their credit union’s worth if that credit union is voluntarily liquidated, Albin said. Additionally, Albin said that while holders of traditional stocks can have a cumulative advantage over their fellow shareholders when leadership decisions are made, credit union members only have one single vote, no matter how large or small their accounts are. These members are also entitled to lending and savings rates that outperform those of traditional banks, for the most part. A credit union’s profits may also be redistributed to its members in the form of dividends, Albin added.

NCUA FCUs may modify with shared-appreciation loans

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WASHINGTON (6/15/09)--In a letter to Michigan credit union representatives, the National Credit Union Administration said that credit unions may offer shared appreciation loan modifications to individual borrowers. According to NCUA, nothing in their current rules would prevent federal credit unions from “offering a shared appreciation loan modification, assuming it is done in a safe and sound manner.” Shared appreciation agreements allow mortgage holders to reduce the balance of their loan by sharing any future increases in the home’s value with the cooperating credit union. In the letter, the NCUA said that such “prudent workout arrangements” can prevent foreclosures by creating workable solutions for both credit unions and homeowners. NCUA generally encourages credit unions to “work with members who could benefit from various loan modification arrangements.” However, the NCUA said, credit unions that wish to take part in mortgage loan modification should consult a tax adviser and should also contact the Treasury to ensure that their actions are permissible under the loan modification guidelines in the Treasury’s Making Home Affordable program. For the full letter, use the resource link below.

Treasury CUNA meet on CU issues

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WASHINGTON (6/12/09)—As the financial services world awaits an expected June 17 announcement by the Obama administration regarding details of its regulatory reform plan, Credit Union National Association (CUNA) representatives met with new U.S. Treasury Assistant Secretary for Financial Institutions Michael Barr to discuss credit union issues. Regulatory restructuring, corporate credit union stabilization issues, increased member business lending authority and access to secondary capital were among the topics CUNA President/CEO Dan Mica raised with Michael Barr. Mica emphasized that the credit union system overall is strong and well-capitalized, but noted the economy has affected credit unions in several states. The CUNA leader also stressed the importance of an independent regulatory agency for credit unions, with a workforce that is well-trained, professional and highly competent. He discussed a number of other issues, including avenues for additional capital for some credit unions in need. "As a former official at Treasury in the Clinton administration, the author of a number of consumer financial publications and a financial institutions law professor, Mr. Barr returns to the agency with a keen understanding of the financial marketplace,” Mica said following the meeting. He added, “I was pleased that he wanted to hear about our concerns and wants to engage CUNA in an ongoing dialogue on significant issues impacting financial institutions and the credit union system.” The Treasury Department can play a critical role in credit union legislation and, sometimes, regulation. “Maintaining a positive relationship with the agency is a high priority for CUNA,” Mica noted. Other Treasury officials at the meeting included new Deputy Assistant Secretary for Consumer Protection Eric Stein, and Mario Ugoletti, recently named as director of the Office of Financial Institutions. CUNA senior staff accompanying Mica were General Counsel Eric Richard, Chief Economist Bill Hampel, Deputy General Counsel Mary Dunn and Vice President for Legislative Affairs Ryan Donovan.

Inside Washington (06/11/2009)

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* WASHINGTON (6/12/09)--On Wednesday, House Financial Services Committee Chairman Barney Frank (D-Mass.) released a statement responding to a European Commission report that investigated U.S. Internet and gambling laws and their enforcement against European Union companies. The U.S. measures constitute an obstacle to trade that is inconsistent with World Trade Organization rules, the report said. “This is further argument for repealing the law, which currently restricts the personal freedom of American adults to gamble online,” Frank said. He has tried to modify the law, the Unlawful Internet Gambling Enforcement Act of 2006, since it was passed. While the Credit Union National Association (CUNA) does not support or condone illegal Internet gambling, it is concerned that credit unions could be swamped by the law’s compliance burdens ... * WASHINGTON (6/12/09)--Treasury Secretary Timothy Geithner Wednesday unveiled principles regarding executive compensation and an interim rule that implements

CU CEO proposes total charter revamp

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WASHINGTON (6/12/09)—Wendell “Bucky” Sebastian, CEO of Tampa, Fla.-based GTE FCU, proposed a radical reinvention of the current credit union system at the National Credit Union Administration’s symposium highlighting the 75th anniversary of the 1934 Federal Credit Union Act. Under Sebastian’s concept, credit unions would change their title to financial services cooperatives. These financial cooperatives would continue to have voluntary directors and would hold direct elections. Organizations would be allowed to choose their own markets and determine which types of loans they wish to provide to their members. Supplemental and alternative capital would also be allowed. Fields of membership would not be determined by third parties, but by the cooperative’s board of directors. The compensation for CEOs would be capped at 20 times the salary of an average employee of the cooperative, and the salaries of CEOs and high-ranking executives would be published for public record purposes. These organizations would be taxed on earnings in excess of expenses, dividends, and any reserves beyond 12 % of their total assets, but would, like many other financial organizations, “be subject to taxation but pay no tax.” Community reinvestment act reporting rules would also be enforced. Oversight of these organizations would still be performed by the National Credit Union Administration. However, the name could be changed to the National Cooperative Regulatory Agency. Sebastian advocated maintaining the existing credit union charter for those that are satisfied with the current results for their organizations and members. However, he said, many existing credit unions would benefit from a new model that would still provide “first class, open, transparent, absent-of-greed financial institutions that are working in the best interest of their members and never in the interest of a third party group different from their members.”

Red Flags FAQs from regulators available

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WASHINGTON (6/12/09)—A set of identity theft frequently asked questions (FAQs) to help financial institutions and others comply with federal regulations was jointly released Thursday by federal financial institution regulators. The FAQs address the “Red Flags and Address Discrepancy Rules” that implement sections of the Fair and Accurate Credit Transactions Act (FACT Act). Those rules were issued jointly by the National Credit Union Administration (NCUA), federal bank and thrift regulators, and the Federal Trade Commission, in 2007. The rules require financial institutions and creditors to develop and implement written “Identity Theft Prevention Programs” and require issuers of credit cards and debit cards to assess the validity of notifications of changes of address. The rules also provide guidance for users of consumer reports regarding policies and procedures to employ when consumer reporting agencies send notices of address discrepancy. According to a release, the FAQs provide guidance on such aspects of the rules as:
* Entities and accounts covered; * Establishing and administering an Identity Theft Prevention Program; * Validation requirements applicable to card issuers; and * Obligations of users of consumer reports upon receiving a notice of address discrepancy.
Use the resource link below to find the FAQs.

Key lawmaker supports CU tax status MBL cap lift

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WASHINGTON (6/12/09)--Maintaining the existing tax-exempt status of credit unions and lifting the 12.25%-of-assets cap imposed on credit union member business lending (MBL) are hot topics for credit unions, and Rep. Ron Kind (D-Wis.) told attendees at the American Association of Credit Union Leagues' 2009 GAPS Conference that credit unions have his full backing regarding both of these issues. Addressing political and governmental affairs specialists from state credit union leagues, Kind said that he is a “strong critic” of taxing credit unions, adding that he would oppose any measure that could potentially tax credit unions to offset federal spending under pay-go budgetary rules. Taxing credit unions could also be one of a multitude of potential reforms studied by President Barack Obama’s tax reform panel, but Kind said that he would look out for the interests of credit unions when this panel reports its findings in late 2009. Credit union representatives nationwide should be prepared to contact their legislators and make their voices heard if the taxation of credit unions is proposed, Kind said. However, Rep. Paul Ryan (R-Wis.), speaking during a later session, said that he does not expect credit union taxation to be on the table this legislative session. Both Kind and Ryan are members of the powerful tax policy-writing House Ways and Means Committee. Commending credit unions for “stepping in to the void” and continuing to lend to small businesses when many other financial institutions have tightened their lending practices, Kind said that he favors lifting the MBL cap. There is also a “growing sentiment” among members of Congress that the MBL cap should be lifted, he added. Ryan took a more general tone, speaking in support of regulatory relief and credit relief, both of which would be a preferred means of stimulating the economy. Both lawmakers said that credit unions should be recognized for making the right decisions and avoiding the risky investments that have lead to the economic downturn, and encouraged credit unions to continue telling “their story” to both legislators and citizens.

Inside Washington (06/10/2009)

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* WASHINGTON (6/11/09)--The Federal Reserve Board will not have sole responsibility to handle systemic risk, said Treasury Secretary Timothy Geithner Tuesday (American Banker June 10). The job is too big for one agency, he told a Senate Appropriations financial services subcommittee. Geithner hinted that he might support an idea suggested by Federal Deposit Insurance Corp. Chairman Sheila Bair to create a regulatory council. Geithner also said during the hearing that the Obama administration’s regulatory revamping plan could be announced next week--but wouldn’t have a framework to revamp Fannie Mae and Freddie Mac. Sen. Dick Durbin (D-Ill.), who has pushed for legislation to reform mortgage bankruptcy proceedings and place rate caps on consumer credit products, asked Geithner during the hearing if a voluntary loan modification program would be enough to stem foreclosures. Geithner, who said he opposes rate caps, told Durbin that the Obama administration’s proposal will be much different than the previous administration’s, and that regardless of the plans, homeowners may still have a few challenging years ahead ... * WASHINGTON (6/11/09)--Rep. Carolyn Maloney (D-N.Y.) said she supports a recommendation to continue stress-testing the nation’s larges financial institutions. Elizabeth Warren, who chairs the oversight panel of the Troubled Asset Relief Program, said the stress tests were helpful but limited (American Banker June 10). The tests should be repeated as long as banks hold toxic assets on their balances sheets, Warren said. Maloney agreed, saying the tests should be extended beyond next year, especially given concerns in the commercial real estate market ... * WASHINGTON (6/11/09)--Critics question what the Treasury Department will do once it receives $68 billion from 10 banks slated to repay their government capital from the Troubled Asset Relief Program (TARP). After the funds are repaid, TARP will have $270 billion left. The funds could be used to offset the national deficit, or be placed into a reserve for future use, said President Barack Obama (American Banker June 10). The money, by law, will go into the Treasury’s general fund, said Treasury Secretary Timothy Geithner. However, critics question if the repayment could cause backlash from institutions that cannot repay the funds--such as Bank of America Corp. and Citigroup Inc. Of the 10 institutions that announced their repayments Tuesday, JPMorgan Chase and Co. was cleared to repay the largest amount at $25 billion ... * WASHINGTON (6/11/09)--The House Oversight Committee Tuesday subpoenaed the Federal Reserve Board for documents regarding the purchase of Merrill Lynch and Co. by Bank of America (Bloomberg.com June 10). Bank of America Corp. CEO Kenneth Lewis said he was pushed by federal officials to complete the purchase after he became aware of significant losses at Merrill Lynch. In prepared remarks for testimony today, Lewis said the Treasury and Fed asked Bank of America to delay any action to slow the transaction because of Merrill’s losses. The government and Bank of American knew that if Merrill Lynch collapsed, it could trigger a crisis, Lewis said ... * WASHINGTON (6/11/09)--Senate Banking Committee Chairman Christopher Dodd (D-Conn.) encouraged the Federal Reserve Board to require credit card companies to get their customers’ permission before enrolling them in overdraft programs (American Banker June 10). The opt-in approach provides better consumer protection because the default then would be on overdraft service or fees, while the opt-out just continues the status quo, Dodd said. He also noted his concern that banks may start hitting consumers with other fees since new credit card standards--the Credit Card Accountability, Responsibility and Disclosure Act--were signed into law recently ...

CUNA MBL cap is No. 1 deterrent to SBA lending

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WASHINGTON (6/11/09)—Credit Union National Association (CUNA) witness Roger Heacock told the House Small Business Committee Wednesday that credit unions stand ready to do more to provide credit to small businesses. Heacock is president/CEO of Black Hills FCU, Rapid City, S.D., which
Click to view larger image CUNA witness Roger Heacock outlines credit union challenges to participating in SBA guaranteed loan programs. Number one, he says, is the low MBL cap, which keeps some credit unions from setting up small business lending programs in the first place. Heacock is president/CEO of Black Hills FCU, in South Dakota. To Heacock's right is National Association of Small Business Investment Companies witness Hollis Huels. (CUNA photo)
received a South Dakota district Small Business Administration (SBA) award for writing more SBA loans in the state than any other financial institution during 2008-2009. The loans totaled just over $1.6 million, and averaged $56,703 per loan. “We have a number of members who started small businesses using SBA loan funds, while continuing to work at their primary job as their main source of income. The SBA helped us be there for our members, and this has resulted in additional employment opportunities,” Heacock testified before the committee. However, he added, some credit unions find SBA fees prohibitive and the application process unnecessarily complex, creating barriers to participation. Another barrier, identified by Heacock as the number one obstacle, is the restrictive 12.25%-of-assets cap imposed on credit union member business lending (MBL) just over 10 years ago. While noting the cap does not apply to SBA loans, he pointed out it is a huge deterrent to credit unions' developing MBL programs, without which they cannot pursue SBA programs. Also, without the cap, credit unions could infuse communities with as much as $10 billion of small business credit, CUNA has noted. Heacock acknowledged that there can be additional risk to small-business types of borrowers and noted that “other lenders shy away from helping them because there is not a proven cash flow.” “We are able to do this type of lending because of the guarantee that SBA provides,” he said referring to his credit union’s experience, “The programs allow us to help the borrower who comes in and may not have the equity investment we would generally like to see, but has a good business plan.” “The SBA helps us create an acceptable level of risk and it is a win-win situation for all of us – the credit union, the SBA and the borrower,” he added. In response to a question, Heacock also addressed the negative role some federal credit union examiners play in credit union interest in SBA guaranteed lending programs and business lending in general. He told the committee members, "Examiners' anti-business lending approach in some parts of the country is hurting credit union lending to small businesses." The committee hearing, overall, was intended as an exploratory look at the role of the SBA’s financing programs in providing access to capital for small businesses. Additionally, the committee intended to examine better ways to achieve the SBA mission of providing access to capital for small businesses. Two panels of witnesses were scheduled to testify. Along with Heacock, the first panel featured representatives from the Independent Community Bankers of America, American Bankers Association, National Association of Development Companies, and the National Association of Small Business Investment Companies. The second panel was comprised of representatives from the following organizations: the Biotechnology Industry Organization, the International Franchise Association, Associated Equipment Distributors, and National Marine Manufacturers Association. Use the resource link below to read CUNA's entire statement.

Alternative capital questions arise at NCUA symposium

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WASHINGTON (6/11/09)—National Credit Union Administration (NCUA) board member Gigi Hyland said this week that while the NCUA is studying the concept of allowing credit unions to pursue supplemental capital, there is no set timeline for such a move. Hyland was addressing the NCUA’s symposium highlighting the 75th anniversary of the 1934 Federal Credit Union Act. She noted that the NCUA is conducting studies to develop an official position on the issue and to prepare the board for possible discussion of alternative capital with legislators. Speaking on his own behalf at the symposium, NCUA Deputy Executive Director Larry Fazio also addressed alternative capital. He said he has mixed feelings about the use of alternative capital, and that any move toward allowing alternative sources should only be done after intense deliberation. The optimal approach to the issue, Fazio opined, would be to allow the U.S. Congress to address this issue legislatively. Fazio questioned the overall benefit of allowing alternative capital, saying that larger credit unions may be the only ones that benefit. Internationally, credit unions have issued alternative capital with mixed results, he said. However, fellow panelist Andy Poprawa, president/CEO of Deposit Insurance Corp. of Ontario, said that while the structure of credit unions in Canada is somewhat different from those in the United States, Canadian credit unions that have issued alternative capital through shares have not sacrificed their institutional safety. They also, he said, have maintained the same levels of protections. Canadian credit unions that have issued shares have also been able to keep the core values of the credit union movement while enhancing their financial standing as well. The Credit Union National Association (CUNA) supports expanding the sources of capital available to credit unions. Such expansion, CUNA says, will support continued credit union growth and help credit unions provide the services that members demand, while meeting statutory net worth requirements.

Uncle Sam assures summer commuters on CU funds

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ALEXANDRIA, Va. (6/11/09)—The National Credit Union Administration (NCUA) Wednesday unveiled its new summer transit bus advertisement campaign aimed at assuring members of the public that their money is safe with credit unions. The campaign began on June 1 and is scheduled to run through Aug.
NCUA commuter bus ad campaign.
31. It will appear on local transit buses in nine major metropolitan areas in three states: Arizona, California, Florida, and the District of Columbia. The ad, featuring a traditional and familiar picture of Uncle Sam-- a symbol of the United States government--with his fingered pointed at the viewer, proclaims, “Your Federally Insured Credit Union Funds are Safe up to $250, 000,” and prominently displays the NCUA logo. The ad will follow commuters around in a total of 1,700 transit buses in the following cities: In Arizona, Phoenix; in California, Sacramento, San Francisco, Santa Clara Valley, Los Angeles, San Diego; in Florida, Tampa and Ft. Myers; and Washington, D.C.

Durbin is back with interchange fee bill

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WASHINGTON (6/11/09)—As he pledged to do when his interchange fee amendments failed to be included in a credit card bill passed into law in May, Sen. Richard Durbin (D-Ill.) has resurrected legislation that could impose government limits on the rates set for credit and debit card processing—i.e., interchange fees. The new bill, S. 1212, is very similar to one Durbin introduced in the last Congress, right down to its name, the Credit Card Fair Fee Act. It proposes to establish a full-time panel of three Electronic Payment System Judges to intervene in disputes between card service providers and merchants regarding fees set for use of the electronic payments system. The tribunal would have broad power to determine access rates and terms and to impose civil money penalties on any party deemed to be out of compliance with its authorities. The Credit Union National Association (CUNA) has said that such a tribunal would be costly and would serve to impose government decisions on a system that is more appropriately governed by the market. CUNA Senior Vice President of Legislative Affairs John Magill said Wednesday, “We will continue to reach out to Sen. Durbin and other senators to stress the importance of interchange to credit unions and their 92 million members.” Along with CUNA, all members of the Electronic Payments Coalition and the U.S. Department of Justice have been among opponents of the "fair fee" legislation. “The merchants' effort to avoid paying their fair share of electronic transactions threatens the integrity of the payment processing system. Our consumer members value the debit cards and credit cards issued by their credit union,” Magill said. He added, “We will do everything we can to ensure our members are not adversely affected by the merchants' legislative strategy to reduce the merchants' obligation in the marketplace.” Proponents of the legislation, such as the large National Retail Federation, argue that the savings merchants might realize on interchange fees would benefit consumers. However, according to CO-OP Financial Services President/CEO Stan Hollen in 2008, "Past experience with similar legislation in Australia suggests the merchants did not pass any interchange reduction on to consumers."

Kanjorski to NCUA symposium Should lift MBL cap

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WASHINGTON (6/10/09)--Saying “I am a member of the credit union family,” longtime credit union champion Rep. Paul Kanjorski (D-Pa.) said he supports lifting the statutory cap on credit union member business lending (MBL). He made the comments Tuesday at the National Credit Union Administration’s (NCUA) symposium highlighting the 75th anniversary of the 1934 Federal Credit Union Act. The symposium was organized by NCUA board member Gigi Hyland, who said its goal is to generate ideas and suggestions on the direction of the credit union movement that she can take back to the NCUA board for further discussion. Credit Union National Association (CUNA) President Dan Mica was among those attending. Rep. Kanjorski said lifting the MBL cap would be a quick way to stimulate the economy with $10 billion in new lending. Credit unions, he added, provide an important and needed service in this area. “Those business limitations must be raised,” he said, provided adequate enforcement is in place as a safeguard. Lifting or eliminating the MBL cap is one of CUNA’s top legislative priorities this year. The congressman also urged the NCUA to pursue its review of the corporate credit union sector, saying there should be fewer than 28 corporates, though he did not indicate how many. He expressed his preference for federal over private deposit insurance. And he reiterated his view that in credit union-to-bank conversions the members’ capital should be channeled to a not-for-profit entity such as another credit union, rather to a small group of insiders. Credit unions’ tax-exempt status is secure, he said, but credit unions must adhere to the core legislative principles that define them as not-for-profit cooperatives, democratically controlled, overseen by volunteer boards, and meeting the financial needs of all consumers, especially those of modest means. With the Obama administration due to unveil its proposal for financial regulatory reform next week, Kanjorski said the derivatives and hedge fund markets must be brought under government supervision, calling them a “silent cancer” that potentially can be disastrous for the economy if left unregulated. In conversation with CUNA’s Dan Mica afterward, he said the rating agencies also should come under closer congressional scrutiny. Kanjorski said that legislators should take a patient approach to any regulatory reform, as adhering to an arbitrary deadline would mean that they “are going to do a superficial patch-up" rather than a comprehensive overhaul of the financial regulatory structure. Hyland’s symposium continues through this morning. Mica commended her for hosting the event. “It is clear Board Member Hyland is committed to broadening the conversation and enhancing the credit union movement for its next 75 years,” he said.

Inside Washington (06/09/2009)

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* WASHINGTON (6/10/09)--Though a Treasury Department announcement that 10 of the largest U.S. financial institutions participating in the Capital Purchase Program have met the requirements for repayment, financial industry observers argue that regulators’ confidence in capital infusions to stabilize banks could be too optimistic. Treasury has notified the institutions that they can complete the repayment process, and if the funds are repaid, Treasury will receive $68 billion (American Banker June 9). There are still bad assets on some institutions’ balance sheets, critics say. The asset problem was there before the Troubled Asset Relief Program (TARP) and it will be there after TARP is gone, according to Karen Shaw Petrou, Federal Financial Analytics Inc. managing director. Douglas Elliott, a Brookings Institution fellow, said the government shouldn’t be overly optimistic, because there is much the industry doesn’t know yet. Lawrence White, finance professor at New York University, said if troubled assets don’t “come around,” there will be another TARP program ... * WASHINGTON (6/10/09)--Many financial institutions have not yet created an effective process or system to measure and manage risk, according to a Global Risk Management Survey by Deloitte and Touche LLP. Only about one-third of institutions have implemented enterprise risk management (ERM) solutions. Another one-third said they are establishing ERM, while 18% said they are planning to create ERM. “Most institutions have an unfinished agenda when it comes to the development of sophisticated risk-management capabilities, enabling an integrated, enterprise wide approach to managing the varied and dynamic risks they face. Financial institutions that can understand risk holistically--managing the full range of risks they confront--can strategically use risk-taking as a means to strengthen their competitive position and create value. Deloitte surveyed 130 financial institutions worldwide ... * WASHINGTON (6/10/09)--The 10 banking organizations required to bolster their capital buffers have all submitted capital plans that, if implemented, would provide sufficient capital to meet the required buffer, the Federal Reserve Board said Monday. The Fed said it would work with the institutions to ensure their plans are implemented quickly and effectively. Earlier this year, federal regulators deployed stress tests at 19 of the nation’s largest institutions. Results of the tests were released last month ... * WASHINGTON (6/10/09)--The U.S. Supreme Court is delaying the sale of Chrysler to Fiat because it is considering whether to hear the objections of three Indiana state funds and consumer groups (The New York Times June 9). The delay could be resolved by Thursday, but if the court decides to hear an appeal that lasts several weeks or months, Chrysler could be put at risk of going out of business, the Times said. Legal experts noted that the delay should not be interpreted as a sign of the court’s intentions. The delay comes after President Barack Obama said he would work to implement a quick bankruptcy process for Chrysler. A lawyer for Chrysler argued in a recent filing that the auto manufacturer loses $100 million per day while in bankruptcy. Under the Fiat deal, Chrysler would have a union retiree trust owning 55%; Fiat would own a 20% share that could increase to 35%; and the U.S. and Canadian governments would hold the minority stakes. Fiat can exit the deal with Chrysler if it is not complete by Monday ... * WASHINGTON (6/10/09)--National Credit Union Administration (NCUA) Chairman Michael E. Fryzel commended New Jersey Credit Union League members for being proactive in serving their members, and enthusiastic and skillful in working with congressional legislators, during a speech to the league June 4 in Township, N.J. “The credit union industry and NCUA have been through a difficult and challenging 10 months,” Fryzel said. “Despite unprecedented upheavals during what some are calling the most difficult year in the first century of the credit union industry, the record we have established is unarguably positive. In short, despite tremendous stresses on both the corporate and natural person credit union parts of the industry, we were able to make “business as usual” the word of the day. And for that, I believe we all deserve credit.” Fryzel also commended New Jersey credit unions for their proactive efforts involving chartering new credit unions, student loan participation and seeking a new state law that would allow credit unions to accept government deposits ... * WASHINGTON (6/10/09)--Twenty-two credit union leaders from Michigan and four representatives from the Michigan Credit Union League visited Capitol Hill last week to meet with lawmakers (Michigan Monitor June 8). “Legislators were thankful for the benefits of the Invest in America program in assisting our domestic automakers and the ongoing efforts of credit unions to serve their local communities,” said MCUL Executive Vice President Patrick La Pine. “As many lawmakers and their staff have heard the stories of struggling small businesses in their districts, we made sure they understood the advantage of lifting the member business lending cap.” In addition to visiting all 17 members of the Michigan congressional delegation, the group met with National Credit Union Administration (NCUA) Executive Director David Marquis about NCUA’s corporate stabilization plan. From left are: La Pine; Melinda Bouie of Oakland County CU; Scott Pauly, Onaway CU CEO; and Jeff Noe, Co-op Services CU executive vice president. (Photo provided by the Michigan Credit Union League) ...

Prez may appoint future IGs for NCUA other regulators

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WASHINGTON (6/10/09)--The National Credit Union Administration’s (NCUA) office of the inspector general could become a presidential appointment after the House passed H.R. 885, the Improved Financial and Commodity Markets Oversight and Accountability Act, by a voice vote. The bill also would elevate the inspectors general of the Commodity Futures Trading Commission, the Board of Governors of the Federal Reserve, the Pension Benefit Guaranty Corporation, and the Securities and Exchange Commission to the level of presidential appointment. In a release, Rep. John Larson (D-Conn.) said that the bill, if enacted, would give inspectors general the tools they need and, overall, would fight against some of the same types of regulatory failures that have led to the weakened state of the current economy. “Simply stated--independent watchdogs ensure better performance from government agencies,” Larson added in a statement delivered on the House floor. NCUA board member Gigi Hyland told News Now that while the board has no official position on the potential legislation, current NCUA Inspector General William DeSarno has joined other inspectors general in voicing opposition to the bill. The bill will now move on to the Senate.

Inside Washington (06/08/2009)

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* WASHINGTON (6/9/09)--Under a new Obama administration proposal, banks that have received two rounds of bailout money from the federal government would be required to submit any significant executive pay changes for approval (The New York Times June 8). The proposal is part of wider regulations on executive pay that the White House could announce this week. General Motors’ financing arm, GMAC; Bank of America; Citigroup; and the American International Group are expected to face the toughest scrutiny. Kenneth R. Feinberg--known for overseeing payouts to those who lost family members to the Sept. 11, 2001, terrorist attacks--will be in charge of monitoring the executive pay. On Thursday, the House Financial Services Committee is scheduled to hold a hearing about how compensation practices have contributed to the nation’s financial trouble. On June 18, Treasury Secretary Timothy Geithner is expected to testify on compensation ... * WASHINGTON (6/9/09)--Sonia Sotomayor, President Barack Obama’s pick for appointment to the U.S. Supreme Court, has significant experience with business and financial issues in court, but it’s not clear whether she would lean toward banking industry interests (American Banker June 5). Sotomayor has had 11 years of experience on the appeals court with business-related cases. If confirmed, she would be the only Second Circuit veteran. Sotomayor’s background includes a 2001 case where she upheld a lower court’s ruling in an antitrust suit involving MasterCard and Visa. Her decision allowed retailers to sue the card companies for bundling interchange fees on credit and debit cards, which the merchants argued monopolized the debit card market. Visa and MasterCard argued that the suit should not have been a class action. After Sotomayor rejected Visa and MasterCard’s arguments, more retailers joined the suit, increasing the two card companies’ payout ... * WASHINGTON (6/9/09)--The White House has announced that Jim Leach, one of the three authors of the 1999 Gramm-Leach-Bliley Act, will be nominated for chairman of the National Endowment for the Humanities (American Banker June 8). Leach, who lost the election for his Iowa congressional seat two years ago, has worked as a professor at Princeton and interim director of the Institute of Politics at Harvard University ...

FinCEN should allow some SARs latitude CUNA

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WASHINGTON (6/9/09)--The Credit Union National Association (CUNA) in a comment letter presented its interpretation of recent Financial Crimes Enforcement Network (FinCEN) guidance on Suspicious Activity Report (SAR) confidentiality rules. In proposed interpretive guidance, FinCEN would allow financial institutions to share SAR information with U.S. affiliates, but would restrict them from sharing that same information with branches located outside of the United States. SARs are intended for use by government and law enforcement officials to combat money laundering and terrorism financing. In the letter, CUNA said that while it supports the FinCEN’s interpretation of sharing guidelines under the proposed SAR confidentiality rules, relaxing those rules to allow U.S.-based financial institutions to share SAR information with their foreign branches would enhance enterprise-wide Bank Secrecy Act compliance and would “assist in the overall goal of detecting and reporting money laundering and terrorist financing within the institution on a global scale.” Credit unions that serve the military, diplomatic groups and other international organizations would benefit from this change, CUNA added. Further, the disclosure risk presented by relaxing these potential rules would be no greater than the risk under prior guidance that allows sharing between U.S. branches of a foreign bank or a U.S. bank or credit union and related head offices or controlling companies that are based outside of the U.S. In a separate letter, CUNA said that it generally supports FinCEN’s broader interpretation of the SAR non-disclosure prohibition, as well as the proposed rule’s clarification regarding permissible SAR or SAR information disclosures by financial institutions. FinCEN’s proposed rule also includes a number of "rules of construction" that seek to address issues that were not clarified by existing SAR non-disclosure prohibitions. However, CUNA does note that FinCEN should provide additional clarity under the "rules of construction" regarding the distinction between SAR information protected under the non-disclosure rules and underlying facts, which are not protected. Finally, CUNA said it generally supports the proposed rule’s compliance provision. However, CUNA believes that the provision’s treatment of issues regarding third party independent audits for BSA compliance should be clarified. For full text of the comment letters, use the resource link below.

Hyland Kanjorski to kick off NCUA CU Symposium

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WASHINGTON (6/9/09)--The National Credit Union Administration will mark the 75th anniversary of the Federal Credit Union Act on Tuesday and Wednesday of this week, with current NCUA Board Member Gigi Hyland set to open the Washington-D.C.-based symposium on Tuesday morning. Longtime credit union proponent Rep. Paul Kanjorski (D-Pa.), who introduced H.R. 2351, the Credit Union Share Insurance Stabilization Act last month, will deliver a keynote address on Tuesday. Operation HOPE Founder, Chairman and CEO John Hope Bryant will also speak at the symposium in a lunchtime address. Academics, regulators and industry insiders will also address the present relevance, ongoing sustainability, and near future of the credit union movement in a series of panel discussions spanning the symposium, which will conclude with closing remarks from Hyland at 11 am on Wednesday.

APRs small biz exec pay on congressional agenda

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WASHINGTON (6/9/09)--Legislation that would set a de facto rate cap on consumer loans could take another step toward the Senate floor when the Senate Judiciary Committee discusses S. 257, the Consumer Credit Fairness Act, during a Thursday markup session. The legislation would look to cap the annual percentage rates for loans of all kinds at 19% by amending the current bankruptcy code. The bill, as currently constructed, would allow consumers of "high cost" consumer loans, including credit cards, to transition directly to Chapter 7 "fresh start" bankruptcy proceedings. The legislation would define a "high cost" loan as loan in which the APR, at any time, exceeds the lesser of 15% plus the yield on 30-year U.S. Treasury securities, or 36%. While the bill was set to be debated last week, the Senate Judiciary Committee’s full slate pushed discussion back to this Thursday. Also this week, the Credit Union National Association (CUNA) will take part in a Wednesday House Small Business Committee hearing, "Laying the Groundwork for Economic Recovery: Expanding Small Business Access to Capital," with Roger Heacock, president/CEO of Black Hills FCU in Rapid City, S.D., testifying on CUNA’s behalf. Discussion at the hearing will focus on the role of the Small Business Administration's financing programs, and CUNA believes that the hearing will provide a valuable opportunity to inform Congress on some of the issues facing credit unions involved in small business lending. Testimony from the hearing will be available on CUNA’s legislative affairs website. Elsewhere in Washington, U.S. Treasury Secretary Timothy Geithner and Internal Revenue Service (IRS) Commissioner Douglas Shulman will testify at a Tuesday Senate Appropriations Committee financial services subcommittee hearing on proposed Treasury and IRS budget estimates. The House Financial Services Committee also plans to address executive compensation structure and systemic risk during a Thursday hearing. Though it is not on the schedule for this week, the House Judiciary Committee could begin discussion on interchange fee legislation at any time. Rep. John Conyers, Jr. (D-Mich.) introduced H.R. 2695, the "Credit Card Fair Fee Act of 2009, late last week. The bill would allow merchants to negotiate credit card transaction fees with financial institutions via an antitrust exemption. Conyers, who has chaired the judiciary committee since 2007, could bring the legislation up for debate at any point. However, it is considered likely by some that Congress will not discuss the legislation until the Government Accountability Office (GAO) completes its study of interchange fees, as mandated by the recently enacted H.R. 627, the Credit Cardholders' Bill of Rights. Representatives from CUNA will discuss the interchange issue with the GAO as it develops the study.

Corporate restructure plan may be out this fall

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WASHINGTON (6/9/09)—The National Credit Union Administration (NCUA) is expecting to issue by this fall a proposal addressing changes to the corporate credit union system, according to the agency chairman, Michael Fryzel. Earlier this year, the NCUA received about 450 comments on its advance notice of proposed rulemaking (ANPR) regarding the corporate credit union system and its regulation. The NCUA encouraged credit union comment as the agency began evaluating the corporates' role in the credit union system--including their membership, structure, size and services. Also under consideration is whether to amend Part 704, the corporate credit union regulation, to clarify or revise provisions that include capital, permissible investments, management of credit risk and liquidity, and corporate governance. Fryzel said last week that if the agency issues proposed rules for comment in the fall, it could hopefully approve final rules by early spring, the New Jersey Credit Union League reported. Fryzel spoke to and visited more than 70 credit union leaders in that state, the league said. Some NCUA senior staff have indicated that the process to a final rule may be completed even earlier than the spring. Fryzel said that other issues affecting credit unions, such as supplemental capital, risk-based capital and the member business lending cap, are currently on the back burner of the agency’s priorities until the chairman sees the corporate situation improving, the league reported. Likely before the agency produces a proposal on corporate credit union structure, the leadership of the agency may change. President Barack Obama has nominated former NCUA member Deborah Matz to fill a vacancy that will be created by the departure of Vice Chairman Rodney Hood, with the intention of naming Matz chairman. The Senate Banking Committee has not yet set a date for Matz’s nomination hearing. Use resource link for more information.

Inside Washington (06/05/2009)

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* WASHINGTON (6/8/09)--Senate Banking Committee Chairman Christopher Dodd (D-Conn.) warned banks against gouging consumers with deceptive or excessive checking account fees (Reuters June 4). President Barack Obama last month signed the Credit Cardholders’ Bill of Rights Act, which aims to reform unfair and deceptive credit card practices. Charging excessive fees on bank accounts is forcing consumers into debt, Dodd said. He did not say if he plans to take any action against banks charging excessive fees ... * WASHINGTON (6/8/09)--Congress needs to draft a bill that would require broad regulation of over-the-counter derivative dealers and markets, including nonstandardized products and municipal rate swaps, said Gary Gensler, Commodity Futures Trading Commission chairman, Thursday. One firm’s derivatives trading activities can hurt the entire financial system, he said. He suggested requiring dealers to meet reporting and record-keeping requirements, including anti-fraud and anti-abuse rules. An audit trail and capital and margin requirements also could be required. Customized derivatives, including rate swaps, could be regulated through the dealer requirements, he said. Senate Agriculture Chairman Tom Harkin (D-Iowa) said the committee would take action on the matter this year ... * WASHINGTON (6/8/09)--Herbert Allison, the former Fannie Mae CEO who was nominated to run the Troubled Asset Relief Program, could be approved for the position this week (American Banker June 5). Allison is well-suited for the position, according to Senate Banking Committee Chairman Christopher Dodd (D-Conn.). The Senate committee could vote Wednesday on Allison’s nomination ...

NCUA update TCCUSGP participation ticks up

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WASHINGTON (6/8/09)--The National Credit Union Administration today announced that all but two corporate credit unions have now elected to participate in NCUA’s revised Temporary Corporate Credit Union Share Guarantee Program (TCCUSGP). The TCCUSGP, which backs up the National Credit Union Share Insurance Fund’s (NCUSIF) coverage of all shares, excluding paid-in-capital and membership capital accounts, at corporate credit unions, became effective for Central Corporate Credit Union, Corporate America Credit Union, Kansas Corporate Credit Union, Kentucky Corporate Federal Credit Union, Southeast Corporate Federal Credit Union, and VACORP Federal Credit Union on May 29. In other corporate credit union news, both U.S. Central and Wescorp have been able to fulfill the needs of their members. These credit unions have also continued to communicate their status through conference calls and town hall meetings, and future communication plans are currently in the works. Wescorp held its monthly board meeting this week, and the credit union plans to cut costs by consolidating some of its branch processing facilities over the course of the next year. WesCorp disclosed $7.6 billion in losses in its 2008 and 2007 audited Consolidated Financial Statements released earlier this week. U.S. Central members have created an internal audit group to better address it impairment issues, and a board meeting has been planned for June 23. This week's update on the corporates will be the last for the time being, as NCUA said that it will provide future updates on an as-needed basis.

CUNA seeks CU input on proposed FACT Act changes

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WASHINGTON (6/8/09)--Credit unions are being asked to comment on proposed changes to the Fair and Accurate Credit Transactions (FACT) Act that would require regulators to define the circumstances under which a report issuer would investigate disputes regarding the accuracy of a credit report. Once adopted by the National Credit Union Administration, the revisions would apply to federally chartered credit unions. Similar provisions adopted by the Federal Trade Commission would apply to state-chartered credit unions. The Credit Union National Association (CUNA) is asking credit unions to comment specifically on the following issues:
* When and how often do furnishers provide account opening dates to credit bureaus? Would the lack of an account opening date, or other specific information, cause issues for a bureau that is evaluating a consumer’s creditworthiness or compromise the integrity of the information? * Should some credit products or services be exempted from these guidelines? * Would small institutions be affected if furnishers provided more information, such as account opening dates? Should small institutions be approached differently?
Comments on the proposed changes to the FACT Act are requested by CUNA by July 20. To read CUNA's Comment Call, use the link below.

FTC mortgage restriction plan open for comment

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WASHINGTON (6/8/09)--The Credit Union National Association (CUNA) has issued a regulatory comment call on a recent Federal Trade Commission advance notice of proposed rulemaking regarding mortgage loan practices. In the notice, the FTC asks for input on which types of unfair or deceptive acts and practices should be prohibited or restricted during the marketing, origination, and servicing of loans. The FTC has also asked for public comment on how to prevent independent companies that offer loan modification or foreclosure mitigation from engaging in abusive practices. The FTC rules would not apply to federally chartered credit unions, but state-chartered credit unions would be subject to the rules. CUNA is asking for industry comment on whether or not state-chartered credit unions should also be exempted from the potential rules. CUNA has also asked for specific examples of industry practices that should be restricted or banned under the new rules. Comments are due to CUNA by July 21. For more information, use the link.

Conyers bill would force interchange negotiations

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WASHINGTON (6/5/09)--Interchange fees could again be a topic of debate on Capitol Hill after Reps. John Conyers, Jr. (D-Mich.) and Bill Shuster (R-Pa.) on Thursday introduced H.R. 2695, the “Credit Card Fair Fee Act of 2009.” The bill would allow merchants to negotiate credit card transaction fees with financial institutions via an antitrust exemption. Credit unions regulated by the National Credit Union Administration (NCUA) and other financial institutions with less than $1 billion in total assets would be exempted from the terms of the bill. Financial institutions also would not be bound by the terms of outside agreements that they had no part in negotiating. However, the Credit Union National Association (CUNA) still strongly opposes this bill and disputes proponents arguments that the bill would benefit consumers. John Magill, senior vice president of legislative affairs at CUNA, said Thursday, "The fact is that the only group that stands to benefit from this legislation is the merchants, and the large merchants at that. "The payment system is working, and the evidence is that consumers can go into most places of business and use a plastic card to pay for their transaction, if they so choose. "Further proof that the payment system is competitive is that consumers have so many card choices, and merchants have so many credit unions and banks to choose from for acquiring services,” Magill said. He added, “This legislation is a solution in search of a problem." Similar legislation, H.R. 5546, met bipartisan opposition last year, yet narrowly passed the House Judiciary Committee by a 19-16 vote. The bill never received a full vote in Congress. H.R. 2695 is expected to be referred to the House Judiciary Committee soon. While the recently enacted Credit Card Accountability, Responsibility and Disclosure Act of 2009 did not mandate any changes in interchange fees, it did direct the Government Accountability Office to complete a study on the issue. That study should be completed within six months.

CUNA to testify on small business access to capital

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WASHINGTON (6/5/09)—The House Small Business Committee has announced a June 10 hearing to explore the role of the Small Business Administration’s (SBA) financing programs in providing access to capital for small businesses. Additionally, the committee intends to examine better ways to achieve the SBA mission of providing small businesses with an ability to access capital in the current economic environment. The hearing is titled “Laying the Groundwork for Economic Recovery: Expanding Small Business Access to Capital.” Roger Heacock, president/CEO of Black Hills FCU, Rapid City, S.D., is scheduled to testify on behalf of the Credit Union National Association (CUNA). In May 2009, Black Hills FCU received the District Director’s Leadership Award from the South Dakota SBA. The credit union wrote more SBA loans in the state than any other financial institution during 2008—2009 loans for a total of just over $1.6 million, an average of $56,703 per loan. CUNA has worked closely with the SBA to address barriers that credit union involvement. Some credit unions find the SBA fees prohibitive and the application process unnecessarily complex. Also, the current statutory 12.25%-of-assets member business lending cap can deter some credit unions from more extensive involvement in SBA guaranteed lending through such programs as SBA’s 7 (a) and 504.

Inside Washington (06/04/2009)

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* WASHINGTON (6/5/09)--The Obama administration may announce its plan to overhaul the nation’s financial regulatory structure on June 17, according to a Thursday report by Reuters. Attributing the information to a U.S. Treasury Department source and “a source familiar with thinking at the U.S. Treasury Department,” the article stated that the administration will not propose a single, super bank regulator to replace the current system. It is more likely to propose merging the Office of Thrift Supervision and the Office of the Comptroller of the Currency. The article noted that both administration officials and federal lawmakers have indicated they want to have broad legislation regarding financial reform passed this year. The lawmakers and the executive branch have been meeting to craft a proposal, which could place the Federal Reserve Board as a systemic risk monitor and allot the Federal Deposit Insurance Corp. new powers to address large, troubled financial institutions … * WASHINGTON (6/5/09)--Former Federal Reserve Board Chairman Alan Greenspan said there is no escaping the idea that some large financial institutions are “too big to fail.” Addressing the problem has drawbacks, he said (American Banker June 4). At a minimum, the government would have to offset the borrowing cost advantage by imposing a comparable cost--like increasing capital requirements, he said. Another alternative would require nonbanking business to be conducted by partnerships. But then, nonbanks could convert to a bank charter so they could take on risk. Greenspan said he was puzzled that more banks have not formed during the housing crisis because a new bank without toxic assets could generate profit ... * WASHINGTON (6/5/09)--House Small Business Committee Chairman Nydia Velazquez (D-N.Y.) sent a letter Tuesday to Small Business Administration (SBA) Administrator Karen Mills criticizing a program SBA announced last week that would secure financing for auto dealers’ inventories (American Banker June 4). She expressed concerns that the program is risky and would reach only a few businesses. Velazquez’s concerns are surprising, said Jonathan Swain, SBA assistant administrator for communications. The program had strong support from the White House, Congress and auto dealers. Before Mills took office, Sen. Olympia Snowe (R-Maine) and Jeanne Shaheen (D-N.H.) requested that SBA guarantee floor plan loans. Sen. Mary Landrieu (D-La.) also said she supports the program. However, banking industry groups have questioned the plan and said Velazquez raises legitimate concerns ... * WASHINGTON (6/5/09)--Federal Housing Finance Agency (FHFA) Director James Lockhart provided several frameworks for the future of Fannie Mae and Freddie Mac during a meeting with the House Financial Services Committee subcommittee on capital markets Wednesday. He suggested charging premiums for catastrophic reinsurance for the secondary mortgage market. The enterprises also could be used as a catastrophic risk insurer, a provider of subsidies or a liquidity provider of last resort for the mortgage market (American Banker June 4). Nationalization is still a solution, but could create a moral hazard by allowing for risk, he said. The enterprises also could be privatized, remain as they are, or be merged with the Federal Housing Administration, he said. During the meeting, Lockhart also lobbied FHFA for a role to prevent systemic risk. ... * WASHINGTON (6/5/09)--The Federal Deposit Insurance Corp. (FDIC) said Wednesday that development of its Legacy Loans Program will continue but a planned pilot sale of assets by open banks will be postponed. The program would match private and government equity with FDIC-guaranteed debt to let investors buy bad bank assets. FDIC will test the funding mechanism in a sale of receivership assets this summer. The agency said it expects to solicit bids for this sale of receivership assets in July ... * WASHINGTON (6/5/09)--National Credit Union Administration (NCUA) Chairman
Click to view larger image Click for larger view
Michael Fryzel toured State Farm FCU in Bloomington, Ill., on May 27. Fryzel met with CEO Tom DeWitt, and members of the board and executive staff to discuss NCUA’s Corporate Stabilization Plan and the economy. From left are: Jacquie Bristow, member services manager; Mike Mailloux, board vice-chair; Steve Gorrie, operations manager; DeWitt; Fryzel; Laura Haas, board chair; Rob Moser, associate vice president of human resources; and Bob Force, financial manager. (Photo provided by the National Credit Union Administration) ...

Redacted PIMCO report posted online

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ALEXANDRIA, Va. (6/5/09)—The National Credit Union Administration has posted online a redacted version of a report prepared by the Pacific Investment Management Company LLC (PIMCO) on behalf of the agency. The redacted report was released in response to requests by the Credit Union National Association (CUNA) and others under the Freedom of Information Act (FOIA). The PIMCO report was the basis, in part, of the NCUA's action to conserve two corporate credit unions, U.S. Central FCU, Lenexa, Kan., and Western Corporate FCU (WesCorp), San Dimas, Calif. PIMCO is a PIMCO is a leading global investment management firm. In March, CUNA followed up two earlier requests for information with a formal FOIA to the NCUA regarding its actions involving corporate credit unions. In April, the NCUA released a summary of the PIMCO analysis of the residential mortgage-backed securities held by corporate credit unions. The summary did not provide a detailed review of PIMCO's analyses or findings, but did give information on the process for valuing the loans on which the mortgage-backed securities are based and information on PIMCO's views and conclusions. Use the resource link below to access the redacted report.

Senate postpones APR cap discussion

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WASHINGTON (6/5/09)--The Senate Judiciary Committee on Thursday postponed its consideration of S. 257, the Consumer Credit Fairness Act, until next week. However, in anticipation of Thursday’s planned discussion, the Credit Union National Association outlined some concerns regarding the legislation in a letter delivered to Sens. Patrick Leahy (D-Vt.) and Jeff Sessions (R-Ala.). Although credit unions are not known for the types of abusive lending practices that this legislation intends to combat, the legislation could have the unintended consequence of forcing “mainstream lenders” to adjust their lending practices. The legislation, which would effectively cap annual percentage rates for loans of all kinds at 19% by amending the current bankruptcy code, could limit the availability of “convenient credit” to consumers and would likely raise the overall cost of credit card access, the CUNA letter said. As currently crafted, the bill would permit consumers that have been driven into debt by so-called "high cost" consumer credit card transactions to transition directly to Chapter 7 "fresh start" bankruptcy proceedings, even if the debtor failed the means test. Under the terms of the bill, a “high cost” loan would mean a loan in which the APR, at any time, exceeds the lesser of 15% plus the yield on 30-year U.S. Treasury securities, or 36%. Dealing with this seemingly shifting interest rate ceiling “would present an impossible compliance burden” for creditors and could limit the bankruptcy courts ability to interpret the law in a uniform matter, CUNA said. CUNA also observed that using the APR ceiling imposed by the Federal Credit Union Act as a basis for the standards in this and other bills or, more generally, as a justification for broadening existing APR caps, may be “confusing” and “misleading.” To see the letter in full, use the resource link.

Inside Washington (06/03/2009)

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* WASHINGTON (6/4/09)--The Federal Housing Finance Agency (FHFA) is considering creating an insurance fund that could absorb losses at a troubled Federal Home Loan Bank (American Banker June 3). The FHFA has not said if any of the banks are in trouble. Currently, all 12 banks are liable for each other’s debt. The joint system is a source of strength, according to FHFA Director James Lockhart. He was slated to testify Wednesday before a House Financial Services Committee capital markets subcommittee on the future of Fannie Mae and Freddie Mac, where the issue of creating an insurance fund could surface. Financial observers have questioned how the insurance fund would work, how much money each bank would have to contribute to the insurance fund, and how long it would take to establish the fund ... * WASHINGTON (6/4/09)--The underbanked’s monthly transaction fees can range from $10 to $100 for the same transactions depending on the provider, says a study by the Center for Financial Services Innovation. The center interviewed 22 prepaid cardholders in Chicago and Seattle for “One Size Does Not Fit All: A Comparison of Monthly Financial Services Spending.” The analysis indicates that financial products and services available to underbanked consumers could be improved by broadening the availability and use of direct deposit; expanding the functionality of both prepaid cards and checking accounts; increasing the transparency and certainty around fees to be paid; and guiding consumers to the best choice for their needs ... * WASHINGTON (6/4/09)--Christopher Cox, former Securities and Exchange Commission (SEC) chairman, wrote Federal Housing Finance Agency Director James Lockhart to ask if Fannie Mae and Freddie Mac were being pushed too hard by the government to boost the housing markets (Bloomberg June 3). Cox, who wrote the letter in his final days as chairman, told Lockhart to develop an exit strategy for the enterprises. The letter has not been released to the public, but it indicates tension at Fannie and Freddie between the government’s demands and their obligations to investors. The future of the enterprises was scheduled to be discussed at a House Financial Services Committee capital markets subcommittee Wednesday. Cox left the SEC Jan. 20 ... * WASHINGTON (6/4/09)--Federal Reserve Board Chairman Ben Bernanke called for a plan to restore the nation’s fiscal balance in remarks at a House Budget Committee hearing. The national deficit is expected to reach $1.8 trillion this year. To address the country’s fiscal problems, Congress, the Obama administration and consumers must confront how many economic resources to devote to federal government programs, Bernanke said. “Whatever size of government is chosen, tax rates must ultimately be set at a level sufficient to achieve an appropriate balance of spending and revenues in the long run. In particular, over the longer term, achieving fiscal sustainability--defined, for example, as a situation in which the ratios of government debt and interest payments to gross domestic product are stable or declining, and tax rates are not so high as to impede economic growth--requires that spending and budget deficits be well-controlled,” he added ...

Remittance reforms are on House agenda

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WASHINGTON (6/4/09)--Rep. Luis Gutierrez (D-Ill.) in a Wednesday House subcommittee hearing said that he would soon introduce legislation aimed at remittance-related reforms. Speaking during a House subcommittee on financial institutions and consumer credit hearing entitled "Remittances: Regulation and Disclosure in a New Economic Environment," Gutierrez said that his to-be-introduced legislation would address disclosure and transparency issues faced by the remittance industry. Gutierrez also hinted that larger reforms, including the possible creation of a federal regulatory regime for the remittance industry, could be part of pending financial industry regulatory reorganization. Remittances are currently regulated on the state level, although financial institutions that are involved in the remittance industry still must comply with federal regulations, including the Bank Secrecy Act. In a joint letter submitted during Wednesday’s hearing, the Credit Union National Association (CUNA) and the World Council of Credit Unions (WOCCU) asked members of Congress to investigate the abusive and potentially monopolistic business practices of some money transmitter firms. Specifically, the letter asks Congress to research competition-limiting practices such as one-way exclusivity clauses used by some U.S.-based money transmitter organizations (MTOs). In some instances, these firms also assess early termination penalties on their partner financial institutions. CUNA and WOCCU believe that these practices can limit the scope of remittance distribution networks and narrow access to financial services in the developing world. These anti-competitive actions are ultimately detrimental to consumers both in the U.S. and abroad, the statement said. These firms have also been known to present their contracts to partner financial institutions in highly technical versions of the English language, rather than using English and the native tongue of their business partner, which oftentimes is Spanish. However, U.S. credit unions currently offer remittance disclosures in both languages. IRNet, a remittance service created by WOCCU, has facilitated the transfer of $2.6 billion in remittance transactions between credit unions in the U.S. and the developing world since its inception in 2001.

Small changes made to red flags rule

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WASHINGTON (6/4/09)--The National Credit Union Administration, Federal Trade Commission, and the other financial institution agencies recently issued a final rule that makes technical corrections to the identity theft “red flags” rule. The changes address discrepancy rules and affiliate marketing rules that were issued under the Fair and Accurate Credit Transactions Act. They include a clarification that notes discrepancy notices need only be provided by nationwide consumer reporting agencies. The agencies also made the following two corrections to the affiliate marketing rules:
* A model form that allows consumers to voluntarily opt-out of marketing by businesses and their affiliates was amended by inserting language in brackets that allows businesses to disclose the duration of any opt-out period; and * A provision in the instructions to the model forms was included to clarify that a person may add a disclosure to the forms that explain the treatment of opt-outs by joint consumers.
For more information about the identity theft red flags rule and the recent technical changes to it, use the resource link below to read the Credit Union National Association’s final rule analyis.

House committee approves data breach bill

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WASHINGTON (6/4/09)--H.R. 2221, the Data Accountability and Trust Act, passed the House subcommittee on commerce, trade, and consumer protection by a voice vote during a Wednesday markup session. The bill, which was introduced by House Subcommittee Chair Rep. Bobby Rush (D-Ill.), would require businesses to notify affected customers when outside parties gain access to sensitive information due to a security breach. Although it supports the goal of granting greater information to consumers whose personal information has been compromised by security breaches, the Credit Union National Association (CUNA) on Wednesday asked legislators to alter some portions of the bill. In a letter to ranking subcommittee members, CUNA said that while most businesses lack the contact information needed to alert their customers, financial institutions normally have the means to directly communicate with their account holders. While any notification of data breach victims should be done by the financial institutions, the cost of this notification should be covered by the entity that compromised the data. Financial institutions should also be allowed to disclose the source of the information leak to their cardholders to avoid any harm that could be done to their reputation, CUNA added. The bill, as currently drafted, excludes federally insured credit unions from Federal Trade Commission (FTC) oversight of their security risk mitigation procedures. However, businesses following standard security precautions of equal or greater quality to those set out by the bill would be deemed compliant by the FTC. The House subcommittee, during the same markup session, voted 16 to 9 to approve H.R. 2309, the Consumer Credit and Debt Protection Act. This bill would direct the FTC to examine its existing rules and possibly to create new rules governing debt settlements and auto sales. The bill would also enhance the FTC’s rulemaking authority as it relates to consumer credit and debt. The House Energy and Commerce Committee has not announced when it may consider these bill.

Inside Washington (06/02/2009)

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* WASHINGTON (6/3/09)--A long-term debate about what should be done with Fannie Mae and Freddie Mac will likely resurface during a House Financial Services Committee capital markets subcommittee hearing scheduled for today with group members expected to consider whether to privatize or nationalize the enterprises. The government is currently using the enterprises to put liquidity back into the mortgage markets to stem the housing crisis (American Banker June 2). The debate could be partisan, as many Republicans want the two to be included in regulatory overhaul of the financial system. However, Democrats traditionally have opposed privatization and perceive Fannie and Freddie as vital to promoting affordable housing. Rep. Paul Kanjorski (D-Pa.) also said that lawmakers would look at extending the Treasury’s ability to purchase debt from the Fannie, Freddie or securities. The Treasury’s purchasing power will expire at the end of the year. Regardless of the direction lawmakers take, financial industry observers expect they will try not to disrupt the markets ... * WASHINGTON (6/3/09)--Just as the Federal Reserve Board Monday released payback criteria for financial institutions that received Troubled Asset Relief Program (TARP) money, several banks have said they plan to exit TARP soon. JPMorgan Chase and Co., which was not required to raise additional money after undergoing stress tests this spring, plans to raise $5 billion in capital to help repay $25 billion it received from the government last year (American Banker June 2). Banks that repay TARP must show they can issue debt not guaranteed by the Federal Deposit Insurance Corp. and that they can access public equity markets. JPMorgan said it has been able to pay back the funds for a long time without accessing public markets ...

HUD scraps paper begins online reporting for FHA lenders

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WASHINGTON (6/3/09)—The U.S. Department of Housing and Urban Development (HUD) has announced that it will change the way that all renewing Federal Housing Authority (FHA)-approved lenders inform HUD of any relevant business changes; HUD is replacing the paper version of its annual verification reports with an electronic certification process. That process will be completed via the FHA connection website. The new online-only disclosures, which HUD believes will strengthen its controls, may only be completed by “corporate officers and principal owners” with the appropriate authority. HUD has asked that all approved lenders confirm that their institutions are properly presented on the FHA connection site. Any errors in this information, including inaccuracies related to the company’s corporate officers or home and branch offices, should be corrected as soon as possible. For access to the full HUD letter, use the resource link below.

Fed Reg D changes open access to EBAs

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WASHINGTON (6/3/09)—The Federal Reserve Board has amended Regulation D, which addresses reserve and reporting requirements for credit unions, banks and thrifts, by directing federal reserve banks to pay interest on certain balances held by or on behalf of depository institutions and allowing for the establishment of excess balance accounts at reserve banks. Under the rule, required reserve balances that are maintained by depository institutions that are not eligible to earn interest themselves on behalf of an eligible institution (a respondent), will accrue interest--which must then be passed back to the respondent. However, excess balances that are maintained by "ineligible" correspondents on behalf of a respondent will not earn interest. Once effective, the changes to Regulation D will also allow depository institutions, including credit unions, to establish limited-purpose “excess balance accounts." Such accounts will allow depository institutions to earn interest on excess balances held at reserve banks, including those institutions which maintain excess balances via an "ineligible" correspondent. The rule will become effective on July 2, 2009. The Fed has said that it plans to reexamine the continuing need for EBAs once financial markets have stabilized. For more on the final rule, use the resource link below.

CUNA FinCEN should streamline suspicious activity reports

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WASHINGTON (6/3/09)—The Credit Union National Association (CUNA) has asked the Financial Crimes Enforcement Network (FinCEN) to streamline the process by which financial institutions submit their suspicious activity reports. FinCEN and federal banmking authorities are currently planning to reissue an unchanged version of the suspicious activity report for depository institutions (SAR-DI). In a letter sent to FinCEN on Monday, CUNA responded to a call for comments by suggesting that FinCEN change SAR-DI to allow financial institutions to file only newly uncovered information in their periodical reports. Portions of the SAR-DI form that are redundant could simply be cross-referenced with an earlier filing, thus saving the financial institution from having to replicate the entire form for each new filing, CUNA suggested. CUNA also advocated allowing SAR-DI filings to follow a format similar to that of Currency Transaction Reports (CTR). Currently, financial institutions filing a CTR are allowed to attach copies of previously filed information to the new information contained on a separate form. FinCEN should also provide “additional narrative and suspect pages” in its SAR-DI forms, CUNA added. Additionally, CUNA suggested extending the repetitive filing threshold beyond the current 90 day schedule, as such a move would “lessen the burden of these filings on financial institutions.”

CUNA urges quick consideration of Matz nomination

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ALEXANDRIA, Va. (6/3/09)—The Credit Union National Association (CUNA) Tuesday urged the Senate to move quickly on the nomination of Deborah Matz to the National Credit Union Administration (NCUA) board. The NCUA announced Tuesday that President Barack Obama had officially nominated Deborah Matz on June 1. The president had announced his intention to do so, and to designate Matz as chairman, on May 21. CUNA President/CEO Dan Mica thanked the Obama administration for moving quickly to formalize the nomination. Mica said that fast action will ensure continued leadership on the NCUA board with a full complement of three members. “We urge the Senate Banking Committee to reflect the swiftness with which the administration has acted and consider Ms. Matz’s nomination as soon as is possible.” He added that CUNA hoped a speedy turn around by the committee would lead to timely Senate action on Matz’ confirmation to the post. Matz would fill a vacancy that will be created by the exit of NCUA Vice Chairman Rodney Hood, whose termed expired in April. The two remaining board members are current Chairman Michael Fryzel, who took the position in August 2008 and whose term extends in to 2013, and Gigi Hyland, confirmed at the same time as Hood, and whose term ends in 2011. Hood issued a statement after the NCUA announced Matz's formal nomination and said he believes Matz will “serve the agency very well and be a strong chairman representing the best interests of America’s credit unions.” He praised he for keeping open lines of communication and added Matz “has the leadership, knowledge and industry experience necessary for these difficult times that credit unions are facing.”

National mortgage originators registry plan issued

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WASHINGTON (6/2/09)—Almost a year after the provisions were signed into law, the federal financial institution regulatory agencies are seeking comment on a plan to implement a national mortgage originators’ registry. The National Credit Union Administration (NCUA), along with five other federal regulators, issued proposed rules to implement the Secure and Fair Enforcement for Mortgage Licensing (SAFE) Act. The SAFE Act requires an employee of a financial institution or its subsidiary, who acts as a residential loan originator, to register with the Nationwide Mortgage Licensing System and Registry. If adopted, the proposed rules will apply to federally insured credit unions, but not to credit union service organizations (CUSOs), as they are not regulated by NCUA. However, CUSOs and their employees must comply with state licensing and registration requirements that are also mandated under the SAFE Act. The SAFE Act also requires the employee to obtain a unique identifier that is associated with the originator within the Registry system and requires the employee to maintain this registration. The proposal released Monday would implement these SAFE Act provisions and instructs financial institutions to require employees to comply with the SAFE Act provisions. It also would compel the financial institution to adopt and implement written policies and procedures that are intended to ensure compliance with these requirements. Those policies and procedures must be tailored based on the nature, size, complexity, and scope of the institution’s mortgage lending activities, according to the joint proposal. Comments on the proposed rule are due within 30 days of its publication in the Federal Register, which should be within the next few days. However, under the proposal, the initial registrations do not have to be completed until 180 days after the Registry is capable of receiving them, which is not expected until mid-year 2010. Use the resource link below to access the Federal Register document.

Miller v. BoA decision favors financial institutions

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WASHINGTON (6/2/09)-- The California Supreme Court Monday backed Bank of America’s (BoA) position and ruled that state law permits BoA and other depository institutions in California to cover overdrafts and overdraft fees from Social Security funds and other protected public benefit deposits. The state supreme court, ruling on an appeal in Miller v. Bank of America, said the practice did not violate the California Unfair Business Practices Act. Credit unions have been watching this case for years as it has moved through the California court system. The decision affects a broad swath of financial institutions, including California credit unions and credit unions doing business in the state. The Credit Union National Association (CUNA), the California CU League, banking trade associations, and the U.S. government filed amicus briefs in the appellate court in support of BoA's position. Many of the same parties, including CUNA, filed an amicus brief with the California Supreme Court. The implications of the case are important to consumers as well. For instance, CUNA General Counsel Eric Richard said Monday that the ruling helps to assure access to checking accounts for those receiving protected federal benefit funds . “If a financial institution’s ability to recoup losses and fees caused by overdrafts was invalidated because an account was funded in part or fully by protected federal benefit deposits such as Social Security funds , it could have the unfavorable result of making it harder for those consumers to have checking accounts and other services such as ATM cards ,” he said. Throughout the case, BofA had argued that federal law and regulation preempt a California law that prohibits tapping SS money in an account. However, in December 2004 a judge for the Superior Court of San Francisco upheld an over-$1 billion-dollar jury award against BofA for violating state law. But in November 2006, a California Court of Appeals reversed the lower court's ruling and award, and decided in favor of BofA. The plaintiff, Paul Miller, then filed an appeal with the California Supreme Court. However, the Supreme Court, as noted, also sided with the bank’s position. In its decision, the court declared that the state financial code “expressly excludes overdrafts and bank charges from the statutes definition of debt.” The court concluded: “…Bank of America’s practice of recouping overdrafts and charging insufficient funds fees is permissible in light of the Legislature’s unequivocal statement in Financial Code section 864 that overdrafts and bank charges are not debts and are therefore not subject to the limitations placed on a bank’s right of setoff set forth in that statute. “ In a related story, The Wall Street Journal reported Monday that the U.S. Treasury Department is getting some heat from a bipartisan group of federal lawmakers to close a loophole relating to federal benefits. Federal law prohibits creditors from taking SS, disability, veterans' and children's survivor benefits to pay a debt. However, the law is silent on how money deposited directly into accounts are financial institutions should be handled. The article reported that the U.S. Treasury and Social Security Administration, along with banking regulators, drafted rules to close the loophole earlier this year, but they have not progressed beyond the proposal stage. Members of the Senate Special Committee on Aging, as well as some members of the House, including Financial Services Committee Chairman Barney Frank (D-Mass.), have urged Treasury Secretary Geithner to act on the plan.

CUNA compliance dept. presents improved website

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WASHINGTON (6/2/09)—The Credit Union National Association (CUNA) on June 1 announced an improved and redesigned compliance website that will feature up-to-the-minute information on federal regulatory developments. Valerie Moss, director of compliance information for CUNA, said the new format will allow credit union compliance professionals to focus on their most pressing issues, with links to federal agency announcements, CUNA compliance information, even the “occasional rumor of when something is expected to be released or is stalled.” What's New in Compliance now appears front and center on CUNA’s compliance website. On the right hand column of the reworked page, users will find CUNA’s upcoming compliance-related events and training resources. This portion of the site will also contain key links to CUNA’s Regulatory Advocacy Website, which covers comment letters, comment due dates, regulatory effective dates, and other related information. The left hand column of the site will connect users to CUNA’s dues-supported compliance materials, including CUNA’s e-Guide to Federal Laws and Regulations, the Bank Secrecy Act Compliance Guide, as well as CUNA’s monthly Compliance Challenge. This portion of the site will also contain compliance-related stories from Credit Union Magazine. The site currently features information as far back as April 1 of this year. To see the redesigned site, use the resource link below.

Inside Washington (06/01/2009)

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* WASHINGTON (6/2/09)--During remarks at an annual credit union volunteers meeting Friday, National Credit Union Administration (NCUA) Chairman Michael Fryzel praised credit union volunteers and called on credit unions to participate in the reform of the corporate credit union system. During his speech, Fryzel detailed provisions of the new corporate credit union stabilization legislation, and applauded Congress and President Barack Obama for their “swift action” in passing the law. He also emphasized that volunteerism is the focus of the credit union philosophy. “When one looks at some of the founding documents of the credit union movement, from 100 years ago it was apparent that volunteer control of credit unions was considered an essential part of their make-up,” he said. The meeting, sponsored by the National Association of Federal Credit Unions, took place in Portland, Ore. ...

Senate Judiciary could vote on APR cap this week

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WASHINGTON (6/2/09)—The Senate Judiciary Committee later this week could vote on a bill aimed at capping the annual percentage rate for loans of all kinds by amending the current bankruptcy code. S. 257, the Consumer Credit Fairness Act, which is co-signed by Sens. Sheldon Whitehouse (D-R.I.), Richard Durbin (D-Ill.), and Sen. Bernard Sanders (I-Vt.), would alter current federal bankruptcy law by allowing consumers that have been pushed beyond the brink by so-called “high cost” consumer credit card transactions to transition directly to Chapter 7 “fresh start” bankruptcy proceedings. Under the terms set forth by the legislation, “high cost” would mean any loan with terms exceeding the lesser of 15%, plus the yield on 30-year U.S. Treasury securities, or 36%. Bankruptcy laws passed in 2005 made it more difficult for borrowers to qualify for Chapter 7. According to a May 29 American Banker story, the true aim of the bill is to force financial institutions to alter their consumer lending practices, such as how they factor annual percentage rates (APR), by making it harder for the creditors to collect on certain forms of consumer debts during bankruptcy proceedings. Such a move would create a de facto APR cap of 18.5%. A Senate amendment that would have imposed a 15% interest rate cap for credit cards was, in the end, not attached to the recently passed Credit Cardholders' Bill of Rights Act, but Sen. Chris Dodd (D-Conn.) has said the Senate should consider creating an interest rate cap for credit cards. Though S. 257 has been on hold for some time and has not yet been presented to the full Senate, sources told the American Banker that the bill has a good chance of clearing the judiciary panel. Negative public sentiment toward the banking industry could also help move the bill forward, the story said.

Coming up in Congress Bernanke on the economy

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WASHINGTON (6/2/09)—Although no finance-related legislation is expected this week, discussions in Congress should pick up midweek, with a pair of House Financial Services Subcommittees and the Senate Banking Committee set to hold hearings on issues that are of interest to credit unions. The Wednesday House schedule will feature Federal Reserve Board Chairman Ben Bernanke’s input on the current economic troubles, with the Fed chair set to testify at a 10 a.m. hearing before the House Budget Committee. Another early hearing, entitled "Remittances: Regulation and Disclosure in a New Economic Environment," will be held before the House subcommittee on financial institutions and consumer credit at 10 a.m. on Wednesday. The World Council of Credit Unions recently predicted that continuing economic instability could lead to a drop in the total number of remittances to the Caribbean and Latin America. (See related May 21 story: Expect decline in remittances for 2009.) Later on Wednesday, the House subcommittee on capital markets, insurance, and government-sponsored enterprises, will discuss the current and future condition of government-backed mortgage lenders Fannie Mae and Freddie Mac with academic and industry reps and officials from the Federal Housing Finance Agency, including current director James Lockhart. On Thursday, Fannie Mae President/CEO Herbert Allison will face the Senate Banking Committee as they hold confirmation hearings for the potential assistant Treasury secretary for financial stability. If confirmed, Allison would administer the Federal Government’s Troubled Asset Relief Program. The Senate Judiciary Committee on Thursday could also vote on S. 257, the Consumer Credit Fairness Act, which would grant increased relief to debtors by altering current federal bankruptcy law.