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TCF Bank withdraws interchange case

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WASHINGTON (7/1/11)--TCF National Bank on Thursday moved to voluntarily dismiss a months-long legal challenge to the Federal Reserve's implementation of new debit interchange fee regulations. TCF last October filed suit against the Fed in the U.S. District Court for the District of South Dakota. TCF alleged that it is unconstitutional for the government to require a business to charge below-cost rates that negatively impact business. The district court in April denied TCF’s motion for a preliminary injunction, indicating the issue was not ripe for decision because the Fed had not yet issued its final regulations on debit interchange. It also denied the Fed's motion to dismiss the case. The bank later appealed to the Eighth Circuit Court of Appeals but that court on Wednesday refused TCF's request for a preliminary injunction to halt the debit interchange fee regulations. The bank asked the district court to dismiss its case at a hearing held early on June 30 in Sioux Falls, S.D. The bank asked for a voluntary dismissal without prejudice, so it would retain the option to re-file the case at a later date. The Credit Union National Association (CUNA), the Clearing House Association LLC, American Bankers Association, Consumer Bankers Association, The Financial Services Roundtable, Independent Community Bankers of America, Midsize Bank Coalition of America, and the National Association of Federal Credit Unions earlier this year filed a pair of amicus briefs in support of some aspects of TCF's arguments against the interchange statute. The amicus briefs were filed in both courts. However, CUNA did not support TCF’s argument that the interchange rule’s small issuer exemption violated the Equal Protection Clause of the U.S. Constitution. The appeals court also dismissed this argument. The final interchange rule, which was unveiled by the Fed on Wednesday, caps large issuer debit interchange fees at 21 cents, to cover network connectivity, hardware, software, and labor costs, as well as costs related to network processing and transaction monitoring. An additional five basis points per transaction may be charged to cover fraud losses, and the Fed has also issued a separate proposal that would permit issuers to charge an additional penny per transaction if they meet certain fraud prevention standards. Debit card issuers with less than $10 billion in assets are exempt from the direct impact of the cap provisions. Prepaid cards and government-issued cards are also exempted. The Fed's initial proposal would have set a cap of 12 cents per transaction. CUNA continues to analyze the Fed’s final interchange rule.

NCUA expands disaster policy due to Midwest floods

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ALEXANDRIA, Va. (7/1/11)--The National Credit Union Administration (NCUA) on Thursday again expanded the scope of its disaster relief policy as severe weather and flooding continued to impact the Midwest. The expansion is a reaction to severe weather and flooding that is impacting areas of Montana, Nebraska, Indiana, Kansas and Iowa. These areas were recently named federal disaster areas by the Obama administration. The agency's disaster relief policy is intended to assist credit unions and their members to deal with potential losses. Under the policy, the agency will, where necessary, encourage credit unions to make loans with special terms and reduced documentation to affected members, reschedule some credit union examinations, guarantee lines of credit for credit unions through the National Credit Union Share Insurance Fund, and make loans to meet the liquidity needs of member credit unions through the Central Liquidity Facility. The NCUA last month reached out to aid credit unions and members impacted by severe flooding in North Dakota, Tennessee and Minnesota and flooding and tornadoes in Missouri. The agency also activated its disaster relief policy in Kentucky, Louisiana and Iowa due to flooding last month, and took similar action following early May tornadoes in the southeast. For more on the NCUA's disaster relief efforts, see the NCUA's release and prior News Now coverage.

CUNA backs patent system reforms

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WASHINGTON (7/1/11)--The Credit Union National Association (CUNA) has joined 12 other trade associations to encourage Senate Majority Leader Harry Reid (D-Nev.) and Minority Leader Mitch McConnell (R-Ky.) to bring H.R. 1249, the “Leahy-Smith America Invents Act,” to the Senate floor soon. H.R. 1249 would alter the patent application system by awarding a patent to the first inventor to file a given application. The legislation also provides greater time for the public to provide input on a patent and changes the rules under which an existing patent may be challenged. CUNA and its fellow trade associations are specifically backing section 18 of the bill, a portion of the bill that would protect credit unions and other businesses from outside claims that some specific customer service, payment and marketing practices have already been claimed under existing business method patents. These patent challenges, which are often brought by non-practicing entities, can become expensive for credit unions and others if they are heard in court. H.R. 1249 would allow the Patent and Trademark Office (PTO) to examine patent challenges outside of the court system. The bill also increases PTO funding. The joint trade association letter, which was also sent to Senate Judiciary Committee Chairman Pat Leahy (D-Vt.) and Ranking Member Charles Grassley (R-Iowa), said that the patent reforms proposed in H.R. 1249 would spur innovation, create jobs, "and ensure that the Patent and Trademark Office (PTO) has the tools necessary to maintain our patent system as the best in the world.” The bill passed the House by a 304 to 117 vote last week, and similar legislation received nearly unanimous support in the Senate earlier this year. The letter was cosigned by the American Bankers Association, the American Council of Life Insurers, the American Financial Services Association, the American Insurance Association, the Clearing House Association, the Consumer Bankers Association, the Financial Services Roundtable, the Independent Community Bankers of America, the Mortgage Bankers Association, the National Association of Mutual Insurance Companies, the Property Casualty Insurers Association of America, and the Securities Industry and Financial Markets Association. CUNA joined these trade groups to successfully defeat a recent amendment that would have removed section 18 from the bill. Two letters addressing patent-related issues have also been recently filed by the joint trade groups. For the full letter, use the resource link.

New Fed CFPB inspector general appointed

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WASHINGTON (7/1/11)--Mark Bialek will begin his term as inspector general of the Federal Reserve and the Consumer Financial Protection Bureau (CFPB) on July 25. Bialek, according to a Fed release, will “lead the Office of Inspector General staff in promoting the economy, efficiency, and effectiveness” of Fed and CFPB operations and “in preventing and detecting waste, fraud, and abuse.” The incoming inspector general will succeed recent retiree Elizabeth Coleman. Bialek most recently held the position of deputy inspector general at the Environmental Protection Agency. He previously held other related legal positions at that agency, and has also worked at the Department of State and the Department of Commerce. The CFPB is scheduled to take over a number of consumer-oriented responsibilities from various financial regulators later this month.

Inside Washington (06/30/2011)

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* WASHINGTON (7/1/11)--Calling prepaid access products “the fastest growing area within the payments sector,” the Office of the Comptroller of Currency (OCC) issed guidance Wednesday supporting national banks’ participation in prepaid programs. The OCC stressed the importance of consumers understanding the products and their associated costs. OCC also cited potential risks to financial institutions, including fraud and money laundering. “To limit potential risks to banks and consumers, however, national banks should implement comprehensive risk management programs that provide appropriate oversight and controls commensurate with the risk, complexity of the activities, and use of any third-party providers to facilitate the prepaid programs,” the guidance said … * WASHINGTON (7/1/11)--Financial firms continued to vie for position in the swaps marketplace in the wake of the Dodd-Frank Act during a Senate Banking subcommittee hearing on securities, insurance and investment. Dodd-Frank established swap execution facilities, similar to the exchanges where securities are traded, in an effort to create more transparent pricing and reduce systemic risk in derivative markets where trades were previously made over the counter (American Banker June 30). About 40 firms will apply to become swaps execution trading facilities, according to testimony at the hearing. But market participants said they expect the market to consolidate to 15 or 20 firms within two years. Jurisdiction of swaps regulation is split between two agencies. The Securities and Exchange Commission (SEC) will regulate security-based swaps. The Commodity Futures Trading Commission (CFTC) will have authority over other swaps. The hope among lawmakers is that the SEC and CFTC will synchronize their rules, according to the Banker

Fed final interchange rule reflects CU input Cheney says

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WASHINGTON (6/30/11)--Credit Union National Association (CUNA) President/CEO Bill Cheney said that the Federal Reserve “listened to the real concerns of credit unions” as it developed its final debit interchange fee cap rule, which was approved by a 4 to 1 vote by the Fed on Wednesday. The final rule would cap large issuer debit interchange fees at 21 cents, to cover network connectivity, hardware, software, and labor costs, as well as costs related to network processing and transaction monitoring. An additional five basis points per transaction may be charged to cover fraud losses. Debit card issuers with less than $10 billion in assets are exempt from the direct impact of the cap provisions. Prepaid cards and government-issued cards are also exempted.
Click to view larger image Fed Chairman Ben Bernanke (shown speaking on the left) opens the public meeting convened yesterday to vote on a rule to impose a debit card interchange fee cap. Bernanke noted that the Fed received more than 11,000 comments on its proposed rule, and called the interchange provisions one of the most challenging elements of the Dodd-Frank Wall Street Reform Act. (CUNA Photo)
A separate interim final rule proposed would allow an additional penny to be charged if financial institutions are in compliance with Fed established fraud prevention standards. Comments on this interim final rule, which is effective Oct. 1, 2011, will be accepted until Sept. 30. The Fed’s initial proposal would have set a cap of 12 cents per transaction. Cheney said that these changes are “certainly an improvement” from the initial proposal, and said that CUNA’s focus would turn to ensuring that the small issuer exemption provided in the final rule would work as planned. Cheney said that many credit unions may be forced to adopt new member fees or take other measures if the two-tiered system does not work as planned. Following a resolution offer by Governor Daniel Tarullo in the form of an instruction to staff, the agency’s staff will report by April 2012 on whether there is a two tiered system and the impact of the rule on small issuers’ interchange fee income. Staff will also bring a more comprehensive report to the Board by April 2013 including whether there is a change in income for smaller issuers, whether merchants are discriminating against small issuers and on the impact of the exclusivity provisions. The final rule requires issuers to provide a debit card that can be processed on at least two unaffiliated card networks, such as one signature network and one unaffiliated PIN network. Under a second alternative, issuers may also provide a debit card that can be processed on two or more unaffiliated signature networks, but not on any PIN networks, or that can be processed on two or more unaffiliated PIN networks, but not on any signature networks. The final rule also prohibits issuers and payment card networks from limiting merchants’ ability to choose the network on which a transaction is routed, limited to those networks on which the debit card is enabled to be used. “Credit unions spoke out loudly and forcefully about the law and their concerns about the Fed’s proposed rule,” and had an impact on the Fed’s rulemaking process, Cheney said, noting that 5,600 of the 11,000 interchange comments that the Fed received came from credit unions, and more than half a million contacts on the interchange proposal were made ahead of a recent Senate vote on delaying interchange implementation. Legislation that would have delayed interchange cap implementation to allow greater time to study the issue failed in the Senate earlier this month, falling on a 54 to 45 vote margin. The measure needed 60 votes to pass. However, CUNA said that the Senate vote may have impacted the Fed’s decision on where to set the final debit interchange fee cap. National Credit Union Administration (NCUA) Chairman Debbie Matz said that the NCUA would “carefully monitor” interchange implementation, with a particular emphasis on the rule's impact on smaller credit unions. “To the extent possible, we need to ensure that this final rule will, in practice, work for credit unions and their members,” Matz said. CUNA will continue to work with the Fed as it implements this rule and monitor its impact on credit union members. The network exclusivity restrictions would become effective on April 1, 2012. The fee limitations are set to take effect on Oct. 1. The final rule will not impact benefit-related cards or prepaid cards until April 1, 2013, or later in some cases. For the Fed rule, use the resource link.

CUs have until July 29 for prepay decisions

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ALEXANDRIA, Va. (6/30/11)--While the National Credit Union Administration’s (NCUA) corporate credit union assessment prepayment plan will help credit unions, the Credit Union National Association (CUNA) said that the program could have been of greater benefit to credit unions if interest were paid on the prepaid amounts and if the size of the program was expanded to at least $1 billion.
Click to view larger image NCUA board members (seated at the table on right) listen and watch as staff makes its presentation on a new plan that would allow credit unions to prepay their Temporary Corporate Credit Union Stabilization Fund assessments due in 2013 and thereafter. From back, board members are Michael Fryzel, Debbie Matz, chairman, and Gigi Hyland. Staff members who presented the plan, which was unanimously adopted, were (from rear, on left) Melinda Love (obscured), John Worth, Larry Fazio, and Lisa Henderson. (CUNA Photo)
The NCUA on Wednesday unanimously voted to move forward with a plan to allow credit unions, on a voluntary basis, to prepay their Corporate Stabilization Fund assessment. The agency has set the target size of the program at $500 million, which will result in a reduction of the 2011 regular assessment from 24.9 basis points (bp) to 18.5 bp. CUNA said that a higher minimum of $1 billion “would have allowed a greater reduction in this year’s assessment beyond NCUA’s projected 6.4 bp, making the program more appealing to credit unions.” If less than $500 million is committed, the NCUA will not implement the program. If more than $500 million is committed, prepayments from credit unions will be prorated so that the $500 million target will not be exceeded. The $500 million target is an increase from the previous minimum starting funding amount of $300 million. Other changes to the proposal include:
* Lowering the minimum level for each credit union’s participation to $1,000 or 5 bp, so that 98% of credit unions are eligible; * Raising the maximum participation per credit union from 36 bp to 48 bp insured shares; and * Using all prepayments made to reduce this year’s assessment.
The agency said that credit unions that take part in the program will not accrue interest on prepaid assessments, as the NCUA does not have the independent authority to issue interest-bearing debt. NCUA Chairman Debbie Matz during the meeting emphasized that participation in the prepayment plan is voluntary, and said that the agency is neither encouraging nor discouraging credit union participation in the program. "We are offering it as an option," she said. Agency staff said that credit unions that do elect to participate in the plan would not be publicized. The amount that they have decided to pay into the prepayment fund would also not be publicized. However, that information will be made available on NCUA call reports once they are released later in the year. CUNA encourages all federally credit unions to consider the extent to which the program will benefit them and whether they should participate. The NCUA will be sending a letter to credit unions today regarding the program and participating credit unions must provide completed program agreements, which the agency is providing with the letter and on its website, by July 29. The NCUA will tally the total amount of credit union commitments on Aug. 9, and, if it moves forward with the plan, will debit the amounts that have been pledged from credit union accounts on Aug. 18. The agency has planned a webinar on the plan for July 11. A list of frequently asked questions for credit unions, and materials from the Wednesday NCUA meeting, can also be accessed via the resource link.

Inside Washington (06/29/2011)

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* WASHINGTON (6/30/11)--The Treasury Department has sided with state regulators and consumer groups to urge the Office of the Comptroller of the Currency (OCC) to scale back its proposed ruled relating to federal pre-emption of state consumer financial law. The OCC’s rule does not center on the key language of the Dodd-Frank Act, which left the pre-emption standard mostly unchanged, but seeks to broaden the standard, said Treasury General Counsel George Madison in a letter to the OCC. The OCC said it can pre-empt laws that “obstruct, impair or condition” the business of banking. But those words were not drawn directly from the 1996 Barnett Supreme Court decision, which Dodd-Frank said should be the preemption standard. “The proposed rule validates all prior preemption determinations, including those based on its deleted “obstruct, impair or condition” standard,” Madison wrote, adding “In our view, this position is contrary to Dodd-Frank” … * WASHINGTON (6/30/11)--In four years, the U.S. Small Business Administration’s (SBA) Patriot Express Pilot Loan Guarantee Initiative has provided more than $633 million in SBA-guaranteed loans to 7,650 veterans to start or expand their small businesses, the SBA announced Thursday. Patriot Express is a pilot loan product with streamlined paperwork based on the agency’s SBA Express program. It offers an enhanced guaranty and interest rate on loans to small businesses owned by veterans, reservists and their spouses. The program was launched June 28, 2007, to expand upon the more than $1 billion in loans SBA guarantees annually for veteran-owned businesses across all its loan programs. Eligible borrowers may borrow up to $500,000 through the Patriot Express loan program for business start-up, expansion, equipment purchases, working capital, inventory or business-occupied real-estate purchases, according to SBA …

NEW NCUA corporate prepayment plan takes next step

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ALEXANDRIA, Va. (UPDATED: 12:45 P.M. ET, 6/29/11)--The National Credit Union Administration (NCUA) earlier today unanimously voted to move forward with a plan to allow credit unions, on a voluntary basis, to prepay their Corporate Stabilization Fund assessment, but made some changes to its original proposal. The plan adopted today would allow credit unions, if they choose to do so, to prepay some their Corporate Stabilization Fund assessment. The agency has set the target size of the program at $500 million, which will result in a reduction of the 2011 regular assessment from 24.9 basis points (bp) to 18.5 bp. If less than $500 million is committed, the NCUA will not implement the program. If more than $500 million is committed, prepayments from credit unions will be prorated so that the $500 million target will not be exceeded. The Credit Union National Association (CUNA) urged the agency to allow up to $1 billion in prepaid assessments. Credit unions may commit a maximum of 48 basis points of their total insured shares as of March 31, 2011 to the fund. The agency previously proposed a maximum payment of 36 basis points. NCUA Chairman Debbie Matz during the meeting emphasized that participation in the prepayment plan is voluntary, and said that the agency is neither encouraging nor discouraging credit union participation in the program. “We are offering it as an option,” she said. Agency staff said that credit unions that do elect to participate in the plan would not be publicized. The amount that they have decided to pay into the prepayment fund would also not be publicized. However, that information will be made available on NCUA call reports once they are released later in the year. The NCUA proposed the prepayment plan at its May open board meeting and accepted public comment on the proposal until June 20. The agency received a total of 184 comments on the proposal, with the majority of credit unions saying that they would participate in the plan. While CUNA commended the agency for going forward with a plan for prepaid assessments and acknowledged some of the changes to the plan would be beneficial to credit unions, CUNA said the program could have been of greater benefit to credit unions if interest were paid on the prepaid amounts and if the size of the program was expanded to at least $1 billion. Nonetheless, CUNA encourages all federally credit unions to consider the extent to which the program will benefit them and whether they should participate. The NCUA will be sending a letter to credit unions today regarding the program and participating credit unions must provide completed program agreements, which the agency is providing with the letter and on its website, by July 29.

Housing finance reforms must meet CU needs CUNA

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WASHINGTON (6/29/11)--Any changes to the U.S. housing finance system must ensure that credit unions and other small issuers maintain fair and affordable access to secondary mortgage markets, SECU of Maryland President/CEO Rod Staatz told members of the Senate Banking Committee on Tuesday. Staatz testified on behalf of the Credit Union National Association (CUNA) during a committee hearing on mortgage finance reforms. He was the only credit union witness.
Click to view larger image Credit unions are increasingly important lenders in the residential mortgage market, testifies CUNA witness Rod Staatz (foreground) before a Senate committee hearing on housing finance reform. After averaging just over 2% of all residential first mortgage originations in the fifteen years ending in 2007, the credit union share of originations more than doubled to 5% during the past three years, and more recently has risen to almost 6%, Staatz, president/CEO of SECU of Maryland, points out. CUNA VP of Legislative Affairs Ryan Donovan is shown behind Staatz. (CUNA Photo)
Congress must “take reasonable time” to complete changes to the country’s housing finance system, including reform of the government-sponsored enterprises (GSE), and to ensure that an effective foundation will be responsive to the needs of borrowers and lenders,” he said during his testimony. While the problems that led to the conservatorships of Fannie Mae and Freddie Mac need to be addressed in a comprehensive and meaningful manner, the widespread availability of mortgage credit, housing affordability, consumer protection, financial stability and strong regulation must be maintained, Staatz added. “Reform of the housing finance system has already proven to be a very difficult challenge, but failing to make necessary changes to improve the system will result in even greater challenges for the economy, lenders, and borrowers,” he said. Toxic assets and other mortgage market issues led to the 2008 conservatorship of the GSEs. The government conservatorship of these entities has cost taxpayers more than $150 billion. The Obama administration has proposed a trio of potential outcomes for the GSEs, including almost completely privatizing the housing finance system, limiting the government's intervention in the mortgage market to times of financial distress, and using a system of reinsurance to backstop private mortgage guarantors to a targeted range of mortgages. Credit unions are concerned that fully privatizing the securitization market by turning it over to a group of large banks, as has been suggested by some, could exclude them from important parts of the market. Staatz noted that maintaining a neutral third party with the sole task of acting as a secondary market conduit must be a vital part of any reforms. Staatz also highlighted the importance of preserving 30-year fixed-rate mortgages and ensuring that the secondary market is strong enough to weather economic adversity. The definition of qualified residential mortgages (QRMs) was also covered during Staatz’s testimony, with the credit union CEO and CUNA urging Congress to insist that regulators go back to the drawing board and issue a new proposed QRM definition for public comments. The Dodd-Frank Wall Street Reform Act requires regulators to write a rule on credit risk retention for securitized assets, but allows QRMs to be exempted from the requirement that the lender retain 5% of the credit risk. CUNA and others, including a bipartisan group of lawmakers, have criticized a proposal to require a 20% down payment for a loan to be defined as a QRM, saying that this change would "shut out responsible homebuyers and further cripple the housing market." Requiring higher down payments from potential homebuyers could also “dry up mortgage liquidity for small lenders,” Staatz warned. American Enterprise Institute fellow Edward Pinto and Community Reinvestment Association of North Carolina executive director Peter Skillern also spoke during the hearing. Peoples Bank Company CEO Jack Hartings also testified on behalf of the Independent Community Bankers of America, and South Shore Saving Bank vice president Christopher Dunn spoke on behalf of the American Bankers Association. For video of the hearing, use the resource link.

Today to see interchange prepay plan action

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WASHINGTON (6/29/11)--Two issues of great importance to credit unions, the debit interchange fee cap and the corporate credit union stabilization fund prepayment plan, will be taken up later today by the Federal Reserve and the National Credit Union Administration (NCUA), respectively. Proposed Governing Debit Card Interchange Fees, Fraud Prevention Adjustment, Routing and Exclusivity Restrictions, and other related matters are on the agenda for the Fed’s meeting on its debit interchange fee cap proposal, which will take place at 3:30 p.m. ET. A draft Fed proposal set the cap at 12 cents per transaction. Credit unions and other financial institutions have said that such a low fee would not cover debit account-related costs and could force debit card issuers to charge fees to consumers for the popular debit card service. The Credit Union National Association (CUNA) and credit unions have urged the Fed to minimize negative effects on credit unions and their members when it issues its final proposal. Legislation that would have delayed interchange cap implementation to allow greater time to study the issue failed in the Senate earlier this month, falling on a 54 to 45 vote margin. The measure needed 60 votes to pass. The NCUA’s Wednesday meeting will address its plan that would allow credit unions, on a voluntary basis, to prepay their Corporate Stabilization Fund assessment. That meeting will begin at 8:30 a.m. ET. The NCUA proposed the prepayment plan at its May open board meeting and accepted public comment on the proposal until June 20. CUNA has anticipated that, if the plan is approved, the NCUA will likely give credit unions approximately 40 days after that to tell the agency whether or not they will commit any funds to the plan. CUNA has made recommendations to improve the complex prepayment plan, but has said overall it could help reduce credit unions' assessment for 2011 substantially, depending on credit unions' participation, and it would help even out assessments for subsequent years. CUNA has urged the agency to raise the target minimum commitment level from $300 million to $1 billion, to allow payment of some interest on the prepaid funds, and to apply any excess prepayments against this year's assessments on a pro-rata basis. It is expected that credit unions will have 40 days after this week's meeting to notify the agency of intentions to participate. News Now will cover developments at each of these meetings via its NewsNowLiveWire twitter feed.

Regulators issue cyber-security guidance

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WASHINGTON (6/29/11)--Noting that many of the methods employed by identity thieves and other online criminals have changed, and that the scope of many of their crimes has grown, the Federal Financial Institutions Examination Council (FFIEC) has urged credit unions and other institutions to update some practices. Institutions should “perform periodic risk assessments considering new and evolving threats to online accounts and adjust their customer authentication, layered security, and other controls as appropriate in response to identified risks,” the FFIEC said. The recommendations are part of a risk management framework update that was released on Tuesday. The new guidance supplements the FFIEC’s Authentication in an Internet Banking Environment guidance that was issued in October of 2005. However, much of the guidance proposed in 2005 is now less effective than it was when it was first released, according to the FFIEC. The FFIEC has said that institutions should rely on more than one authentication method for online bankers and should consider providing different levels of user authentication for different types of online banking transactions. Financial institutions should implement layered levels of online security that are consistent with the risk presented by various consumer transactions, the FFIEC said. Layered security can include advanced fraud detection and monitoring systems and the use of debit blocks and other techniques to limit the amount that can be withdrawn from an account at a given time. Enhanced controls over the number of transactions allowed per day, the timing of any payments, the recipients of those payments, and other account activities can also be added. Institutions can also use software that blocks connections to web servers that have previously been involved in fraudulent transactions, the FFIEC said. Customers should also be made aware of fraud risks and the potential impact of fraud on their accounts, the FFIEC added. The FFIEC said that its various member agencies, including the National Credit Union Administration (NCUA), will “continue to work closely with financial institutions to promote security in electronic banking.” Financial examiners from these institutions will assess financial institutions’ adoption of these security methods starting in January of 2012, the FFIEC added. For the full release, use the resource link.

FinCEN Scrutiny leads mortgage fraud SAR increase

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WASHINGTON (6/29/11)--The total number of mortgage loan fraud-related suspicious activity reports (SARs) filed in the first quarter of 2011 increased by 31% when compared to the first quarter of 2010, the Financial Crimes Enforcement Network (FinCEN) reported in its first quarter update for 2011. FinCEN in its Tuesday release said that the increase is due to “large mortgage lenders conducting additional reviews after receiving demands to repurchase poorly performing mortgage loans.” Over 80% of the mortgage-related SARs related to amounts of $500,000 or less. FinCEN also reported on federal mortgage assistance-related fraud cases, which often involve falsified income, employment, occupancy numbers, or Social Security numbers. Around 230 of these types of SARs were reported each month, with those SARs totaling $73 million in funds. FinCEN Director James Freis said “a substantial majority of reports involved activities that occurred in 2006-2007,” and added that this shows that “the industry is slowly making its way through the most problematic mortgages.” The report covers reports filed between the beginning of this year and the end of March. The agency received a total of 25,485 SARs during this time period, and the total number of SARs filed increased by 10% over the total reported in the first quarter of 2010. California, Nevada and North Carolina reported the most SARs per capita. Los Angeles, Calif., New York, N.Y., Chicago, Ill., and Miami, Fla. had the highest amounts of SARs among the 50 most populous metropolitan areas. For the full release, use the resource link.

Inside Washington (06/28/2011)

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* WASHINGTON (6/29/11)--Jeffrey Goldstein, the Treasury Department’s undersecretary for domestic finance, has announced his resignation. Goldstein’s departure leaves about a dozen posts for President Barack Obama must to fill among the government’s top financial-policy-making agencies (The Wall Street Journal June 28). Goldstein has overseen Treasury’s implementation of the Dodd-Frank Act financial-regulatory overhaul. He also has played a key role in the administration’s transition of mortgage-finance giants Fannie Mae and Freddie Mac …

Inside Washington (06/27/2011)

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* WASHINGTON (6/28/11)--The Group of Governors and Heads of Supervision, the oversight body of the Basel Committee on Banking Supervision, said Saturday Basel’s proposed capital surcharge for the largest financial institutions will be 1% to 2.5%, depending on a bank’s systemic importance. Many regulators, including Federal Deposit Insurance Corp. Chairman Sheila Bair and Federal Reserve Board Gov. Dan Tarullo, had indicated they favor a minimum 3% surcharge (American Banker June 27). The surcharge will not be fully effective until Jan. 1, 2019. Broader Basel III requirements also require all internationally active banks to hold common equity of 7% by 2019. International regulators also indicated that they would accept alternative forms of capital, including hybrid instruments such as contingent capital, to meet the surcharge requirements. U.S. regulators did not favor that approach, but European supervisors have been lobbying hard to include such instruments … * WASHINGTON (6/28/11)--In her last speech before leaving the Federal Deposit Insurance Corp. (FDIC), Chairman Sheila Bair called for longer-term, strategic economic policies to avoid the type of thinking that caused the financial crisis and is threatening current regulatory reforms. Bair, speaking before the National Press Club, called “short-termism” a growing problem in both business and government. She said short-term thinking is “a market failure that leads to underinvestment in valuable projects with long payoff periods.” Bair said the reason that lenders were willing to make risky loans--and security issuers were willing to fund them--during the mortgage crisis--is that they knew they would be paid up front. Mortgage investors and the homeowners, meanwhile ended up bearing the long-term consequences. She said the FDIC is determined to press for a more systemically important financial institution resolution framework …

CUNA urges interest other changes to prepay program

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WASHINGTON (6/28/11)--In advance of the National Credit Union Administration’s (NCUA) Wednesday meeting to consider whether to advance its idea to allow credit unions a prepayment option for their corporate stabilization assessments, the Credit Union National Association (CUNA) Monday wrote to the agency board members reiterating the group’s strong support for the plan. CUNA also urged the NCUA board to incorporate into a final plan changes CUNA has recommended, including allowing payment of some interest on the prepaid funds. The recommendations include:
* Raising the target minimum commitment level to $1 billion, up from $300 million; * Avoiding the establishment of an unneeded, additional liquidity buffer for the fund and instead applying any excess prepayments against this year’s assessments on a pro-rata basis; and * Allowing small credit unions to participate in the program if they want to do so, rather than setting a $10,000 prepayment minimum. That minimum could keep credit unions with assets less than $2.8 million--or about 6,023 credit unions--from being able to participate.
As noted, CUNA also urged the agency to amend its proposal to allow payment of some interest on the prepaid assessments. “While we understand that NCUA has determined that under the Federal Credit Union Act (FCU Act) it is essential that the ‘gift’ nature of the prepayments be preserved, the payment of at least some interest on the prepayments is a very important issue for credit unions,” CUNA President/CEO Bill Cheney wrote. Cheney added that an Internal Revenue Service (IRS) definition of “gift,” which has been recognized by the courts, states “a gift is made when someone provides property (including money) without expecting to receive something of at least equal value in return.” “We believe the payment of at least some interest on the prepaid (assessments) pegged to, but somewhat less than, the rate that (Temporary Corporate Credit Union Stabilization Fund) pays to the U.S. Treasury for its line of credit would be permissible, consistent with the FCU Act and the IRS’s definition,” Cheney wrote. The NCUA is scheduled to meet Wednesday to decide whether or not to establish a prepayment plan for corporate fund assessments. Even if the agency decides then to move ahead at that time, it has said it will not implement a plan if "subscriptions" by credit unions total less than $300 million. It is expected that credit unions will have 40 days after this week’s meeting to notify the agency of intentions to participate.

Compliance CUNA adds RSS Feed to CompBlog

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WASHINGTON (6/28/11)--The Credit Union National Association (CUNA) has added an RSS feed to its new compliance blog, CompBlog. RSS, which stands for “really simple syndication,” is a format used to syndicate--or “feed”-- content automatically. CUNA’s CompBlog users will need a “RSS reader” or “feed aggregator,” such as Google Reader, to access the feed. Then RSS subscribers will automatically receive the blog’s updates without having to check the webpage every day. Use the first resource link below to visit CUNA’s CompBlog and click “CompBlog RSS” in the right-hand column of the page. Then just click on “subscribe” and save the feed in your Internet browser. CUNA's CompBlog combines the information that credit union compliance professionals have relied on for years in CUNA's Compliance Challenge with content previously found in its popular "What's New in Compliance"--and serves it up in a timely delivery format. CUNA launched CompBlog on June 20. CompBlog readers can send comments and questions to CUNA's compliance department via the blog, and keep the conversation going with their peers on COBWEB, CUNA's popular compliance listserv. Readers with an idea for a post or a question should contact CUNA’s compliance team at cucomply@cuna.com.

Housing finance reform hearing today CUNA testifies

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WASHINGTON (6/28/11)--Rod Staatz, who is president/CEO of SECU of Maryland and a member of the Credit Union National Association’s (CUNA) board of directors, is scheduled to testify today before a Senate Banking Committee hearing on housing finance reform. In his testimony, Staatz is expected to describe the state of credit union mortgage lending and outline key principles that should guide the nation’s housing finance reform. These include:
* The need for affordable access for credit unions and other small lenders to the secondary market for mortgage loans; * The importance of preserving the 30-year, fixed-rate mortgage instrument; * The need for a durable secondary market, one that can weather economic adversities; and * The need for an orderly transition to a revised system.
Staatz is also a member of CUNA’s GSE Reform Task Force. He is expected to discuss another important housing topic--the definition of a qualified residential mortgage (QRM). The Dodd-Frank Wall Street Reform Act requires regulators to write a rule on credit risk retention for securitized assets, but allows QRMs to be exempted from the requirement that the lender retain 5% of the credit risk. CUNA supports the goals of a bi-partisan group of U.S. House and Senate lawmakers that have urged regulators not to be rigid in setting the rules. The lawmakers have said a current proposal to require a 20% down payment for a loan to be defined as a QRM would "shut out responsible homebuyers and further cripple the housing market."

Two small CUs placed into conservatorships

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ALEXANDRIA, Va. (6/28/11)--Just two-and-a-half weeks after issuing a cease-and-desist order to the $7 million-asset credit union, the National Credit Union Administration (NCUA) assumed control of Borinquen FCU of Philadelphia on Friday. Under NCUA control, the credit union will continue to provide services to 8,600 Borinquen members, while working to resolve issues the agency said have affected the safety and soundness of the institution. In its cease-and-desist order, the NCUA noted that the credit union has had "serious and persistent record keeping problems" and had failed to perform yearly audits. The NCUA ordered the credit union to:
* Obtain an opinion audit and member account verifications from a certified public accountant; * Reconcile its cash and bank accounts; and * Establish a Bank Secrecy Act compliance program by June 30.
Borinquen FCU is the seventh federally insured credit union placed into conservatorship during 2011. Also on Friday, the NCUA announced it had placed O.U.R. FCU of Eugene, Ore., with $4.3 million in asset, into conservatorship to allow it to continue full operations for its 2,184 members while operating under NCUA control and addressing “previous service and operational weaknesses.” Borinquen and O.U.R. are the seventh and eighth credit unions, respectively, to be placed into conservatorships this year. Use the resource link to see information posted on the credit unions’ websites to help members understand the impact of the conservatorship.

July 25 brings new option for LICU qualification

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WASHINGTON (6/28/11)--Starting next month, federal credit unions have a new option for providing actual income information about their members as a basis for qualifying as a low-income credit union. Back in 2008, the National Credit Union Administration (NCUA) amended its low-income rule to allow credit unions, as an alternative to relying on NCUA’s geo-coding software, the option of providing actual income information about their members as a basis for qualifying as a low-income credit union. Under this new final rule that becomes effective July 25, the NCUA will allow federal credit unions to submit an analysis of a statistically valid sample of member income data--as opposed to actual income information--as evidence they qualify for the designation. In a recently released final rule analysis, the Credit Union National Association (CUNA) has noted these key points of the new rule:
* The random sample must be representative of the membership, sufficient in both number and scope on which to base conclusions, and have a minimal confidence level of 95% and a confidence interval of 5%; and * The NCUA will evaluate the sample income data and the supporting narrative to verify it is a statistically valid, random sample.
The new rule prohibits combining a survey and loan file review. Specifically, the rule states that a credit union must draw the sample either entirely from loan files or entirely from the survey, and must not combine a loan file review with a survey. To read the entire CUNA analysis, use the resource link below.

N.J.s St. James A.M.E. FCU becomes tenth NCUA liquidation

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ALEXANDRIA, Va. (6/27/11)--St. James A.M.E. FCU of Newark, N.J. became the tenth federally insured credit union to be liquidated this year, the National Credit Union Administration announced Friday. North Jersey FCU of Totowa, N.J., a full-service institution with $194 million in assets and more than 29,700 members, immediately assumed St. James A.M.E. Federal Credit Union’s members and those members experienced no interruption in credit union services. The NCUA liquidated St. James after determining the credit union was insolvent and had no prospect for restoring viable operations on its own. At the time its liquidation, the credit union served 831 members and had deposits of approximately $1 million. St. James was chartered in 1946 and originally served embers of the St. James African Methodist Episcopal Church in Newark. Membership was expanded to include members of the Greater Mt. Teman A.M.E. Church in Elizabeth, N.J., in 1994.

GAO Bank PCA rules fail to protect insurance fund

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WASHINGTON (6/27/11)--Current bank prompt corrective action (PCA) rules, which were largely untested before 2007, result in a too-little-too-late supervisory approach, according to a recent Government Accountability Office (GAO) study that was required under the Dodd-Frank Wall Street Reform Act. Under PCA rules for banks, as it is with credit unions, as an institution’s capital level deteriorates, its CAMEL rating goes up. When that happens, regulators are required to increase supervision and take actions meant to force management to make improvements. If those improvements do not materialize, the regulator is required to close the bank before losses to the Deposit Insurance Fund (DIF) can multiply. The banks’ DIF is funded with taxpayers’ dollars, while the National Credit Union Share Insurance Fund is supported solely by the credit union system. However, the mechanics of the PCA rules are substantially similar. The report noted that as a result of bank failures, the DIF balance fluctuated from roughly $51 billion in early 2007, to approximately negative $21 billion in late 2009, and stood at negative $7.4 billion as of the end of 2010. A key finding of the GAO report is that, since the country’s financial meltdown in 2008, PCA actions at banks not only grew tenfold, but for those that ultimately failed PCA did little to decrease losses to the DIF compared to failures that did not go through a PCA routine. The GAO report indicated the fault largely fell with having capital levels serve as the main trigger for PCA actions: “(P)roblems with the bank's assets, earnings, or management typically manifest before these problems affect bank capital. Once a bank falls below PCA's capital standards, a bank may not be able to recover regardless of the regulatory action imposed.” All four federal banking regulators—the Office of the Comptroller of the Currency, the Office of Thrift Supervision, the Federal Reserve, and the Federal Deposit Insurance Corporation—stated that “PCA was not designed for the type of precipitous economic decline that occurred in 2007 and 2008,” according to the report. The GAO made several recommendations for the federal banking regulators to consider, including “adding a measure of risk to the capital category thresholds and increasing the capital ratios that place banks into PCA capital categories.”

Inside Washington (06/24/2011)

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*WASHINGTON (6/27/11)--The House Appropriations Committee approved the fiscal year 2012 Financial Services and General Government Appropriations bill, which provides annual funding for the Treasury Department, the Small Business Administration, the Securities and Exchange Commission, the Consumer Financial Protection Bureau (CFPB), and several other independent agencies, (American Banker June 24). The bill includes $19.9 billion in funding for the agencies, which is nearly $2 billion--or 9%--below last year’s level, nearly $6 billion below the President’s fiscal year 2012 request, and more than $700 million below the pre-stimulus, pre-bailout levels enacted in 2008. The bill also would cap mandatory funds for the CFPB at $200 million--the limit is $600 million--and subject it to the annual appropriations process beginning in 2013. The Dodd-Frank Act prescribes that the bureau receive a percentage of the Federal Reserve budget and is not subject to the appropriations process … *WASHINGTON (6/27/11)--In letters to federal regulators, several banks expressed concern about a requirement that they submit resolution plans outlining how to unwind them in a crisis. One concern is how firms may be penalized if regulators do not like their plans. Under the Dodd-Frank law, the agencies can take remedial action if the living wills, as the resolution plans are known, are deemed inadequate (American Banker June 24). The requirement could potentially mandate significant restrictions on the activities and operations of financial services firms, David T. Hirschmann, president for the Center for Capital Markets Competitiveness of the U.S. Chamber of Commerce, wrote in a June 10 letter. The living wills are required under the Dodd Frank Act to give the federal government authority to seize and wind down institutions deemed too systemic to be resolved through bankruptcy. The proposal, drafted jointly by the Federal Deposit Insurance Corp. and the Federal Reserve Board, would apply to firms with more than $50 billion in assets … *WASHINGTON (6/27/11)--Small businesses won a record $97.95 billion in federal contracts, or 22.7% of eligible contracting dollars in fiscal 2010, the Small Business Administration (SBA) announced Friday. The increase marks the largest single year jump in more than five years, and is a significant improvement over fiscal 2009, when 21.9% of contracting dollars were awarded to small businesses, SBA said. Performance in four out of five of the small business prime contracting categories showed improvement, with increases in contract dollars and also in performance against statutory goals. “When the federal government gets contracts into the hands of small businesses, it is a ‘win-win’ situation: small businesses have the opportunity to grow and create jobs and the federal government gets access to some of the most innovative and nimble entrepreneurs,” said SBA Administrator Karen G. Mills.

Gvt report says NFIP still high risk program

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WASHINGTON (6/27/11)--The National Flood Insurance Program (NFIP) has been on the Government Accountability Office’s (GAO) high-risk list since 2006, when the program had to borrow from the U.S. Treasury to cover losses from the 2005 hurricanes, and its outstanding debt and operational and management challenges keep it there, GAO said in a recently released report. The report outlines measures that could be taken to place NFIP on sounder financial footing “in light of public policy goals for federal involvement in natural catastrophe insurance,” the GAO said. It also highlights the operational and management challenges at FEMA that affect the program. Above all, the GAO report said, congressional action is needed to increase the financial stability of NFIP and limit taxpayer exposure. (Use the resource link to access the report.) NFIP reform has been the subject of hearings in both the U.S> House and Senate this year. On June 9, Senate Banking Committee Chairman Tim Johnson (D-S.D.) opened his panel’s hearing on the program saying that, while he hopes to ensure the future of NFIP--which provides more than $1.2 trillion in coverage to Americans in flood-prone areas--the program does need reforms. The program, he said, has a beneficial effect on both the insurance and housing markets. And on the House side in March, a Financial Services subcommittee conducted a hearing to look at reform proposals. Rep. Judy Biggert (R-Ill.), chairman of the subcommittee conducting the review, cited "inadequate management and insufficient funds," as key problems of the program. "It's crucial that we begin to restore the financial integrity of NFIP so that homeowners and businesses in flood-prone areas, like many in Illinois, are not left without any protection and taxpayers are not on the hook for the failings of NFIP," she said.

Compliance What to know about Reg Z changes

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WASHINGTON (6/24/11)--CompBlog, the Credit Union National Association’s (CUNA) newest addition to its electronic information toolshed for members, has started a conversation about what credit unions should focus on in the changes the Federal Reserve made this spring to its Regulation Z. The blog says that although it does not take effect until October 1, the Fed’s amended rule carries significant changes and credit unions should be aware of such things as new provisions addressing “floor” rates, preferential rates for employees, consumer’s ability to pay, reevaluation of rate changes and a new definition of “significant terms”. Last week CompBlog took a look at “floor” rates and “ability to pay,” and promised more Reg Z postings to come. On fixed-minimum, or “floor” rates, the blog notes such things as;
* Under an “Advance Notice Exception” provision, a creditor isn’t required to provide a notice of change in terms for open-end loans for an increase in a variable-rate APR if the bump up is due to an increase in an index that was previously disclosed, isn’t under the control of the creditor, and is available to the general public; * However, a variable-rate plan that’s subject to a fixed minimum or “floor” doesn’t meet the conditions of the exception to the advance notice requirements in Reg. Z Section 226.9(c)(2)(v)(C); and * Supplemental material to the final rule clarified that a 45-day advance notice of change in terms is required for all open-end loans (except HELOCs) prior to a rate increase on a variable-rate account that’s subject to a fixed minimum or floor.
On Reg Z changes to a credit cardholder’s “ability to pay,” the Fed final rule requires a card issuer to consider a consumer’s independent ability to make required payments on a credit card account, regardless of the consumer’s age, before opening a new card account or increasing the credit limit on an existing account. Outside of community property states, a card issuer may not rely solely on “household income” provided by an applicant on a credit card application, but will need to obtain additional information about the applicant’s independent income. Information concerning the applicant’s “income” or “salary”, however, may be relied on in order to determine whether the applicant has the ability to make the required payments. Use the resource link below to access CUNA’s CompBlog (members only) and read the Reg Z posts in their entirety. The conversation on Reg Z continues today.

Supreme Court to look at RESPA case

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WASHINGTON (6/27/11)--Credit unions will want to be aware of last weeks U.S. Supreme Court decision to hear a Real Estate Settlement Procedures Act--or RESPA--class action case that involves title insurance. The case is known as First American Financial Corp. v. Edwards.

Broadly, the case revolves around whether a consumer, who based a purchase of title insurance on a referral by a real estate settlement agency--under conditiions the consumer claims violated RESPA's anti-kickback provisions, can sue in federal court if there is no evidence of actual injury.

Credit Union National Association Deputy General Counsel Mary Dunn said Friday that the case has significant implications for credit unions.

Credit unions work very hard to comply with all consumer protection laws they are subject to, such as RESPA for mortgage lenders. Also, they generally support reasonable legal protection for consumers.

However, awarding damages when a consumer is not harmed raises serious concerns and this issue deserves judicial review, she said.

To have standing to sue, the class representative, plaintiff Denise P. Edwards, had to meet three requirements, according to court documents: injury, causation, and redressability.

The defendants, First American Corp. and First American Title Insurance, argue that Edwards has not suffered a concrete injury and has not alleged that the charge for title insurance was higher than it would have been without the exclusivity agreement. In fact, the defendants have noted, the plaintiff cannot make that allegation because Ohio law mandates that all title insurers charge the same price.

If the Supreme Court rules against Edwards, CUNA's Dunn noted, it could help credit unions battle against unjustified, gotcha-types of lawsuits that are sometimes filed against lenders under RESPA.

A question raised but not answered so far in the case--and not likely to be addressed by the Supreme Court justices--is whether the title insurance company's tie-in arrangement with the title insurance company is, in itself, an improper arrangement.

Inside Washington (06/23/2011)

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* WASHINGTON (6/24/11)--The National Credit Union Administration (NCUA) has introduced two new online communication systems. NCUA Express is a voluntary electronic notification system that allows subscribers to receive email or RSS feed announcements anytime something gets posted to the NCUA website. NCUA Express subscribers can now customize and manage their announcement list to receive specific types of notifications. With the changes announced Thursday, anyone interested in credit union issues may register to receive updates about NCUA’s activities. New subscribers to NCUA Express can sign up online. Existing NCUA Express users will automatically be ported over within the next few weeks to the new platform, so no further action is required from current subscribers. NCUA Dispatch, a new e-mail notification service, will electronically blast notices to credit unions’ and state regulators’ official e-mail accounts. NCUA Dispatch will eventually replace most paper mailings. There is no need to sign up for the NCUA Dispatch service, as it will go to the intended audience as necessary … * WASHINGTON (6/24/11)--Three U.S. Senate Democrats have publicly called for the Obama administration to replace Acting Comptroller of the Currency (OCC) John Walsh, a Republican, after Walsh said regulators are in danger of going too far to stop risk-taking by big banks. Jack Reed (D-R.I.), Carl Levin (D-Mich.) and Jeff Merkley (D-Ore.) are upset about Walsh’s statements that bank capital requirements are too high and that regulators should be cautious about how much more they require the largest banks to hold, an issue foreign and U.S. regulators are currently negotiating (The Wall Street Journal June 23). “Mr. Walsh’s suggestions that capital requirements should be reduced are counter to what every other regulator has told us,” Reed said in a statement. “Just last week, staff from the OCC told the Senate subcommittee on financial institutions and consumer protection that the ‘financial crisis underscored the importance of strong capital cushions’ and that the OCC was working to ‘strengthen capital and liquidity standards.’” Walsh became the OCC’s interim head last August when John Dugan completed his five-year term …

NCUA to vote on prepay plan next week

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ALEXANDRIA, Va. (6/24/11)--The National Credit Union Adminstration (NCUA) has announced a special open meeting for next Wednesday, June 29, to consider its plan to allow credit unions, on a voluntary basis, to prepay their Corporate Stabilization Fund assessment. The NCUA proposed the prepayment plan at its May open board meeting and the public comment period ended June 20. CUNA has anticipated that, if the plan is approved, the NCUA will likely give credit union approximately 40 days after that to tell the agency whether or not they will commit any funds to the plan. CUNA has made recommendations to improve the complex prepayment plan, but has said overall it could help reduce credit unions' assessment for 2011 substantially, depending on credit unions' participation, and it would help even out assessments for subsequent years. Also expected on Wednesday: The Federal Reserve Board has said it will vote on a final rule to set a debit card interchange fee cap that day. Use the resource link to read CUNA's comment letter.

CFPB to meet on larger participant definition

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WASHINGTON (6/24/11)--The Consumer Financial Protection Bureau (CFPB) has announced it will meet with stakeholders July 8 to work on a definition of what non-depository institution “larger participants” in the financial services market should fall under the bureau’s purview. With its 90-minute meeting, to begin at 8:30 a.m. (ET), the CFPB intends to gather information on setting the parameters of it’s regulation of non-bank/non-credit union financial entities--and identifying what types of entities should be subject to CFPB examination. The Credit Union National Association (CUNA) will participate in those discussions. Under the Dodd-Frank Wall Street Reform and Consumer Protection Act, the CFPB is authorized to supervise all sizes of nonbank payday lenders, private student lenders, and mortgage companies. For other nonbank markets for consumer financial products and services, the Act generally provides authority to supervise “a larger participant”, and requires the CFPB to define such “larger participants.” Dodd-Frank requires that the CFPB issue an initial rule on this subject no later than July 21, 2012, one year after the designated transfer date. Use the resource link below for more information on nonbank participants found on the CFPB website.

TCF wants court to demand Fed interchange rule now

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WASHINGTON (6/24/11)--Disagreeing with the Federal Reserve Board, TCF Bank told a federal court this week that the particulars of a final rule to set a debit card interchange fee cap do matter in the bank’s case to stop the cap, and the bank asked a federal judge to make the Fed hand over the rule even before it is issued for public comment on June 29. TCF Bank, of Minnesota, has sued to stop the Fed from implementing the fee cap that was ordered by the Dodd-Frank Wall Street Reform Act. The bank has argued, in part, that it is unconstitutional for the government to require a business to charge below-cost rates that negatively impact business. The interchange statute excludes certain costs, which makes it an unusual and therefore unconstitutional regulation, TCF maintains. Oral arguments in the case, known as TCF National Bank v. Bernanke ( No. 11-1805), were heard June 16. Since that time the Fed notified the U.S. Court of Appeals for the Eighth Circuit that it would release its final rule on June 29. However, that release, the Fed said, “should not affect the court’s disposition” of this case. TCF then shot off its own letter to the court. The bank agreed the court could rule on its pending appeal in the absence of a final rule. However, TCF attorney Timothy Kelly wrote, the Fed’s rule is very much an issue. He disputed the Fed’s claim that TCF's challenge to the statute "does not implicate the regulation." “For example, the final regulation is relevant to TCF's contention that the language of the Durbin Amendment does not permit the Board of Governors to issue an interchange rate that is non-confiscatory,” Kelly said. TCF did not ask to view an advance copy of the Fed rule, only that the court be supplied with it in confidentiality. The Credit Union National Association, the Clearing House Association LLC, American Bankers Association, Consumer Bankers Association, The Financial Services Roundtable, Independent Community Bankers of America, Midsize Bank Coalition of America, and the National Association of Federal Credit Unions have earlier filed an amicus brief in support of some aspects of TCF's arguments against the interchange statute.

CUNA to testify in Senate Tuesday on housing reform

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WASHINGTON (6/24/11)--Rod Staatz, a member of the Credit Union National Association’s board of directors and its GSE Reform Task Force, is scheduled to testify next week at a Senate Banking Committee hearing on housing finance reform. Staatz, who is president/CEO of SECU of Maryland, in part will
Click to view larger image SECU of Maryland CEO Rod Staatz has been tapped to testify in the Senate next week on housing finance reform. In this photo, Staatz is shown testifying before a House panel on issues surrounding the Consumer Financial Protection Bureau. Staatz urged that credit unions, and the pro-consumer products they provide, should be exempt from any onerous rules the bureau might create. (CUNA Photo).
discuss credit union access to the secondary market for housing loans. Housing finance reform has been identified as an Obama administration priority, and the U.S. Congress has been studying the issue through hearings as well. CUNA has told the Obama administration that the needs of credit unions and other small mortgage lenders must be considered as the country moves forward on needed reforms. Earlier this year, the administration released a report on a tri-level plan for the future of government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac, both of which are operating under government conservatorships. One proposal would almost completely privatize the housing finance system, limiting the government's role to assisting low-income and veteran homebuyers. The report notes that smaller lenders could have a difficult time competing under such a system. Another proposal would create a system through which the government would back mortgages only in times of financial distress. Low-income individuals and military veterans would still be offered assistance under this structure. The government could also use a system of reinsurance to backstop private mortgage guarantors to a targeted range of mortgages. The administration plan notes that this option provides the lowest cost mortgages, and would likely benefit smaller lenders. Use the resource link to see a list of other witnesses.

NEW NCUA to vote on prepay plan next week

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ALEXANDRIA, Va. (6/23/11 UPDATED 3:00 p.m. ET)--The National Credit Union Adminstration (NCUA) just announced a special open meeting for next Wednesday, June 29, to consider its plan to allow credit unions, on a voluntary basis, to prepay their Corporate Stabilization Fund assessment. The NCUA proposed the prepayment plan at its May open board meeting and the public comment period ended June 20. CUNA has anticipated that, if the plan is approved, the NCUA will likely give credit union approximately 40 days after that to tell the agency whether or not they will commit any funds to the plan. CUNA has made recommendations to improve the complex prepayment plan, but has said overall it could help reduce credit unions' assessment for 2011 substantially, depending on credit unions' participation, and it would help even out assessments for subsequent years. Also expected on Wednesday: The federal Reserve Board has said it will vote on a final rule to set a debit card interchange fee cap that day.

Inside Washington (06/22/2011)

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* WASHINGTON (6/23/11)--Financial services representatives told a Senate panel on Tuesday they would support a national standard for how financial institutions notify members and customers of a data breaches. The Obama administration released a proposed national standard May 12 (American Banker June 22). The White House proposal would make penalties for cyber-crimes more stringent by tying them to other laws, such as the Racketeering Influenced and Corrupt Organizations Act, which is often used to fight organized crime but doesn’t apply to cyber-crimes. Senate Banking Committee Chairman Tim Johnson also expressed support for more robust cyber lows, citing several high profile financial services data breaches. Citigroup Inc. was the most recent high-profile data breach. Citi disclosed a hacker had accessed customer information for more than 360,000 credit card accounts last month. Citigroup has been widely criticized for waiting nearly a month to go public with the news. The bank said it discovered the breach on May 10, but didn’t begin notifying customers until June 3. It initially said 200,000 cards were breached (News Now June 20.) … * WASHINGTON (6/23/11)--The first meeting of the Federal Deposit Insurance Corp. (FDIC) Advisory Committee on Systemic Resolution considered how best the agency can use its new powers to unwind a large, systemically important bank. Among the first concerns raised by the newly formed panel was convincing the market that regulators have the will to shut down “too big to fail” firms, preventing a resolution from creating panic within the banking system and using pre-drawn resolution plans with the details of the next crisis still to be determined (American Banker June 22). During the meeting, FDIC officials presented findings from a recent agency report on how it would have handled Lehman’s demise with the new powers. The report determined it could have recovered 97 cents on the dollar for creditors. But former Federal Reserve Board Chairman Paul Volcker asked the panel what if the Lehman failure created a ripple effect and other institutions began to fail en masse? Volcker said the FDIC would have to be prepared to exercise its authority at other institutions …

Financial Capability Council to meet July 12

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WASHINGTON (6/23/11)--The President's Advisory Council on Financial Capability, created by executive order in 2010 to work to increase the financial literacy of the American public, has slated its third meeting for July 12. It will be webcast starting at 2:30 p.m. (ET). The council will receive reports on the progress of its subcommittees on financial access, research and evaluation, partnerships, and youth, and will discuss any recommendations made in those areas. This third session follows the format of the council’s meeting earlier this year, on April 21. During the April, each council subcommittee presented a progress report and the recommendations it thought the council as a whole should make to the President and the Treasury secretary. At that time, the council agreed to forward two recommendations: That Treasury support the Workplace Leaders in Financial Educations Award, administered by the American Institute of Certified Public Accountants and the Society for Human Resources Management; and that the Treasury issue a challenge to the private sector to create applications for mobile devices that promote financial capability and financial access. Treasury is currently looking into how to implement those recommendations. Use the link below for details on how to access the audio webcast, which will be posted closer to the date of the meeting. (Click on Resource Center, then Office of Financial Education and Financial Access, and then on the President's Advisory Council on Financial Capability) or call (202) 622-5770.

Treasury seeks CUs to be iGo Directi Community Ambassadors

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WASHINGTON (6/23/11)--Credit unions and other financial institutions with fewer than 100 branches can now apply for Community Ambassador status for the U.S. Treasury Department’s direct deposit campaign, known as Go Direct. To be a Community Ambassador, a financial institution need only to fill out and submit an online commitment form stating that their financial institution commits to support the campaign--and then spread the message about direct deposit by completing campaign activities between June 20100 and January 2013. The Credit Union National Association (CUNA) is a Go Direct national partner and supports the safety and convenience goals of direct deposit. By promoting direct deposit for federal benefit payments, the Treasury’s Go Direct program notes, your financial institution will:
* Gain recognition from the U.S. Department of the Treasury; * Be part of the Treasury Department’s effort to pay all federal benefits electronically; * Help seniors, veterans and others make a smooth transition to direct deposit before the official deadline requiring all to receive benefits payments electronically; and * Retain current customers or members and potentially gain new ones.
Use resource links below for more information.

Lawmakers urge flexible mortgage QRM down payments

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WASHINGTON (6/23/11)--As federal regulators wrestle with setting the definition of a qualified residential mortgage (QRM)--which under the Dodd-Frank Wall Street Reform Act would be exempt from risk-retention rules--a bi-partisan group of U.S. House and Senate lawmakers urged regulators not to be rigid in setting the rules. At a press conference Wednesday, the lawmakers said a current proposal to require a 20% down payment for a loan to be defined as a QRM would “shut out responsible homebuyers and further cripple the housing market.” Dodd-Frank requires a lender to retain 5% of the credit risk for securitized loans, but allows QRMs to be exempted. A coalition of consumer, housing and business groups, including the Credit Union National Association, appeared on the podium with the House and Senate members to show support for a more flexible down payment requirement. The press conference was called by Sens. Johnny Isakson (R-Ga.), Kay Hagan ( D-N.C.), and Mary Landrieu ( D-La.), Reps. John Campbell ( R-Calif.), and Brad Sherman (D-Calif.). The lawmakers said the proposed 20% down payment required for a qualified residential mortgage would prevent too many borrowers from obtaining loans: It is unduly narrow and would necessarily increase consumer costs and reduce access to affordable credit. “Drawing on my experience over 30 years in the real estate business, I understand the devastating consequences this proposed rule would have on qualified, creditworthy homebuyers and our fragile housing market,” said Isakson told reporters. He added that the proposed rule does not follow legislative intent: “We don’t have a down payment problem in this country, but rather an underwriting problem. I strongly urge regulators to rework their overly rigid down payment requirement for QRM. If left as is, it would make recovery in the housing market almost impossible.” Earlier this month, a bipartisan group of 39 senators sent a letter urging regulators to expand the proposed exemption from risk-retention rules mandated by the Dodd-Frank Act, and also argued the proposed regulation goes beyond the intent and language of the statute by imposing unnecessarily tight down payment restrictions.

Changes at NCUA include GC Fenners retirement

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ALEXANDRIA. Va. (6/23/11)--After 30 years dedicated to service at the National Credit Union Administration (NCUA), Robert (Bob) Fenner has announced that he will retire from the agency on August 1. “Working with every administrator, chairman and board member in NCUA’s history, Bob Fenner has provided invaluable counsel and extraordinary leadership in building and guiding the agency’s legal framework, regulatory policy and ethics program since 1974,” said NCUA Chairman Debbie Matz of Fenner’s role at the agency. “Bob’s dedication, loyalty and reputation are unsurpassed. It is hard to imagine NCUA without him.” Credit Union National Association (CUNA) General Counsel Eric Richard, upon hearing the announcement, said of Fenner: "For more than three decades, Bob has been a devoted public servant who has played a vital in the regulation of credit unions. “He has seen many stages in the growth of credit unions in the United States and is widely respected around the movement. I am sure I speak for credit union lawyers around the country in wishing him every success in his future endeavors." Richard added that Fenner’s influence on NCUA legal matters has been significant. Fenner’s vacated post at the NCUA will be filled by current Deputy General Counsel Michael McKenna, who, Matz said, has the “intellect, creativity and leadership skills” needed to meet the challenges of the job. “He has big shoes to fill, but I am confident he will do so splendidly,” she said. CUNA’s Richard noted that CUNA looks forward to working with McKenna as credit unions continue to grapple with critical issues involving NCUA. Other senior personnel changes announced by the agency include:
* Melinda A. Love, director of the Office of Examination and Insurance (E&I), will replace Larry D. Fazio as NCUA’s deputy executive director until her retirement in December. Fazio has served as NCUA’s deputy executive director since May 2008; * Fazio will take over as director of E&I director; and * The Office of Capital Markets, directed by J. Owen Cole, Jr., will become a division of E&I.
The agency explained the realignment of the Office of Capital Markets, to become a third division within E&I, this way: The organizational change will better integrate all examination program activities within one office and facilitate the establishment of consistent national standards for credit unions.

Fed to consider final interchange rule June 29

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

Inside Washington (06/21/2011)

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

NCUA Inherited IRA is insured but tax issues can be complicated

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

Appeals filed in three CU cases on foreclosure notification

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

NEW Fed to consider final interchange rule June 29

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

Compliance MLOs must register by July 29

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

NCUA sues securities firms to recover millions More suits could come

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ALEXANDRIA, Va. (6/21/11)—Seeking to recover millions of dollars from securities firms alleged to have violated federal and state securities laws, the National Credit Union Administration (NCUA) filed two lawsuit Monday charging misrepresentation in the sale of hundreds of securities, and has said more suits could come. The Credit Union National Association (CUNA) backed the NCUA action, having encouraged the agency to take “all reasonable actions” available to pursue effective restitution from securities firms who “share the culpability for the events that led to the corporate failures.” “While this is a very positive step and the agency should be commended for taking it, the fact is that a very tough road remains ahead. The institutions being sued by NCUA have significant resources to defend their actions, and will no doubt use those resources to the fullest extent,” CUNA President/CEO Bill Cheney remarked Monday. The NCUA took the legal action in its role as liquidating agent for five failed corporate credit unions. The suits filed Monday are against J.P. Morgan Securities, LLC, and RBS Securities, Inc. and involve damages in excess of $800 million. The NCUA said its officials also are discussing losses with a number of other sellers, issuers and underwriters and if they are unable to reach reasonable settlements on behalf of the liquidated credit unions with these additional parties, the agency will likely bring additional lawsuits. Those suits could bring the request for damages into the billions. The NCUA said the suits are intended to “recover losses from the purchase of securities that caused the failures” of the five, large wholesale credit unions. Those institutions are U.S. Central, Western Corporate, Southwest Corporate, Members United Corporate, and Constitution Corporate. “NCUA has a responsibility to do everything in our power to seek maximum recoveries from those involved in the issuing, underwriting and sale of the faulty securities that resulted in the failures of five of the largest wholesale credit unions. Those who caused the problems in the wholesale credit unions should pay for the losses now being paid by retail credit unions,” said NCUA Chairman Debbie Matz announcing the lawsuits. The NCUA’s suits claim the sellers, issuers and underwriters of the “questionable securities” made numerous material misrepresentations in the offering documents. “These misrepresentations caused the corporate credit unions that bought the notes to believe the risk of loss associated with the investment was minimal, when in fact the risk was substantial. The corporate credit unions invested in mortgage-backed securities that experienced dramatic, unprecedented declines in value, effectively rendering the institutions insolvent,” the NCUA said. The NCUA said any recoveries from these legal actions would reduce the total losses resulting from the failure of the five corporate credit unions and would help to reduce the amount of future corporate credit union stabilization fund assessments on credit unions. Use the resource link to see additional actions the NCUA has taken with the intention of mitigating losses to the credit union system from these corporate failures.

This week in Congress Hearings of interest to CUs

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WASHINGTON (6/21/11)--The U.S. House and Senate are in session this week and there are several hearings on the agenda of interest to credit unions. As noted last week in News Now, on Tuesday the Senate Banking Committee is scheduled to conduct a hearing on “Cybersecurity and Data Protection in the Financial Services Sector.” Kevin Streff, associate professor and director of the Center for Information Assurance at Dakota State University; Leigh Williams, president of BITS, and member of the Financial Services Roundtable; and Marc Rotenberg, president of the Electronic Privacy Information Center, are expected to testify. Also on Tuesday, a Senate Judiciary Committee hearing on "Cybersecurity: Evaluating the Administration's Proposals" is expected to hear testimony from Associate Deputy Attorney General James Baker; Acting Deputy Homeland Security Undersecretary Greg Schaffer of the National Protection and Programs Directorate; and Ari Schwartz, senior Internet policy adviser at the National Institute of Standards and Technology. This week's calendar also shows:
* On Wednesday, the House Small Business Committee is slated to study “The State of Small Business Access to Capital and Credit: The View From Secretary Geithner." As the title of the hearing suggests, U.S. Treasury Secretary Geithner is expected to testify. * Also on Wednesday, the House Financial Services Committee will hold a mark-up a number of bills, including: the Report on the Activity of the Committee on Financial Services for the 112th Congress; H.R.1082, the Small Business Capital Access and Job Preservation Act; and the Burdensome Data Collection Relief Act; * The House Oversight and Government Reform subcommittee on TARP, financial services and the bailout of public and private programs has scheduled a hearing titled “The Changing Role of the FDIC (Federal Deposit Insurance Corporation)." *On Thursday, the Senate Banking Committee will hold Part Two of a hearing on "Reauthorization of the National Flood Insurance Program"; * Also on Thursday, the House Appropriations Committee will markup the Fiscal Year 2012 Financial Services Appropriations Act.

CUNA backs prepay concept but urges key changes

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WASHINGTON (6/21/11)—Reaction from credit unions to the National Credit Union Administration’s (NCUA) voluntary corporate stabilization fund prepayment plan has been mixed, the Credit Union National Association (CUNA) noted in its June 20 comment letter, but CUNA endorsed the concept of prepaid assessments. The deadline for comments to the NCUA on the design of its voluntary prepayment plan ended yesterday. However, that is not the deadline for credit unions to inform the agency of whether or not it will participate, or to what extent. CUNA anticipates that now that the comment period has closed, the agency will take a few weeks to decide on a final plan, which they will announce to credit unions. Credit unions will likely have approximately 40 days after that announcement to tell NCUA whether or not they will commit any funds to the plan. In its comment letter CUNA wrote, “We believe there are several factors that have undermined greater support for the proposal.” Among those factors, CUNA said, is the opinion of some credit unions that the NCUA should have developed such a proposal sooner to avoid having to make decisions on a rushed basis. In addition, CUNA added, there are those credit union officials who would like to pay all remaining assessments now in one year and those who want to spread out those assessments over many years. Further the proposal is complex and not quickly understood, CUNA noted, and said that complexity is an important issue since credit union officials are “very busy in this new era of heightened oversight and continued challenges created by the current economic environment.” “Underlying all these issues is a general feeling of skepticism stemming from the agency’s past communication about the corporate stabilization, its handling of some of the corporate credit unions prior to their conservatorship, examination issues, and overregulation,” CUNA said. Nonetheless, CUNA said it continue to supports the concept of prepaid assessments, and called the agency proposal “a sound and creative approach to address the legitimate needs of credit unions.” CUNA recommended that the NCUA increase the minimum participation threshold for its prepayment plan from $300 million to $1 billion because doing so would increase the amount of possible assessment reduction, thereby making the program more attractive for credit unions. That change, CUNA said, could reduce the amount of assessments charged in 2011 and 2012 to 12 or 13 basis points. CUNA also encouraged the NCUA to allow credit unions of any size to participate in the plan if they wish to do so. To read more on CUNA’s concerns with the prepayment plan, as well its recommendations to make the plan more appealing to credit unions, use the resource link below.

Inside Washington (06/20/2011)

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* ALEXANDRIA, Va. (6/21/11)--The National Credit Union Administration board has scheduled a special closed board meeting for Thursday at 1 p.m. (ET) to consider two supervisory activities. The agenda for the meeting is available online

Inside Washington (06/17/2011)

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* WASHINGTON (6/20/11)--Federal Reserve Chairman Ben Bernanke will appear before the House Financial Services Committee at 10 a.m. (ET) July 13 to deliver the semiannual Monetary Policy Report to the Congress. The Federal Reserve reports to the committee twice a year on the conduct of monetary policy and the state of the economy. The Federal Reserve is primarily responsible for formulating the nation’s monetary policy to maintain economic and price stability and maximum employment … * WASHINGTON (6/20/11)--Sen. Olympia Snowe (R-Maine) called for the Small Business Administration (SBA) to correct processing errors that resulted in millions of dollars in overpayments on loan guarantees in 2007. About 27% of 2007 loan guarantee payments were incorrect, resulting in a total of $234 million in overpayments, according to an inspector general’s report (American Banker June 17). Snowe called on the SBA to develop a standardized process to correct the errors “without delay” during a Senate Small Business Committee hearing on waste and fraud in SBA programs. The SBA is conducting a joint review with the inspector general to determine the exact number of overpayments in 2007, according to SBA administrator Karen Mills. But delays could prevent overpayments from being determined in fiscal year 2010, said SBA Inspector General Peggy Gustafson. Snowe and Sen. Chuck Grassley (R-Iowa) sent a letter Wednesday to the Department of Justice asking why 17 cases of fraud and abuse determined by the SBA inspector general have not been prosecuted … * WASHINGTON (6/20/11)--Fears that Dodd-Frank Act requirements and strict international capital and liquidity rules are driving financial institutions overseas resurfaced during a House Financial Services Committee hearing Thursday. Rep. Shelley Moore Capito (R-W.Va.) expressed concern that the costs related to Dodd-Frank compliance could lead to job losses and damage U.S. standing as a global financial center (American Banker June 17). While there is consensus that capital and liquidity standards were largely inadequate prior to the financial crisis, the impact of raising capital standards under Basel III remains to be seen, said Rep. Jeb Hensarling (R-Texas). Lael Brainard, undersecretary of the Treasury for international affairs, said the U.S. is still moving from a position of strength and the rest of world would follow the higher standards …

Tenn. individual banned from CU work

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ALEXANDRIA, Va. (6/20/11)--A former employee of Fort Campbell FCU, Clarksville, Tenn., has been banned by the National Credit Union Administration (NCUA) from an future participation in the affairs of any federally insured financial institutions. The NCUA Friday announced a prohibition order against Aimee Rattiff, who, the NCUA noted, was convicted of theft of property. Rattiff was sentenced to probation, ordered to perform 150 hours of public service work and to pay $4,200 in restitution. Violation of a prohibition order is a felony offense punishable by imprisonment and a fine of up to $1 million. Back in 2008, a Fort Campbell car loan program designed to finance cars for soldiers and their families was defrauded by 11 individuals who pleaded guilty to fraudulently obtaining almost $84,000 in car loans. The fraud reportedly involved fake identifications and Social Security numbers, false statements on loan applications, and reporting incorrect amounts of down payments to the auto dealership.

CUNA launches CompBlog today

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WASHINGTON (6/20/11)--“CompBlog,” the Credit Union National Association new compliance issues blog, is being launched today as part of a continuing effort to keep apace with the challenges that face credit unions every day. “Credit union compliance challenges continue to arise at a record pace, and we wanted to move to a format that addresses questions at the same rate of speed,” said Valerie Moss, CUNA’s director of compliance information. CUNA’s CompBlog combines the information that credit unions haverelied on for years in CUNA’s Compliance Challenge with content previously found in its popular “What’s New in Compliance”--and serves it up in a timely delivery format. CUNA published its last monthly Compliance Challenge newsletter last month. “With CompBlog, users have all they need on one site to monitor the latest regulatory developments,” said Moss. “The goal is to make this new site a user-friendly destination that credit union compliance professionals find helpful in their daily quest to stay in compliance with the ever-increasing list federal rules and regulations.” CompBlog readers can send comments and questions to CUNA’s compliance department staff (via cucomply@cuna.com), and keep the conversation going with their peers on COBWEB, CUNA’s popular compliance listserv. “We look forward to comments and suggestions from readers on what we can do to best serve their needs,” said Moss. “Working in close partnership with the leagues, CUNA’s mission remains to provide member credit unions with timely and helpful regulatory compliance information.” Visit CUNA’s CompBlog at www.cuna.org, and click on “Regulations & Compliance.”

CUNA backs NCUSIF reserve level review

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ALEXANDRIA, Va. (6/20/11)—The Credit Union National Association (CUNA) has commended National Credit Union Administration (NCUA) board member Gigi Hyland’s suggestion that the agency consider lowering the reserve levels of its National Credit Union Share Insurance Fund. CUNA suggested that any money that is no longer needed for NCUSIF reserve purposes should be transferred to the agency’s Temporary Corporate Credit Union Stabilization Fund. Doing so would reduce corporate assessments that are charged to credit unions, CUNA added. Hyland raised the issue during Friday’s NCUA June open board meeting. The NCUSIF reserves currently stand at $1.2 billion. The NCUA’s Office of Examination and Insurance is currently analyzing the NCUSIF’s reserve levels, and that will complete that analysis by the end of June. The monthly insurance fund report, which was released during Friday’s meeting, noted that the TCCUSF brought in $7.5 million in earned revenues and $447,850 in operating expenses during May, resulting in a surplus of more than $7 million. CAMEL Code credit unions accounted for 22% of total insured shares during May, and the NCUA reported that there were 377 CAMEL 4 and 5 credit unions and 1,791 CAMEL 3 credit unions. CAMEL 4 and 5 credit unions held $36 billion in shares and CAMEL 3 credit unions held $130 billion in shares during that month. For more on the NCUA board meeting, use the resource link.

NCUA may alter CU derivative investment rules

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ALEXANDRIA, Va. (6/20/11)--The National Credit Union Administration (NCUA) is considering broadening rules that allow certain credit unions to hedge interest rates by investing in some forms of derivatives, and is accepting public comment on this action. The agency currently allows only institutions that were approved under its own investment pilot program that was established in 1999 to take part in derivatives transactions. These transactions typically involve interest rate swaps and caps to hedge interest rate risk on fixed-rate investments such as mortgages. Using interest rate swaps and caps in this manner can effectively convert a fixed-rate loan into a variable-rate loan for the duration of the swap or cap contract. The NCUA is accepting comment on whether it should consider allowing credit unions to be approved to use derivatives -- such as interest-rate swaps -- on a case-by-case basis, allowing credit unions to invest via third parties, or invest independently in derivatives. The agency is also considering canceling its existing credit union derivatives investment program altogether. Comments on how best to regulate any credit union derivative activity will also be accepted. Under the NCUA’s pilot investment program, credit unions that invest in derivatives must have a minimum net worth ratio of 7% and to have positive earnings for the past 12 months. Eligible credit unions must also review each transaction before it is made, and affirm that the transaction is being made to address interest rate risk only. Periodic reviews of the status of the investment, and the credit unions own financials, are also required. A credit union must also ensure that its own accounting policies and procedures are suitable for derivative transactions before it may proceed. The agency also requires specific internal controls. The NCUA will accept comment on its advanced notice of proposed rulemaking for 60 days after it is published in the Federal Register. The recently issued “golden parachute” prohibition was also addressed during the meeting, with the NCUA issuing a technical change that specifies that 457(b) tax free deferred compensation plans, but not other types of 457 plans, are among employee payment options that are protected from regulator scrutiny. The agency noted, however that other types of 457 plans, such as 457(f) plans, can often fall within a different exemption depending on the applicable facts and circumstances. The prohibition, which prevents credit unions from offering high value payments to departing executives of troubled credit unions, does not apply to qualified pension plans, "bona fide" deferred compensation, and some other types of employee benefits and severance agreements. The NCUA also made final rules that will permit federal credit unions to use "statistically valid" random samples of member income data to prove their low-income status to the agency. The low-income and golden parachute releases will remain out for public comment for 30 days. For more on the NCUA meeting, use the resource links.

Matz MBL cap lift increases CU safety soundness

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WASHINGTON (6/17/11)—Raising the “artificially low” credit union member business lending (MBL) cap, which stands at 12.25% of assets, would increase the safety and soundness of credit unions by helping them diversify their portfolios and reducing risk concentrations, National Credit Union Administration (NCUA) Chairman Debbie Matz said during Thursday testimony before the Senate Banking Committee. The NCUA chairman testified before a committee hearing on S. 509, a bill that would increase the credit union member business lending cap to 27.5% of assets. Credit Union National Association President/CEO Bill Cheney and other credit union and bank representatives also testified during the hearing. The relatively small size of credit union business loans, and the agency’s strong underwriting standards, significantly ease any safety and soundness concerns that would accompany increased business lending authority, Matz added. The NCUA leader said that 2,200 credit unions are active in the business lending market, and only one of those credit unions failed due to issues with its business lending practices. Overall, business lending delinquencies at credit unions have declined during the last quarter, and delinquent loans held by credit unions do not always result in losses if the loans are well collateralized. It’s part of the NCUA’s job to ensure that credit unions are backing their loans with the needed collateral to avoid significant issues, Matz said. She added that the agency will make sure that credit unions that are starting up new business lending programs or are expanding their existing programs do so prudently. Matz said that her agency would soon issue a draft rule for comment on changes to its MBL regulations. The proposal will, she said, “clarify and revise a number of current provisions.” However, she urged the banking panel to increase the MBL cap for credit unions to allow small businesses to obtain “reasonably priced loans.” If legislative changes increase the current cap on member business lending, Matz indicated that NCUA would move swiftly to amend its rules and vigorously supervise the law’s implementation. For more on the hearing, use the resource links.

Cheney to Congress CUs will help those ignored by banks

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WASHINGTON (6/17/11)--As small business owners continue to be turned away by banks when they come in search of a loan, credit unions stand ready to pick up the slack and provide small businesses access to much needed credit without putting taxpayer funds at risk, Credit Union National Association (CUNA) President/CEO Bill Cheney said at a Senate Banking Committee hearing yesterday.
Click for slide show At the Thursday Senate Banking Committee hearing on a bill to increase member business lending (MBL) authority for credit unions, CUNA President/CEO Bill Cheney both made the credit union case in favor of helping the economy by providing more credit to the nation’s small businesses through a higher MBL cap and warded off banker attacks against the change. (CUNA Photo)
Cheney’s remarks were made at Thursday’s hearing on S. 509, legislation that would expand credit union business lending authority to 27.5% of total assets. Cheney, National Credit Union Administration (NCUA) Chairman Debbie Matz, and other credit union and bank representatives testified during the hearing. In a Thursday letter sent to all senators after the hearing, Cheney said it is disturbing that bankers seem more concerned with keeping credit unions from lending to small businesses than with helping small businesses themselves. Cheney during his testimony said that bank loans to businesses have fallen by 4% since March, while credit union business lending has increased by 5% during that same time period, he said. Banks have remained reticent to lend in spite of the federal government’s gifting them with $30 billion in taxpayer-funded small business lending incentives. Cheney contrasted the MBL cap lift proposal with these recent government-backed actions, saying that the cap lift is “a job creation proposal that would not cost the taxpayers a dime and would not increase the size of government.” While credit union business lending has been a major growth area, “credit unions have expanded their member business lending portfolios carefully and prudently,” Cheney added. The CUNA CEO said that the cap lift is a necessary change for smaller credit unions to become more involved in business lending. The additional income will allow credit unions that otherwise would not have participated in business lending to bring in personnel with business lending expertise and to establish the procedures, safeguards, and internal controls needed to run a business lending program, he added. “The cap is a reason that so few credit unions do business lending,” he added. CUNA has estimated that lifting the cap would inject $13 billion in funds into the economy, creating over 140,000 new jobs. S. 509 had 19 co-sponsors at press time, including Senate Majority Leader Harry Reid (D-Nev.). Fellow co-sponsor Sen. Charles Schumer (D-N.Y.), in a statement submitted for the hearing record, called the cap lift a “commonsense way to immediately increase the amount of credit available to small businesses.” A House version of MBL cap lift legislation was introduced earlier this year by Reps. Ed Royce (R-Calif.) and Carolyn McCarthy (D-N.Y.), and that bill has 38 total co-sponsors. The Competitive Enterprise Institute’s John Berlau and the Heartland Institute’s Eli Lehrer also called the MBL cap lift bills “a step in the right direction,” adding that “current rules preventing credit unions from lending more than 12.25% of their assets to businesses make no sense.” For more on the hearing and CUNA’s letter to Congress, use the resource links.

Final NCUA NGN offering nets 2.2B

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ALEXANDRIA, Va. (6/17/11)--The National Credit Union Administration (NCUA) sale of NCUA Guaranteed Notes (NGNs), which was completed this week, netted a total of $50.5 billion to fund the resolution of troubled corporate credit unions. The first of the agency’s 13 NGN offerings was closed in October of 2010 and brought in around $3.8 billion in income. The agency announced yesterday that the last of the offerings was released on June 6 and brought in $2.21 billion in proceeds. The NGNs were comprised of $50 billion of legacy assets held by the NCUA. Those legacy assets are primarily of private label, residential mortgage-backed securities that were significantly devalued during the turmoil in the overall mortgage market. A total of $35 billion of those assets were reissued as NGNs and sold on the open market. NCUA Chairman Debbie Matz said that the securitization program “was hugely successful in helping to manage the problem assets of failed corporate credit unions. It was a cost-effective method for funding the legacy assets owned by the corporate credit unions, ensuring the system as a whole endured.” The NCUA amended its definition of low-risk assets to allow credit unions to invest in NGNs, and these investments received a zero risk weight due to their federal government backing. For the full NCUA release, use the resource link.

Financial data protection gets House Senate committee attention

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WASHINGTON (6/17/11)--“Cybersecurity and Data Protection in the Financial Sector” is the title of a newly posted hearing on the June 21 agenda of the Senate Banking Committee. Scheduled witnesses include Kevin Streff, associate professor and director of the Center for Information Assurance, Dakota State University; Leigh Williams, BITS president, The Financial Services Roundtable; and Marc Rotenberg, president, Electronic Privacy Information Center. Additional witnesses may be announced. Also on the calendar, the House Financial Services Committee has scheduled a field hearing June 29 at the National Computer Forensics Institute in Alabama to take a close look at cybercrimes. The committee’s chairman, Rep. Spencer Bachus (R-Ala.), said in an announcement that a recent series of high-profile cyberattacks, such as one in which the CIA fell victim, should “serve as a major wakeup call for our country.” “Cybercriminals here at home and abroad are constantly trying to discover and exploit weaknesses in our security, both on a national level and a personal level. The committee’s hearing at the National Computer Forensics Institute could not come at a more appropriate time as the frequency of these attacks appears to be growing.” Other recent cyberattacks noted by Bachus include hacking incidents at the International Monetary Fund, the European Union’s headquarters, Citigroup, Sony Corp., Lockheed Martin Corp., RSA Security, the U.S. Senate and Nintendo Co. The committee’s field hearing at the National Computer Forensics Institute will examine the threat hackers pose to individuals, businesses and financial institutions; the methods hackers employ; and ways law enforcement has been able to foil hackers and solve cyber crimes. Earlier this week, the Secure and Fortify Data Act, intended to establish uniform nationwide standards for data security and data breach notification, was discussed during a hearing conducted by the House Energy and Commerce subcommittee on commerce, manufacturing and trade.

Inside Washington (06/16/2011)

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* WASHINGTON (6/17/11)--The National Credit Union Administration (NCUA) has issued an alert for fraudulent corporate checks drawn on Consumer FCU, Greenville, Tenn. The credit union has advised this is a Nigerian check cashing scam. Consumer FCU did not suffer any losses and there is an ongoing investigation. For more information, contact Michael Veksler at 718/266-2204. Additional information on fraudulent schemes can be found on NCUA’s website ... * WASHINGTON (6/17/11)--The Federal Reserve will pay close attention to how it determines whether large U.S. banks can pay dividends to shareholders, a top Fed official said Wednesday. The central bank will carefully monitor capital distributions going forward, and expects bank boards and senior management do the same, Patrick Parkinson, director of the division of banking supervision and regulation for the Fed, said in a speech to the Exchequer Luncheon (American Banker June 16). Before the financial crisis, the Fed and other regulators did not pay close enough attention to bank distribution activities, Parkinson said. Last week the Fed issued a proposal that would require banks with more than $50 billion of assets to submit an annual capital plan … * WASHINGTON (6/17/11)--Oversight of banks with more than $10 billion in assets by the Consumer Financial Protection Bureau (CFPB) will start as planned July 21, Steven Antonakes, the top bank supervisor at the bureau, said Wednesday. Antonakes will oversee 111 credit unions, banks, and thrifts--about $10 trillion, or 80% of U.S. banking assets, Bloomberg June 16). The CFPB will conduct four- to 12-week examinations, depending on the size and complexity of the institution. If an exam is clean, a financial institution likely won’t hear from the bureau for two years, said Antonakes, who spoke at a conference of the American Bankers Association in Washington. Financial institutions with issues found on exams can expect closer monitoring. Financial institutions with more than $100 billion in assets will be subject to stronger supervision, particularly banks involved in consumer finance. The CFPB won’t gain the full authority granted by the Dodd-Frank Act until it has a Senate-confirmed director. President Barack Obama has yet to select a nominee … * WASHINGTON (6/17/11)--U.S. Sen. Robert Menendez (D-N.J.) on Wednesday called for an investigation of Citigroup’s recent data breach. In a letter to the acting head of the Office of the Comptroller of the Currency (OCC) John Walsh, Menendez emphasized the importance of investigating the matter, given the implications it has for the security of the financial industry and Citigroup’s failure to immediately notify customers of the security breach. “As Citigroup’s primary regulator with jurisdiction for data security issues, I hope that you also believe this to be unacceptable for consumers,” Menendez wrote in the letter. “Reportedly, customer and account information, including card numbers and e-mail addresses, were viewed during this breach. Obviously, the implications of this, combined with the lengthy delay, are troubling,” he said. Citibank said Wednesday about 360,000 credit cards were affected by the attack, nearly double the amount previously indicated (The Wall Street Journal June 16) …

NEW Matz asks Senate panel to increase MBL cap

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WASHINGTON (UPDATE 6/16/11, 10:20 a.m. (ET)--National Credit Union Administration (NCUA) Chairman Debbie Matz, testifying now in front of the Senate Banking Committee on credit union member business lending, says her agency will soon issue a draft rule for comment on changes to its MBL regulations. The proposal will, she said, “clarify and revise a number of current provisions.” However, she urged the banking panel to increase the MBL cap for credit unions to allow small businesses to obtain “reasonably priced loans.” In her written testimony, Matz noted:
* Today, credit unions have more than 167,000 outstanding loans to businesses, and statistics suggest that credit unions serve a small but important segment of the marketplace; * Approximately 2200 credit unions hold member business loans, up 10 percent since 2006; * Eighty-three percent of MBLs are secured by real estate; * The average size of an MBL is $223,000; and * While nearly 30% of credit unions underwrite business loans, these loans comprise just 1% percent of all commercial lending.
MBL averages range from $17,000 for unsecured lines of credit, to $680,000 for construction and development loans. Matz noted. In 2010, credit unions granted or purchased $12.1 billion in MBLs, and another $3.1 billion were added in the first quarter of 2011. If legislative changes increase the current cap on member business lending, Matz indicated that NCUA would move swiftly to amend its rules and vigorously supervise the law’s implementation. Answering lawmakers' questions now, Matz underscores credit unions' favorable delinquency rates and the positive safety and soundness record associated with such credit union loans.

NCUA announces July CU workshops roundtables

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ALEXANDRIA, Va. (6/16/11)—The National Credit Union Administration's (NCUA's) Office of Small Credit Union Initiatives has scheduled a series of credit union workshops for July. The workshops will focus on:
* Issues facing credit unions; * NCUA--Consumer Protection Office--What It Means To You; * Duties of federal credit union boards of directors (NCUA Regulations 701.4); * Basic financial literacy requirements; * Due diligence and evaluating payment system service providers; and * Examination issues.
Little Rock, Ark., will host the first July credit union roundtable on July 8, with workshops following in New Orleans, La., on July 9; Louisville, Ky., on July 14; Tampa, Fla., on July 22; and Albany, N.Y., on July 23. The agency also announced a workshop will take place on June 22 in Erie, Pa. Additional roundtables and workshops are scheduled through November. Use the resource link for registration information.

More MBLs mean stronger economy CUNA will testify

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WASHINGTON (6/16/11)--Credit Union National Association (CUNA) President/CEO Bill Cheney today will urge members of the Senate Banking Committee to let credit unions help small businesses and the larger American economy by lifting the credit union member business lending cap. The committee hearing, which is scheduled to start at 10 a.m. ET, will focus on Sen. Mark Udall’s S. 509. That bill would lift the MBL cap from 12.25% of assets to 27.5% of total assets. Lifting the cap would inject $13 billion in funds into the economy, creating over 140,000 new jobs, CUNA has estimated. Increasing credit union MBL authority will give small businesses greater affordable financing options, and will offer funding to the small businesses that have all too frequently been turned down by banks. Also, Cheney is expected to note that increasing credit union lending will not only aid economic growth, it will help credit unions increase their earnings, capital contributions, and safety and soundness by allowing them to shift their assets from low-yielding investments into higher-yielding member business loans. The list of S. 509 cosponsors recently grew to 19 with the early June addition of Senate Majority Leader Harry Reid (D-Nev.). Similar legislation introduced last year had 15 co-sponsors, but the yearly Senate calendar ended before it could come up for a final vote. A House version of MBL cap lift legislation was introduced earlier this year by Reps. Ed Royce (R-Calif.) and Carolyn McCarthy (D-N.Y.). The House legislation, known as the Small Business Lending Enhancement Act, has 36 additional cosponsors. For more on the hearing, use the resource link.

Data security scrutiny returns to Congress

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WASHINGTON (6/16/11)--The Secure and Fortify (SAFE) Data Act, which would establish uniform nationwide standards for data security and data breach notification, was discussed during a Wednesday House Energy and Commerce subcommittee on commerce, manufacturing and trade hearing. Subcommittee chairwoman Mary Bono Mack (R-Calif.) introduced a discussion draft of the legislation earlier this week. The bill would require entities that are impacted by a security breach to alert the Federal Trade Commission (FTC) and consumers of the issue. This alert would need to be provided within 48 hours after the issue has been dealt with and the scope of the breach has been determined. The FTC could impose civil penalties against entities that do not comply with this timeline. In opening statements delivered on Wednesday, Bono Mack said that electronic commerce “is a vital and growing part” of the U.S. economy, and said that Congress “should take steps to embrace and protect it,” starting with “robust cyber security.” The subcommittee chairwoman added that the legislation builds on a bill that passed the House in 2009, but was never taken up by the Senate. The Credit Union National Association at that time supported allowing financial institutions to charge retailers for any costs incurred by the financial institution that is forced to notify its accountholders following a data breach, and encouraged legislators to allow financial institutions to disclose the source of the breach or loss to affected accountholders. Doing so would allow credit unions and other financial institutions to inform affected individuals while continuing to protect their own reputations. For more on the hearing, use the resource link.

Inside Washington (06/15/2011)

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* WASHINGTON (6/16/11)--Senate Democrats are calling on the Office of the Comptroller of the Currency (OCC) to take a tougher approach with bank foreclosure practices. Twelve senators sent a letter to Acting Comptroller of the Currency John Walsh Tuesday urging him to enact strict regulations for mortgage servicers. The letter called on the OCC to work with other federal and state officials to develop a comprehensive fix to problems in banks’ home-foreclosure practices. “We urge you to take every opportunity to ensure that servicers not only account for past harms, but also take steps to prevent future servicing deficiencies so that homeowners going forward are treated fairly,” the letter said. The lawmakers also asked the OCC to consider servicing standards proposed by state attorneys general and to incorporate legislation that will improve the foreclosure process and help more homeowners avoid foreclosure… * WASHINGTON (6/16/11)—The Consumer Financial Protection Bureau (CFPB) has hired Christopher C. Haspel, director of the monitoring division at the Government National Mortgage Association, though Haspel’s role at the bureau has not been defined (American Banker June 15). At Ginnie Mae, Haspel was responsible for servicing and securitization. He previously worked at BlackRock Inc., General Electric Co., Capital One Financial Corp. and Fannie Mae. The CFPB has hired about 220 people, with plans to double that number within two months … * WASHINGTON (6/16/11)--Whether the Dodd-Frank Act adequately addressed the “too big to fail” issue will not likely be determined until the next financial crisis. During a house Financial Services Committee hearing Tuesday, lawmakers argued over several issues that have yet to be determined by the market, such as which institutions are systemically significant and how regulators will supervise such firms (American Banker June 15). Success will depend on the market’s perception of how effective the Treasury Department is in handling systemically significant institutions, said Christy Romero, the acting special inspector general for the Troubled Asset Relief Program. Mandatory living wills for the biggest institutions and new powers granted to the Federal Deposit Insurance Corp., will stop the government from bailing out large banks again, Democrats said. But by identifying systemically important firms, Dodd-Frank has made “too big to fail” more clear, rather than eliminating it, Republicans countered …

NCUA CUs may invest in insurance agencies as CUSOs

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WASHINGTON (6/15/11)--Federal credit unions may purchase or invest in an insurance agency as a credit union service organization (CUSO) provided the insurance agency primarily serves credit unions, their members, or the membership of credit unions that are under contract with the agency. The insurance agency also could engage only in activities “related to the routine daily operations of credit unions.” These comments were made in a National Credit Union Administration (NCUA) legal opinion letter by NCUA Associate General Counsel Hattie Ulan. Ulan in the letter responded to a question from Sharon Henderson of McGuire Woods LLP, Jacksonville, Fla. Insurance sales, vehicle warranty services, group purchasing programs, and real estate settlement services are among the list of permissible activities, according to the NCUA. The NCUA added that credit unions must assess the number of credit union affiliated members that the insurance agency serves and the amount of revenues that the agency derives from credit union members. The number of insurance policies that have been sold to members, and the general accessibility of services for credit union members must also be determined before a credit union can invest, according to the NCUA. Credit unions “must vigilantly reassess” these customer base requirements “on a constant basis,” the NCUA added. The agency said that failure to adhere to these standards “could easily lead to safety and soundness problems” for credit unions, and could potentially threaten the National Credit Union Share Insurance Fund. The NCUA said that credit unions “have the authority to invest up to 1% of their paid-in and unimpaired capital and surplus in CUSOs structured as a corporation, limited liability company, or limited partnership.” For the full letter, use the resource link.

CFPB notes commitment to discussing CU concerns

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WASHINGTON (6/15/11)--The Consumer Financial Protection Bureau (CFPB) this week said it is “committed to remaining attentive” to the concerns of credit unions and other small financial institutions, and looks forward to addressing the concerns of credit unions and community banks throughout the development of CFPB priorities. CFPB Assistant Director for Community Banks and Credit Unions Elizabeth Vale made the remarks in a a CFPPB blog post, which follows a late May meeting with credit union representatives. Credit Union National Association (CUNA) Deputy General Counsel Mary Dunn and CUNA Senior Assistant General Counsel Michael Edwards were among those attending the meeting, and the CFPB said that this meeting led “to valuable, specific insights on what mortgage information works best for consumers.” The CFPB added that it “wanted to make sure individuals from credit unions and community banks were heard from alongside the consumers they serve and other stakeholders.” A mortgage form that combines the disclosure requirements outlined in the Truth in Lending Act (TILA) and the Real Estate Settlement Procedures Act (RESPA) into a single page, two-sided disclosure is under CFPB development. The CFPB released a sample form earlier this year, and more refined versions of this sample form will be released as that agency works toward a July 2012 implementation date for a final version of the form. CUNA and credit union representatives will again meet with the CFPB when it releases an updated mortgage disclosure proposal later this month. Regulations addressing lending, savings, and consumer privacy will also be reworked by the CFPB when a number of finance industry oversight tasks are moved from the Federal Reserve, the National Credit Union Administration, the Federal Deposit Insurance Corp., and other regulators next month. The Equal Credit Opportunity Act and the Fair Credit Reporting Act, as well as regulations addressing electronic fund transfers, mortgage originator registration, and mortgage assistance relief services, are also no the CFPB’s regulatory agenda. A total of 47 rules are scheduled to come under the CFPB’s oversight in late July. For the CFPB blog post, and more on upcoming CFPB actions, use the resource link.

Inside Washington (06/14/2011)

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* WASHINGTON (6/15/11)--Big banks will be required to follow the same minimum capital requirements as all other depository institutions under a final rule passed by the Federal Deposit Insurance Corp. (FDIC) board of directors Tuesday. The rule is part of an amendment proposed by U.S. Sen. Susan Collins (R-Maine) to the Dodd-Frank Act. It prevents banks from taking the Basel II “advanced approach” of holding less capital than smaller domestic institutions. Basel II requires banks to use a system in which capital levels could fluctuate. The amendment ensures that even under Basel II, U.S. banks could never reduce their capital below the traditional levels used by domestic regulators for other institutions. The regulation will be issued jointly by the FDIC, Federal Reserve Board and Office of the Comptroller of the Currency …

NCUA makes 1.74M available for small CU assistance

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ALEXANDRIA, Va. (6/15/11)--The National Credit Union Administration (NCUA) will make $1.74 million in funds available to low-income credit unions during the 2011 edition of its Community Development Revolving Loan Fund (CDRLF) Technical Assistance Initiative. The initiative aims to help low-income credit unions “improve the quality and quantity of financial services to their members,” and NCUA Chairman Debbie Matz in a release strongly encouraged all low-income designated credit unions “to consider the advantages of CDRLF programs and apply for technical assistance.” Congress appropriated $1.25 million in funds to this CDRLF initiative in 2010. $1.25 million was also appropriated by Congress for this 2011, and the NCUA elected to add about $500,000 of its own CDRLF money. Matz said that the funding was increased for 2011 due to heightened demand last year. Matz in the release paid particular attention to the agency’s Financial Education and Financial Literacy in Schools Initiative, noting that funds from that initiative could be used to reimburse credit unions “for collaborative functions with schools, community organizations, and other financial institutions to broaden the delivery of financial literacy and financial education training.” Matz added that the maximum allocation for the NCUA’s Urgent Needs Initiative, which covers expenses incurred during natural disasters or other unexpected events, has been increased to $7,500. The maximum allocation in 2010 was $5,000. A total of $400,000 is being made available for these requests. Up to $400,000 will be made available for credit unions that wish to build their internal capacity, and $600,000 in CDRLF funds will be evenly split between volunteer income tax assistance, internships and job creation, and staff training initiatives. $300,000 will be available for community outreach and partnerships. The Credit Union National Association (CUNA) supports the CDRLF program, and has said that increasing CDRLF funding “will enhance the growth and long-term viability of credit unions in underserved and low-income communities.” For the NCUA's letter to credit unions and background information on the CDRLF program, use the resource links.

CUNA delves into corporate fund prepayment issues

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WASHINGTON (6/14/11)--The National Credit Union Administration (NCUA) continues to evaluate credit union interest in its proposal to allow credit unions to prepay some of their corporate credit union stabilization fund assessments, and NCUA Deputy Director Larry Fazio on Monday said that whether or not a given credit union participates in the plan would not affect its NCUA examination or treatment by examiners Fazio made his remarks during a Monday Credit Union National Association (CUNA) audio conference on the agency’s voluntary corporate prepayment plan. CUNA President/CEO Bill Cheney, Chief Economist Bill Hampel, and Deputy General Counsel Mary Dunn led the discussion during the call. Fazio said that the prepayment plan, which would allow most credit unions to voluntarily prepay up to 36 basis points (bp) of their corporate stabilization assessments, was specifically created due to heavy credit union interest. CUNA had also encouraged the NCUA to create such a plan. The majority of credit unions are divided into two camps, according to the NCUA deputy director: Some that want to pay of the corporate stabilization costs as soon as possible, and some that wish to spread out repayment over a longer time period. Even so, he added, there are surely others who are in the middle. The panelists noted that it is up to individual credit unions to analyze their own financial plans and decide if they wish to participate, and Fazio said that those that wish to comment on the plan must do so by June 20. Comments should be directed to regcomments@ncua.gov. To participate, a credit union would need to advance the minimum amount of $10,000 , and the NCUA said it would not move forward with the plan if credit unions do not commit at least a total of $300 million in funds to the proposal. The prepayment plan would generate $2.8 billion in funds if all eligible credit unions contributed the maximum amount, which is 36 basis points of insured shares as of the March 31, 2011 Call Report. The NCUA has recently said that about 6,023 credit unions would be able to take part in the plan. If the NCUA does not move forward with the prepaid assessment plan, the regular assessment, which will be about 25 bp, would likely be assessed in July, Fazio said. With sufficient participation in the voluntary plan, the 2011 and 2012 assessments would be in the low teens, followed by assessments of 10 bp in 2013 and less in the following years until the Corporate CU Stabilization Fund is retired. The NCUA would process a direct debit to a credit union’s account in August for the prepayment, if the agency’s plan is approved. Then, all credit unions’ regular assessment for this year would be due in August if the prepaid assessment proposal is adopted. The prepayment plan would not have a material impact on the total amount of assessments to be paid over the life of the stabilization fund. Instead, its purpose is to avoid the front loading of much of the assessment expenses and to even out assessments for subsequent years of the life of the Corporate Credit Union Stabilization Fund. The reduction of assessments in the first two years of the stabilization fund’s life would be particularly beneficial to credit unions currently close to PCA capital ratio thresholds. The prepayment funds would be passed on to the acquiring credit union in the event of a merger, would be used to pay out creditors in the event of a liquidation, and would be repaid when the stabilization fund is fully paid off in the event of a credit union to bank charter conversion. An archived version of the audio conference should be available by Wednesday.

CU small business work gets positive reviews

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WASHINGTON (6/14/11)--Ahead of a Thursday Senate Banking Committee hearing on lifting the credit union member business lending cap, credit unions, and their work with small businesses, are receiving positive buzz in the blogosphere. A small business blog sponsored by financial software firm Intuit last week noted that while “banks are holding on tight to their cash” and “making fewer loans,” credit unions “are becoming more obliging to small businesses” and increasing their small business lending. In the blog post, Henry Kertman of the California and Nevada Credit Union Leagues pointed out that the average credit union business loan is approximately $220,000. “And when a credit union lends to one of its business-owning members, that money stays in the community the credit union serves, and helps employ area residents,” he added. David Donovan, vice president of commercial services at USC CU in Los Angeles, Calif., emphasized credit unions’ exemplary service: “We don’t look at you in terms of the size of your loan, we look at you as a member,” he said. Credit unions would do even more to work with their small business-owning members if the MBL cap, which stands at 12.25% of total assets, is lifted to 27.5% of assets. Legislation that would lift the cap is the centerpiece of Thursday’s hearing, and blogger Eli Lehrer wrote on FrumForum.com that Sen. Mark Udall’s S. 509 “offers policies that should warm every free-marketer’s heart. “By sweeping aside some dated regulations, it will free up much-needed business credit and create thousands of jobs without costing the United States Treasury a dime,” Lehrer added. The MBL hearing is not the only credit union-related action on Capitol Hill this week. A House Energy and Commerce subcommittee will study consumer data protections during another Wednesday hearing. Consumer data breaches were a top legislative priority before the economic crisis, and recent breaches that affected Sony Playstation Network users and Michael’s Stores shoppers have helped to bring renewed attention to the issue. Also on Wednesday financial industry safety and soundness enhancements will be discussed during a Senate Banking Committee financial institutions subcommittee hearing. The House Appropriations Committee’s subcommittee on financial institutions will markup the fiscal year 2012 appropriations bills for agencies under its jurisdiction on Thursday, and the House Small Business Committee economic growth subcommittee will examine the Dodd-Frank Act’s impact on small business lending that same day. The Senate Small Business Committee will also examine ways to address fraud and inefficiency in various U.S. Small Business Administration programs during a Thursday hearing. To read the pro-MBL blog posts, and more on Thursday’s MBL hearing, use the resource links.

Fed acts on disclosure trigger lease threshold

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WASHINGTON (6/14/11)--The Federal Reserve Board Monday published its annual adjustment to the amount of fees that triggers additional disclosure requirements under the Truth in Lending Act and the Home Ownership and Equity Protection Act for home mortgage loans that bear rates or fees above a certain amount. The agency also adjusted Regulation Z (Truth in Lending) and Regulation M (Consumer Leasing) by increasing the dollar threshold for exempt consumer credit and lease transactions to $50,000--as required under the Dodd-Frank Wall Street Reform Act--up from $25,000, effective on July 21. Beginning on January 1, 2012, these thresholds will be adjusted for inflation to $51,800. Transactions at or below the new threshold are subject to the protections of the regulations. Regarding the mortgage disclosures, the dollar amount of the fee-based disclosure trigger has been adjusted to $611 for 2012 based on the annual percentage change reflected in the consumer price index that was in effect as of June 1. The adjustment becomes effective Jan. 1, 2012. The Home Ownership and Equity Protection Act restricts credit terms such as balloon payments and requires additional disclosures when total points and fees payable by the consumer exceed the fee-based trigger or 8% of the total loan amount, whichever is larger. Use the resource links to read more about the Fed’s actions.

TCULs Gill hired as NCUA strategic advisor

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ALEXANDRIA, Va. (6/14/11)--On July 5, after serving seven years as the chief advocacy officer and senior vice president of the Texas Credit Union League (TCUL), James H. “Buddy” Gill, III, will become the National Credit Union Administration’s (NCUA) new senior strategic communications and external relations advisor. In announcing Gill’s addition to her staff, NCUA Chairman Debbie Matz noted Gill’s nearly fifteen years’ experience working directly with credit unions of “all sizes, industry trade groups, federal and state lawmakers, policymakers, the media, and other industry stakeholders” on credit union issues. “His keen strategic sense, communication abilities, and credit union legislative successes are well known and respected nationally. Buddy can hit the ground running at NCUA,” the chairman said. In his new post, Gill will work closely with the chairman and the NCUA’s Public and Congressional Affairs team. Also, Matz said Gill will serve as a liaison between the agency and the credit union industry, as well as related stakeholders, on issues such as how regulations are working at the credit union level, and how the NCUA can better help credit unions serve their members. Credit Union National Association (CUNA) Deputy General Counsel Mary Dunn said CUNA looks forward to working with Gill when he joins the agency in July. She said the new liaison position between the agency and stakeholders, through which the NCUA could gain more insight about regulatory burden, could be valuable to credit unions.

NCUA offers financial statement training for CUs

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ALEXANDRIA, Va. (6/14/11)--Learning materials related to income statements, statements of cash flow, and balance sheets will be provided by a new National Credit Union Administration (NCUA)-produced online financial literacy training program. The NCUA training session will cost $15 and will take one hour to complete, the agency said. NCUA Chairman Debbie Matz in a release said that “the key measure of any credit union’s success or failure is its financial statements,” and added that the NCUA’s training will help volunteer directors acquire the skills needed to “meaningfully participate in the control of the credit union.” The NCUA late last year established a new set of financial literacy guidelines for federal credit union directors which held that those directors should have the ability to examine their credit union's balance sheet and understand specific financial activities that their credit union takes part in. The NCUA will not test individual directors to assess their financial literacy, but will examine the training programs that federal credit unions have set up for their directors. The NCUA has specifically said that directors should have complete knowledge of risks, including credit risk, liquidity-related risks, and interest rate, compliance, strategic, transaction, and reputation risks. The agency noted that this level of training “may not be sufficient for larger or more complex federal credit unions” and encouraged credit unions “to develop policies to educate board members in a manner that is appropriate for the size and complexity of their institutions.” CUNA earlier this year suggested that training policies for more complex credit unions should include specifics on more unconventional activities. These credit unions should specifically state that their board will be trained on the financial risks raised by those activities and the steps that the credit union takes to limit and control those risks. For more on the program, use the resource link.

Inside Washington (06/13/2011)

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* WASHINGTON (6/14/11)--President Barack Obama has nominated Martin Gruenberg as the chairman of the Federal Deposit Insurance Corp. (FDIC). Gruenberg has been vice chairman of the FDIC board of cirectors since August 2005. He served as acting chairman from Nov. 15, 2005 to June 26, 2006. In 2007, Gruenberg was named chairman of the executive council and president of the International Association of Deposit Insurers (IADI). Gruenberg joined the FDIC board after broad congressional experience in the financial services and regulatory areas. He served as senior counsel to U.S. Sen. Paul S. Sarbanes (D-Md.) on the staff of the Senate Committee on Banking, Housing, and Urban Affairs from 1993 to 2005 … * WASHINGTON (6/14/11)—A proposal from the Federal Reserve Board will require U.S. bank holding companies with assets of more than $50 billion to submit annual capital plans for review. The Fed expects bankds to have plans for sufficient capital so that they can continue to lend to households and businesses, even under adverse conditions. It would require boards of directors to review and approve capital plans each year before submitting them to the Fed. The proposal seeks to ensure that institutions have capital planning processes that account for risks and that permit continued operations during times of economic and financial stress, the Fed said. It would evaluate plans for capital distributions, such as increasing dividend payments or repurchasing or redeeming stock, as part of the capital plan reviews. In some cases, such as when an institution’s capital plans have been rejected by the Fed, firms would be required to receive approval before making capital distributions … * WASHINGTON (6/14/11)--The Office of the Comptroller of the Currency Monday announced formal enforcement actions against eight national bank mortgage servicers and two third-party servicer providers for unsafe and unsound practices related to residential mortgage loan servicing and foreclosure processing. The eight servicers are Bank of America, Citibank, HSBC, JPMorgan Chase, MetLife Bank, PNC, U.S. Bank and Wells Fargo. The two service providers are Lender Processing Services (LPS) and its subsidiaries DocX LLC, and LPD Default Solutions Inc.; and MERSCORP and its wholly owned subsidiary, Mortgage Electronic Registration Systems, Inc. (MERS). The enforcement actions require the servicers to correct deficiencies that examiners identified in reviews conducted during the fourth quarter of 2010. Servicers must make significant improvements in practices, including communications with borrowers and dual-tracking, which occurs when servicers continue to pursue foreclosure during the loan modification process. Servicers cannot pursue foreclosures once a mortgage has been approved for modification and must establish a single point of contact for borrowers throughout the loan modification and foreclosure processes. The actions also require servicers to establish robust oversight and controls with third-party vendors, including outside legal counsel, that provide default management or foreclosure services …

Todays audio call to discuss possible improvements to corporate prepayment plan

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WASHINGTON (6/13/11)—During today’s free 45-minute audio conference on issues surrounding a proposal to allow credit unions to prepay some of their total assessments to the Temporary Corporate Credit Union Stabilization Fund, Credit Union National Association (CUNA) Deputy General Counsel Mary Dunn will lead a discussion that likely will address possible improvements to the plan. Credit unions can still register for the CUNA 2 p.m. (CT) session that will feature Dunn as moderator and speakers including s on the call will be CUNA President/CEO Bill Cheney, National Credit Union Administration (NCUA) Deputy Director Larry Fazio, and CUNA Chief Economist Bill Hampel. The NCUA proposed the voluntary prepayment plan at its May open board meeting and is accepting public comment through June 20. The NCUA prepayment program could help reduce credit unions' assessment for 2011 substantially, depending on credit unions' participation, and it would help even out assessments for subsequent years, CUNA has noted. CUNA is offering the audio conference to credit union officials who continue to have questions about the proposal, to help address those questions and facilitate credit unions' understanding of the proposal. Much of the 45-minute call will be reserved for questions. Use the resource link to register. For those who cannot participate in the live event, use the second resource link to register for an archived version to be available within 48 hours of the live event.

NCUA places BCT FCU into conservatorship

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ALEXANDRIA, Va. (6/13/11)— BCT FCU, of Binghamton, N.Y., is now operating under National Credit Union Administration (NCUA) management after the agency assumed control Friday. The NCUA will continue normal services to the credit union’s 3,911 members and will work to resolve issues affecting the institution’s safety and soundness. BCT FCU has served New York’s southern tier’s educational community for 67 years. The NCUA said in a release announcing its supervisory action that the decision to conserve a credit union enables the institution to continue regular operations with expert management in place, correcting previous service and operational weaknesses. During conservatorship, members may therefore continue to conduct business at the credit union. The Federal Credit Union Act authorizes the NCUA board to appoint itself conservator when necessary to conserve the assets of a federally insured credit union, protect members’ interests, or protect the federal share insurance fund. BCT is the sixth federally insured credit union placed into conservatorship during 2011.

Cheney to Treasury Aid CU interchange solution search

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WASHINGTON (6/13/11)—No issue is more significant to the credit union system now than a favorable resolution regarding debit card interchange fees, and Credit Union National Association (CUNA) President/CEO Bill Cheney has urged U.S. Treasury Secretary Tim Geithner “to help pursue solutions that will help small issuers without undermining the interchange statute.” Cheney in a letter to Geithner asked the Treasury Secretary to discuss ways to protect credit unions and other small issuers with Federal Reserve Chairman Ben Bernanke, and suggested several ways that the Fed could achieve that goal. Among Cheney’s suggestions are:
*Requiring card networks to report to the Fed once a two-tiered debit interchange fee structure has been established; *Requiring ongoing updates of the status of the two-tiered fee system. These updates could be reported to Congress; *Ensuring that the Fed accounts for all allowable and reasonable costs when it sets the interchange fee rate cap; and *Exempting small issuers from routing and exclusivity provisions, or delaying implementation of those provisions for a minimum of 24 months.
Cheney said that the issue is simple: “Congress provided that the Fed consider interchange costs for large issuers, but directed that debit card interchange income to small issuers be protected. That is unquestionably the outcome that Congress intended when it approved the exemption for small issuers as part of the interchange law.” While interchange implementation delay legislation was narrowly defeated in the Senate last week, Cheney said that the 54 to 45 vote count still shows that senators are skeptical over whether or not the interchange plan would work as intended. Cheney said that credit unions can use the support of these senators “as a tool” to help improve the interchange implementation rule being drafted by the Fed. CUNA is pressing the Fed to help minimize negative effects on credit unions and their members, and also remains active in the courts, joining TCF Financial in litigation that challenges the interchange provisions. (See related story: TCF/Fed oral arguments set for June 16) For the full letter to the Treasury, use the resource link.

Inside Washington (06/10/2011)

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* WASHINGTON (6/13/11)—One credit union was among those to receive a total of nearly $10 million in matching grants for Low Income Taxpayer Clinics in the 2011 Internal Revenue Service (IRS) grant cycle. El Paso Credit Union HOAP, Inc. received a $40,000 grant, according to an IRS release. Through the LITC program, the IRS awards matching grants of up to $100,000 a year to qualifying organizations. For the 2011 grant cycle, the IRS awarded LITC grants to 165 organizations … * WASHINGTON (6/13/11)--The Treasury Department announced Thursday it will deny foreclosure-prevention program incentive payments to mortgage servicers that are not modifying loans according to the administration's guidelines. Treasury has begun to withhold incentive payments from Wells Fargo, Bank of America and JPMorgan Chase until they improve their performance in the Making Home Affordable Program (American Banker June 10). The program aims to reduce monthly mortgage payments for struggling borrowers. Participants receive incentive payments for each mortgage they permanently modify. Participants were assessed in three categories: identifying and contacting homeowners; homeowner evaluation and assistance; and program reporting, management and governance. According to the new assessments, the three banks to be denied incentive payments made substantial errors in determining eligibility for the program, communicating with potentially eligible borrowers and calculating the incentives they are owed … * WASHINGTON (6/13/11)--As regulators wrestle with the definition of a qualified residential mortgage (QRM)-- mortgages that would be exempt from risk retention--Federal Deposit Insurance Corp. Chairman Sheila Bair said Thursday she would eliminate the exemption entirely(American Banker June 10). Regulators proposed a 20% down payment and certain debt-to-income restrictions as the exemption standard. Banks and consumer advocates said restrictions that rigid would only benefit the wealthy and become the new standard for conforming loans. Blair, in remarks to the Council on Foreign Relations, suggested it would be better to do away with a QRM standard and still require a retention rate of 5% …

Derivatives discussion on NCUA agenda

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ALEXANDRIA, Va. (6/13/11)--The National Credit Union Administration has previously indicated that it would consider allowing credit unions to use derivatives to help manage interest rate risks, and an advanced notice of proposed rulemaking seeking comments on this concept is set to be considered at this month’s NCUA open board meeting. This month’s meeting will take place at 10:00 a.m. ET on June 17. The meeting was originally scheduled for Thursday, June 16. The final version of an NCUA proposal that would permit federal credit unions to use "statistically valid" random samples of member income data to prove their low-income status to the agency is also scheduled to be released during the June meeting. This alternative approach would allow credit unions that do not qualify as low-income according to the NCUA’s geocoding software to draw member income data from their own loan files or surveys. This data could then be used to prove a given credit union’s low-income status. CUNA supported this proposal, but encouraged the NCUA to provide credit unions with a more detailed explanation of what should be covered in the narrative and supporting material sections of a credit union’s low-income status application. Current NCUA regulations require a credit union to show actual income data from a minimum of 50% of its membership, plus one additional credit union member as an alternative basis for qualifying as low-income. So-called "golden parachutes" and indemnification payments will return to the NCUA agenda for the second consecutive month, with the agency covering technical corrections to those rules. The NCUA's monthly report on the status of its insurance funds will also be delivered during the meeting. A closed NCUA session will follow the open meeting. A waiver request, personnel issues and supervisory matters will be discussed during the closed meeting. For the full NCUA meeting agenda, use the resource link.

New compliance audio conference offered June 15

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WASHINGTON (6/13/11)--SAFE Act registration, proposed changes to current risk-based pricing regulations, and other compliance issues will be covered during a June 15 audio conference presented by the Credit Union National Association. The audio conference, which will begin at 1:00 p.m. CT, is recommended for credit union and league compliance professionals, credit union management, directors, volunteers or anyone interested in credit union compliance. The cost of registration is $89. CARD Act clarifications, changes to the National Foundation for Consumer Credit’s (NFCC) CARD Act National Locator Line, and related changes to Regulation Z periodic statements, will also be covered. Other topics include Regulation CC changes and coverage of ATM surcharge disclosures. CUNA Director of Compliance Information Valerie Moss, Federal Compliance Counsel Nicole Seabron, and Assistant General Counsel and Senior Compliance Counsel Mike McLain will lead discussion. The audio conference will be archived, and conference registrants will also have access to related archives for six months. For more on the audio conference, use the resource link.

TCF interchange arguments set for June 16

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WASHINGTON (6/13/11)—The next stage of TCF National Bank’s appeal to block the Federal Reserve's implementation of proposed debit card interchange fee cap regulations will take place on June 16, when the U.S. Court of Appeals for the Eighth Circuit hears oral arguments regarding a preliminary injunction. Those arguments will take place at 1:30 p.m. CT in St. Louis, Missouri before a three judge panel. TCF's initial lawsuit, which was filed in October, alleged that the government cannot constitutionally write laws--such as the interchange law--that would arbitrarily prevent a business from recovering its costs sufficiently to avoid losses on its business operations. The suit also included other constitutional arguments. The U.S. District Court for the District of South Dakota in Sioux Falls in April denied TCF's motion for a preliminary injunction, but did not dismiss the case. The Fed has countered TCF’s argument in its own appeals court brief, stating that nothing in TCF’s contract with Visa “guarantees any minimum interchange fee or even limits the circumstances in which Visa can reduce the fee schedule." The Fed added that the district court found that "there is no statutory or contractual provision guaranteeing TCF a certain level of interchange income." CUNA, the Clearing House Association LLC, American Bankers Association, Consumer Bankers Association, The Financial Services Roundtable, Independent Community Bankers of America, Midsize Bank Coalition of America, and the National Association of Federal Credit Unions have joined to support some aspects of TCF’s arguments via an amicus brief. With a legislative solution to the interchange implementation issue off the table for now, Credit Union National Association President/CEO Bill Cheney said that credit unions are focusing on the legal and regulatory systems to challenge the pending debit interchange fee cap. CUNA has developed a list of 13 specific points senators should be asked to make to the Fed, including asking the agency to require the card networks to report to the Fed that they have developed a two-tiered system that will provide higher fee income for small issuers than the board allows for large issuers. For prior coverage of this case and the general interchange issue, use the resource links.

Inside Washington (06/09/2011)

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* WASHINGTON (6/10/11)--A speech last week by Federal Reserve Board Gov. Dan Tarullo has created fear among the largest banks that they may have to hold more capital than previously expected. At issue is a proposed capital surcharge for significantly important financial institutions (American Banker June 8). Under proposed Basel III requirements, all banks would have to hold 4.5% of common equity by 2015, and a 2.5% conservation buffer starting in 2019. Tarullo speculated that regulators could require banks to hold as much as 1.5% to 7% capital on top of the proposed Basel III capital requirements, creating a maximum capital requirement of 14% for the largest banks. Tarullo’s comments created unease among investors causing stock prices to drop at several banks ... * WASHINGTON (6/10/11)--The Federal Reserve Board, the Office of the Comptroller of the Currency, and the Federal Deposit Insurance Corporation have released proposed guidance for stress-testing practices at banks with assets of more than $10 billion. The agencies issued the proposal to emphasize the importance of stress testing for banks to assess the risks they face and potential adverse outcomes. Building on previously issued supervisory guidance that discusses the uses and merits of stress testing in risk management, the proposal provides an overview of how an organization should develop a structure for stress testing. The guidance outlines general principles for a stress testing framework and describes how it should be used at various levels within an organization. The guidance also discusses the importance of stress testing in capital and liquidity planning, and the importance of strong internal governance and controls in an effective stress-testing framework. The agencies request comment on the proposal by July 29 ...

Sens. Johnson Shelby NFIP reforms needed

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WASHINGTON (6/10/11)--Sen. Tim Johnson (D-S.D.) on Thursday said that while he hopes to ensure the National Flood Insurance Program, which provides more than $1.2 trillion in coverage to Americans in flood-prone areas, continues to function, the program is in need of reform. Johnson, the Senate Banking Committee Chairman, added during a Thursday committee hearing that the NFIP “needs certainty” and said he wants to provide it that certainty by approving an extension of the program. Lapses in the program, some of which have occurred recently, “have detrimental effects on both the insurance and housing markets,” Johnson said. Noting that the NFIP is $18 billion in debt to the U.S. Treasury, ranking committee member Sen. Richard Shelby (R-Ala.) said that every aspect of the NFIP “must undergo significant revision for it to survive and continue on a sustainable path.” Cheney suggested that the committee examine the relationship between the NFIP and participating insurance companies, with particular attention paid to increasing transparency and accountability. The types of properties that the NFIP is covering should also be examined “to ensure that its resources are spent effectively,” and privatization of portions of the program should also be considered, Cheney added. The NFIP is currently set to expire on Sept. 30, and legislation that would extend the program for an additional five years was approved by the House Financial Services Committee last month. That legislation would also preserve the rights of credit unions to protect their collateral from flood hazards and would clarify that flood insurance purchased by credit unions "would date back to the date the existing policy lapsed or became insufficient in coverage amount, including any premiums or fees incurred during the 45-day notification period." CUNA has backed these planned changes to the NFIP. For the full comments of Johnson and Shelby, use the resource links.

Cheney to testify at June 16 Senate MBL hearing

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WASHINGTON (6/10/11)—Credit Union National Association (CUNA)President/CEO Bill Cheney is expected to urge the Senate to allow credit unions to help the economy grow and prosper through increased member business lending during a June 16 Senate Banking Committee hearing on a bill to increase the MBL cap. National Credit Union Administration Chairman Debbie Matz is also scheduled to testify. The Thursday hearing will focus on S. 509, which would lift the current MBL cap to 27.5% of total assets. Senate Majority Leader Harry Reid (D-Nev.) this week declared his support for S. 509, adding his name to the list of 19 cosponsors. Sen. Mark Udall (D-Colo.) introduced S. 509 earlier this year. Similar legislation, introduced by Reps. Ed Royce (R-Calif.) and Carolyn McCarthy (D-N.Y.), is pending in the House. Cheney said yesterday that the hearing is a “terrific opportunity” for CUNA to “tell the good news about credit unions and their business lending success.” An MBL cap increase is among CUNA’s top legislative priorities, a list which also includes gaining authority for credit unions to have supplemental sources of capital beyond retained earnings. Other witnesses scheduled to appear are National Association of Federal Credit Unions Board Chairman and Webster First FCU CEO Michael Lussier, American Bankers Association Chairman Stephen Wilson, and Grand Rapids State Bank CEO Noah Wilcox, on behalf of Independent Community Bankers of America.
Click to view larger image Sen. Mark Udall (D-Colo.), right, says his bill to increase MBL authority for credit unions has growing bi-partisan support. He was addressing the American Association of Credit Union Leagues 2011 governmental affairs and political specialists conference here this week. (CUNA Photo)
Earlier this week, Udall, speaking at the American Association of Credit Union Leagues 2011 governmental affairs and political specialists (GAPS) conference this week, said that both Republican and Democratic colleagues are expressing support for the cap lift, adding that they all have “been looking to forge that key to get our economy back on track.” Udall recommended that credit union advocates urge his colleagues, at a minimum, to allow a vote on the MBL legislation, and said that the type of direct interaction that credit union leagues and credit union leaders, as well as members, have with legislators “really does make a difference.” CUNA has estimated that lifting the MBL cap would generate $13 billion in new small business loans over the first year, creating 140,000 new jobs at no expense to taxpayers. For more on the hearing, use the resource link.

CUNA Strong Senate support can be used to shape interchange rule

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WASHINGTON (6/10/11)--Credit Union National Association (CUNA) President/CEO Bill Cheney said the Senate clearly acknowledged with its 54-45 vote Wednesday that there are issues with the debit card interchange fee cap that need to be examined before a rule goes into effect. “The legislation to delay the interchange provisions of the Dodd-Frank Act required 60 votes to pass the Senate, and it is a sore disappointment that the vote fell short of that. “However, it is important to note that a majority of senators voted with us on the delay--to stop, study, and start over on the fee cap. “We need to use their support as a tool to help improve the interchange implementation rule being drafted by the Federal Reserve Board--to minimize negative effects on credit unions and their members,” Cheney said Thursday in a call to state credit union league presidents. Cheney urged the following actions as the Fed works to meet a July 21 effective date. For senators who supported the delay, Cheney encouraged credit unions to:
* Thank them as soon as possible and urge them to contact the Fed about improvements to the proposed rules. * Tell them it is “absolutely critical” that the Fed take great care in drafting its final rule in a way that goes as far as possible to protect credit unions and other small issuers from the major impact that the new interchange restrictions will have. * Ask them to write to the Fed immediately to ask the agency to use its full authority to protect small debit card issuers and to include all of the appropriate costs when determining a “reasonable and proportional” interchange rate.
For senators who opposed the delay legislation, sponsored by Sens. Jon Tester (D-Mont.) and Bob Corker (R-Tenn.), Cheney said credit unions should: * Contact those senators by email, fax, phone call or letter; * Remind them the interchange statute itself intends to protect credit unions and other small issuers; and * Ask them to speak up on out on behalf of that protection. CUNA has developed a list of 13 specific points senators should be asked to make to the Fed, including asking the agency to require the card networks to report to the Fed that they have developed a two-tiered system that will provide higher fee income for small issuers than the board allows for large issuers. (Use resource link to see remaining points.) Contacts with the Fed should, Cheney advised, be made prior to the agency’s scheduled June 20 meeting. “We anticipate that they might release an interchange cap proposal then with a 30 day comment period.” Cheney added that in their conversations with lawmakers, credit unions must reiterate the impact that will be felt by consumers if card issuers lose the ability to provide free debit card services. Cheney thanked the leagues and credit unions for all their efforts on the interchange issue. He added, “This isn’t over yet; we have more work to do and a chance to make some vital changes. Let’s make the most of the significant impact we have had on this process.”

CUNA seeks comment on NACHA proposal

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WASHINGTON (6/10/11)--The Credit Union National Association (CUNA) has requested comment on operating rule amendments that NACHA, the electronic payments association, has proposed to address various risk management issues. NACHA has proposed prohibiting the sharing of customer information, including full social security numbers. However, portions of customer social security numbers may be shared, according to NACHA. The scope of the condition under which a participating depository financial institution may claim an excused delay would also be modified, excluding delays related to payment interruption, payment suspension, or unavailability of funds from another institution or electronic payment operator from the scope of that provision. Return thresholds for originating depository institutions would also be reduced under the NACHA proposal. Return rates for unauthorized debits would drop from 1% to 0.75% for one year, and then to 0.50%. The threshold for returns resulting from invalid account information would be set at 1%. The due date for compliance audits would also be shifted from Dec. 1 to Dec. 31 under the proposal. The excused delay and audit date provisions would become effective on Sept. 16. The rest of NACHA’s proposed provisions would become effective on March 16, 2012. Comments must be submitted to CUNA by June 17. For the full comment call, use the resource link.

Consumer advisors to Fed take up mortgage issues June 16

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WASHINGTON (6/8/11)--The consumer advisory panel for the Federal Reserve Board is scheduled to meet June 16 to discuss several housing and mortgage loan-related topics, as well as a propose rule on remittance transfers. The CAC is composed of 30 members that serve three-year terms, and UW CU Chief Credit Officer Mike Long currently serves on the panel. The CAC advises the Fed on its responsibilities under the Consumer Credit Protection Act and on other matters in the area of consumer financial services. The group meets three times a year in Washington, D.C. and meetings are open to the public. The agenda for the June 16 meeting carries the following discussion items:
* National servicing standards for residential mortgage loans; views on what principles, policies, and procedures such standards should include; * Real estate-owned (REO) properties’ a look at such as topics as financial institutions' REO management practices, ``first look'' programs, and the implementation of the regulation providing Community Reinvestment Act consideration for certain neighborhood stabilization activities; * The Fed’s proposed rules under Regulation Z (Truth in Lending Act) that would require lenders to determine a consumer's ability to repay a mortgage loan before extending the credit and establish minimum mortgage underwriting standards; * A risk retention proposal that would require sponsors of asset-backed securities to retain at least 5% of the credit risk of the assets underlying the securities--with certain exemptions. The panel will also address a proposed definition of ``qualified residential mortgages,'' which would not be subject to the rule's requirements; and * Proposed rules, issued under Regulation E (Electronic Fund Transfer Act), to create new disclosures and protections for consumers who send remittance transfers to recipients in foreign countries.
The June 16 meeting is the second CAC meeting of the year.

CUNA offers audio conference on NCUAs prepaid assessment plan

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WASHINGTON (6/9/11)--Credit unions can tune in Monday, June 13, for a free Credit Union National Association audio conference on issues surrounding a proposed a plan to allow credit unions to prepay some of their total assessments to the Temporary Corporate Credit Union Stabilization Fund. The National Credit Union Administration proposed the voluntary prepayment plan at its May open board meeting and is accepting public comment through June 20. The NCUA prepayment program could help reduce credit unions’ assessment for 2011 substantially, depending on credit unions’ participation, and it would help even out assessments for subsequent years, CUNA has noted. CUNA is offering the audio conference to credit union officials who continue to have questions about the proposal, to help address those questions and facilitate credit unions’ understanding of the proposal. Speakers on the call will be CUNA President/CEO Bill Cheney, NCUA Deputy Director Larry Fazio, CUNA Chief Economist Bill Hampel and CUNA Deputy General Counsel Mary Dunn. The call will last one hour, 45 minutes of which will be reserved for questions. Use the resource link to register. For those who cannot participate in the live event, use the second resource link to register for an archived version to be available within 48 hours of the live event. http://cuna.org/training-education/event/TA61311

CU efforts intensify at Fed as interchange delay fails in Senate

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WASHINGTON (6/9/11)--Credit Union National Association (CUNA) President/CEO Bill Cheney said Wednesday that the U.S. Senate's failure to delay implementation of the Federal Reserve's debit card interchange fee cap is deeply disappointing and CUNA and credit unions will continue pressing the Federal Reserve to improve the proposed rule to minimize negative effects on credit unions and their members. In fact, promptly after the Senate vote, CUNA sent a letter to all Fed governors to reiterate several recommendations that could help insulate small issuers from the negative impact on their income that many fear will be the result of the Fed’s current proposal. Among the actions Cheney suggested:
* Establish a monitoring process under which the card networks would first report to the Board that a two-tiered structure has been established and then report annually on how such a two-tiered system is working, and also provide that information to Congress; * Include all allowable and reasonable costs in setting the cap on interchange fees; and * Revise the proposal regarding routing and exclusivity provisions to consider either exempting small issuers or delay the provisions for up to 24 months for small issuers. (See resource link for full letter)
CUNA is also involved in litigation to challenge the law and rule in an endeavor to preserve the revenue credit unions need to offer debit card services. CUNA filed an amicus brief in the suit against the interchange provisions brought by TCF Financial. The Fed's proposed interchange regulations, which now seem to be on track for at least the fee cap provisions to go into effect July 21, would limit debit card transaction fees to as little as 12 cents per transaction, if adopted as proposed. The Fed has acknowledged there are costs it could include but did not in the proposal. An exemption for issuers with under $10 billion in assets is include in the statue and acknowledged in the Fed proposal, but CUNA, the leagues and credit unions emphasize that the exemption is flawed and will not work in practice if it is not subject to enforcement by the Fed. Fed Chairman Ben Bernanke, FDIC Chairman Sheila Bair, National Credit Union Administration Chairman Debbie Matz, and other regulators have also said they are not sure that the exemption would work as planned. In the Senate vote yesterday, credit unions won the majority of votes when the Senate weighed in on an amendment--54 in favor and 45 against--to effect a delay and require an impact study of the interchange cap and the small-issuer exemption. However, to pass the amendment needed a total of 60 votes in favor. CUNA has worked intently for months on the legislative and regulatory fronts in an effort to improve the interchange rules, make the exemption for smaller institutions truly effective, and prevent credit unions and their members from being hurt by these measures, CUNA’s Cheney said. He commended Sens. Jon Tester (D-Mont.) and Bob Corker (R-Tenn.), sponsors of the amendment to delay the interchange cap, for their work on behalf of credit unions. The Senate "missed a huge opportunity to get this right," and credit unions are "deeply disappointed the Senate disregarded the more than half a million contacts made by credit unions and their members over the last three months in failing to pass the Tester-Corker amendment," Cheney added. Cheney said that CUNA has made it clear that these cap rules "will impose a severe hardship on credit unions with debit card programs, draining the revenue they need to offset the costs of providing card services.” He added, "much as they would prefer not to, credit unions will have no recourse but to make up these costs by imposing new fees or service restrictions on their members. How are consumers better off under this scenario? The plain fact is they are not."

Flood insurance examined today by Senate Banking

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WASHINGTON (6/9/11)—National Flood Insurance Plan (NFIP) reauthorization will be discussed by the Senate Banking Committee at 10 A.M. ET today. Federal Emergency Management Agency Administrator William Craig Fugate was the sole witness at press time, but the committee said that additional witnesses may still be added. A separate NFIP reauthorization package passed out of the House Financial Services Committee last month. That piece of legislation would reauthorize the NFIP for a further five years. It would also preserve the rights of credit unions to protect their collateral from flood hazards and would clarify that flood insurance purchased by credit unions "would date back to the date the existing policy lapsed or became insufficient in coverage amount, including any premiums or fees incurred during the 45-day notification period." CUNA has backed these planned changes to the NFIP. The Senate committee will likely develop its own legislation, and eventually merge its bill with the House legislation. The NFIP is currently set to expire on Sept. 30.

Inside Washington (06/08/2011)

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* ALEXANDRIA, Va. (6/9/11)—The National Credit Union Administration Board has scheduled a special closed board meeting for Thursday, June 9 at 5:30 pm (ET) to consider a supervisory activity. The agenda for that meeting is available online … * WASHINGTON (6/9/11)--Two model mortgage disclosure forms unveiled by the Consumer Financial Protection Bureau (CFPB) last month attracted more than 14,500 individual comments. In May, the CFPB released two alternate prototype forms that combine two federally required mortgage disclosures into a single form to make the costs and risks of the loan clear and allow consumers to comparison shop for the best offer, as required by the Truth in Lending Act and Real Estate Settlement Procedures Act (American Banker June 8). The initial 10-day comment period on the new prototype forms ended Friday. The bureau began testing the prototypes with focus groups in Baltimore last month, a process it said will continue in other cities before beginning a formal rulemaking process. It will conduct four more rounds of evaluation and revision through September. The bureau has until July 2012 to issue the final version of the form … * WASHINGTON (6/9/11)--The Federal Deposit Insurance Corp. (FDIC), the receiver for Downey Savings and Loan Association, has filed a lawsuit against mortgage broker Amerifund Financial Inc. and affiliated individuals in federal court. The suit, filed June 3 in U.S. District Court in Santa Ana, Calif., seeks $1 million in damages for breach of contract, professional negligence and civil fraud. Amerifund, of Spring Valley, Calif., and its agents processed mortgages for Downey in 2004 and 2005 and allegedly altered or misstated financial statements in loan applications, according to the complaint (American Banker June 8). Downey Financial Corp., the S&L’s parent, filed for Chapter 7 liquidation in 2008, claiming $50 million in assets and $500 million in debts. U.S. Bancorp eventually acquired Downey … * WASHINGTON (6/9/11)--Austan Goolsbee has resigned as chairman of the Council of Economic Advisers, the White House announced Monday. Goolsbee, a key adviser to President Barack Obama on economic policy, has been on the council since the beginning of the president’s term in early 2009. Goolsbee took over as chairman in September, following Christina Roemer’s resignation (American Banker June 8). He also was the staff economist for the president’s Economic Recovery Advisory Board. Goolsbee will reassume his position as an economics professor at the University of Chicago, where he taught for 14 years before joining the administration, the White House said …

Fannie Mae releases delinquent mortgage rules

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WASHINGTON (6/9/11)—Mortgage servicers will need to build “a strong customer-service relationship with homeowners” to determine why a borrower’s mortgage is delinquent, under new mortgage servicing guidelines issued by Fannie Mae. Those guidelines also ask lenders to assess a delinquent borrower’s ability to pay the remainder of their mortgage. The guidelines go into effect on Sept. 1. The new guidelines were released earlier this week, and the government sponsored mortgage entity said that these guidelines will “require servicers to implement consistent processes across a number of areas, and hold them accountable if they do not.” Servicers will also need to inform borrowers on any available foreclosure prevention resources, and mortgageholders must be contacted within the first 120 days that they are delinquent, Fannie Mae said. The foreclosure process will begin after 120 days of delinquency. Servicers must follow a strict timeline as they move loans through the foreclosure process, and financial penalties will be assessed for any timeline violations. However, Fannie Mae said it would provide financial incentives to mortgage servicers that work out foreclosure alternatives with their mortgageholders. The new standards are required by a Federal Housing Finance Agency (FHFA)-ordered regulatory alignment between Fannie Mae and Freddie Mac. FHFA Acting Director Edward DeMarco has said that the directive should "result in earlier servicer engagement to identify the best solution available for homeowners, given their individual circumstances." The Credit Union National Association continues to analyze the Fannie Mae release. Freddie Mac is required to release similar guidelines by the end of the third quarter of 2011. For more on the new standards, use the resource link.

NEW CUs deeply disappointed on interchange vote CUNA

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WASHINGTON (UPDATED: 2:40 p.m. ET, 6/8/11)-Credit Union National Association (CUNA) President/CEO Bill Cheney said that the Senate’s failure to delay implementing the Federal Reserve’s interchange debit fee cap “is going to create a train wreck that will affect every consumer with a debit card.” Credit unions won the majority of votes this afternoon when the Senate weighed in 54 in favor and 45 against an amendment that would have required the U.S. Congress to stop, study, and start over on a statutory debit card interchange fee cap. However, a 60 vote majority was required to pass the delay. After the vote, Cheney said credit unions are “deeply disappointed the Senate disregarded the more than half a million contacts made by credit unions and their members over the last three months in failing to pass the Tester-Corker amendment.” The Senate “missed a huge opportunity to get this right,” Cheney added. Cheney said that CUNA has repeatedly emphasized that these rules “will impose a severe hardship on credit unions with debit card programs, draining the revenue they need to offset the costs of providing card services. “Much as they would prefer not to, credit unions will have no recourse but to make up these costs by imposing new fees or service restrictions on their members. How are consumers better off under this scenario? The plain fact is they are not,” he added. Cheney said CUNA will continue and re-double its efforts to work with the Federal Reserve as it moves forward in creating its implementation rule, set to go into effect July 21. Last December, the Fed proposed to cap debit card transaction fees at 12 cents per transaction. A proposed exemption for issuers with under $10 billion in assets is included in the proposal, but CUNA, the leagues and credit unions--and the Fed itself--have said that the exemption is flawed and will not work in practice.

Risk retention comment deadline extended to Aug. 1

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WASHINGTON (6/8/11)--Comments on a joint federal agency proposal that aims to address abuses in the mortgage lending market by altering risk retention requirements will now be accepted until August 1. The previous deadline for comment on the risk retention provisions, which are required by the Dodd-Frank Wall Street Reform Act, was June 10. The Federal Deposit Insurance Corp., the Securities and Exchange Commission, the Office of the Comptroller of the Currency, the Federal Reserve, the Department of Housing and Urban Development, and the Federal Housing Finance Agency (FHFA) in a joint release said that the additional time was allotted to allow commenters more time to analyze the proposal and prepare their comments. The proposed rule, which was released in March, would require loan securitizers to retain a 5% economic interest in a material portion of the credit risk for any asset that they transfer, sell, or convey to a third party. Loan originators would generally be exempt from the credit risk retention requirements as long as they contribute less than 20% of the loans or other collateral to a given pool of asset-backed securities. The majority of credit unions would likely be exempted under this threshold. If the credit union’s or other mortgage originator's loans make up 20% or more of a pool of asset-backed securities, the originator would then be required to take on a portion of the loan securitizer's risk retention requirement in the same percentage amount as its contributions to the asset pool. Qualified residential mortgages and U.S. government-guaranteed mortgages, such as FHFA and Veterans Administration mortgages, would be exempt from all risk-retention requirements, and government-sponsored entities Fannie Mae and Freddie Mac would also be exempt from the securitzer risk-retention requirements for as long as those entities are held under government conservatorship. CUNA has said that while credit unions did not participate in the types of abusive practices that the rule seeks to address, it is concerned that credit union mortgage lending will be impacted by these rules and standards that develop in the marketplace. For the joint agency release, use the resource link.

CUNA to Senate Support amended interchange delay

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WASHINGTON (6/8/11)--The Credit Union National Association (CUNA) has urged senators that when a scheduled vote comes up at 2 p.m. (ET) today to vote in support of a revised delay provision for the debit interchange fee cap rules. The revised legislation, which was introduced by Sens. Jon Tester (D-Mont.) and Bob Corker (R-Tenn.) yesterday, would shorten the implementation delay to a maximum of one year. CUNA President/CEO Bill Cheney on Tuesday said that the amendment presents “a fair approach” to the interchange fee cap issue and “ensures that small issuer and consumer impact is taken into consideration when the [Fed] regulates debit interchange fees." Under the delay proposal, the Federal Reserve, the National Credit Union Administration, the Federal Deposit Insurance Corp., and the Office of the Comptroller of the Currency would be given six months to determine whether or not the Fed's current proposal accounts for all fixed and incremental costs to financial institutions, whether the proposed debit interchange cap would adversely impact consumers, and if a small issuer exemption would work as planned. The Fed would then be given six months to rework the interchange rules if the Fed and one of these other regulators determine that the rule needs revision. The current rules would be implemented as planned if no issues are detected by the study. The Fed would be required to review its interchange regulations within two years of their implementation. The amended legislation has bipartisan support, with Sen. Mike Crapo (R-Idaho), who voted in favor of the Durbin amendment, among its cosponsors. Sens. Kay Hagan (D-N.C.), Tom Carper (D-Del.), Roy Blunt (R-Mo.), John Kyl (R-Ariz.), Chris Coons (D-Del.) and Michael Bennet (D-Colo.) are among the cosponsors of the amendment, and Senate Banking Committee Chairman Tim Johnson (D-S.D.) also said he would support Tester's amendment in a Tuesday release. The is being offered as an amendment to a bill to reauthorize the Economic Development Administration (EDA), and Sen. Majority Leader Harry Reid (D-Nev.) on Tuesday said a vote on the amendment would take place early this afternoon. The amendment will need 60 yes votes to be added to the EDA reauthorization bill. For the full CUNA letter, use the resource link.

NCUA issues CandD order to Phillys Borinquen FCU

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ALEXANDRIA, Va. (6/8/11)—Borinquen FCU of Philadelphia has agreed to a National Credit Union Administration (NCUA)-issued cease and desist order. The NCUA notice, which was released to the public by the agency on Tuesday, orders the 8,600 member, Philadelphia, Penn.-based credit union to:
* Obtain an opinion audit and member account verifications from a certified public accountant; * Reconcile its cash and bank accounts; and * Establish a Bank Secrecy Act compliance program by June 30.
The NCUA noted that the credit union has had “serious and persistent record keeping problems” and had failed to perform yearly audits. For an NCUA release on the order, use the resource link.

Inside Washington (06/07/2011)

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* WASHINGTON (6/8/11)--U.S. Treasury Secretary Timothy Geithner on Monday urged global regulators to keep pace with U.S. financial regulation reforms. Geithner, speaking before the International Monetary Conference in Atlanta, said the U.S. government seeks to reduce the risk that markets will move overseas to avoid stringent regulations. “We live in a global financial marketplace, with other financial centers competing to attract a greater share of future financial activity and profits,” Geithner said. “As we strengthen the protections we need in the U.S., we have to reduce the chance that risk just moves outside the U.S. Allowing that would not just weaken the relative strength of U.S. firms and markets, it would also leave the world economy vulnerable to future crises” … * WASHINGTON (6/8/11)--Nearly a year after the Dodd-Frank Act’s passage, more than two dozen of the legislation’s rule changes have fallen behind schedule (The New York Times June 7). Many of the rule changes have been resisted by Wall Street and Congress, and regulators have extended the comment periods on some proposals. With the delays, some mandates are in danger not being implemented before the next elections, which could give newly elected officials an avenue to back away from the overhaul, according to the Times. So far, 28 of Dodd-Frank’s deadlines have been missed, according to Davis Polk, a law firm that tracks the rules. Of the 385 new rules to be written, 24 requirements have been completed--41 such actions were scheduled for completion by now … * WASHINGTON (6/8/11)--Nobel laureate Peter Diamond, President Barack Obama’s three-time nominee for the Federal Reserve’s board of governors, has withdrawn his nomination because of Republican opposition. Diamond, a professor at the Massachusetts Institute of Technology, made the announcement in an opinion-page article in The New York Times on Monday. In the article, Diamond criticized the bipartisan nature of the confirmation process in which his credentials were questioned. “We need to preserve the independence of the Fed from efforts to politicize monetary policy and to limit the Fed’s ability to regulate financial firms,” Diamond wrote …

NEW Amended interchange delay bill introduced

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WASHINGTON (UPDATED: 4:00 P.M. ET, 6/7/11)--Sens. Jon Tester (D-Mont.) and Bob Corker (R-Tenn.) have introduced a revised version of their debit interchange fee cap implementation delay legislation. The revised legislation, which is being offered as an amendment to a bill to reauthorize the Economic Development Administration (EDA), would shorten the implementation delay to a maximum of one year. The EDA reauthorization bill was still being discussed on the Senate floor at press time. The Federal Reserve, the National Credit Union Administration, the Federal Deposit Insurance Corp., and the Office of the Comptroller of the Currency would be given six months to determine whether or not the Fed’s current proposal accounts for all fixed and incremental costs to financial institutions, whether the proposed debit interchange cap would adversely impact consumers, and if a small issuer exemption would work as planned. The Fed would then be given six months to rework the interchange rules if the Fed and one of these other regulators determine that the rule needs revision. The current rules would be implemented as planned if no issues are detected by the study. The Fed would be required to review its interchange regulations within two years of their implementation. The Credit Union National Association followed up on the release of the legislation by urging Senators to support the proposed delay, calling the measure a “common sense” approach to the issues surrounding the interchange cap. The amended legislation has bipartisan support, with Sen. Mike Crapo (R-Idaho), who voted in favor of the Durbin amendment, among its cosponsors. It is not expected that a vote on the revised interchange delay amendment will take place today.

Matz to iWash. Posti CUs offer payday loan alternatives

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ALEXANDRIA, Va. (6/7/11)--National Credit Union Administration (NCUA) Chairman Debbie Matz said in the Washington Post Monday that credit unions are authorized to offer loans designed to provide members affordable short-term cash, and that the loans are “very attractive” compared to triple-digit costs of payday loans. Matz noted that it was just last September that the NCUA approved the rule to allow federal credit unions to offer the short-term, small amount loans to their members. Interest rates for these loans must be capped at a maximum of 10 percentage points above the established interest rate ceiling. The current maximum APR on these loans would be 28%. A $20 application fee may also be charged. Matz said that with a 28% ceiling, the short-term credit union loans have a higher annual rate than conventional loans, which are capped for federal credit unions at 18%. But, she added in her published letter to the editor, a recent Post article titled “Credit unions increasingly offer high-rate payday loans” was misleading. The Post reported that credit unions are offering alternative short-term loan products, with some of those loans having an effective interest rate of over 100% when the $20 loan application fee is factored in to a $200 short-term loan. “Predatory lending in any form is wrong,” Matz wrote, and added, “I am committed to protecting consumers and preventing predatory lending by credit unions and their affiliates.” However, she added, the “picture the story painted was misleading. More credit unions are offering payday loan alternatives.” For Matz's Washington Post item, use the resource link.

Interchange vote could happen by midweek

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WASHINGTON (6/7/11)--A final vote on Senate legislation that would delay the implementation of a new debit interchange fee cap could happen as early as midweek, with a remote possibility the vote could occur today. Sens. Jon Tester (D-Mont.) and Bob Corker (R-Tenn.) in March introduced S. 575, a bill that would delay implementation of the Federal Reserve’s rules to implement the interchange fee cap ordered by last year’s Dodd-Frank Wall Street Reform Act. The Tester-Corker bill would also require a study of the rules’ impact on consumers, credit unions and other financial institutions, and merchants. Similar delay legislation has been offered in the House, but House members have said that they would wait for the Senate to act first on the interchange issue, since that legislation was first offered in the Senate. Senate Majority Leader Harry Reid (D-Nev.) yesterday indicated that the interchange delay could be one of the first amendments offered to a bill the Senate is scheduled to take up today—a bill to reauthorize the Economic Development Administration. The Fed's proposed interchange regulations could limit debit card transaction fees to as little as seven to 12 cents per transaction. A proposed exemption for issuers with under $10 billion in assets is included in the proposal, but the Credit Union National Association, leagues and credit unions have been emphasizing that the exemption is flawed and will not work in practice. Members of the House of Representatives are in their home districts this week, but the full Congress is scheduled to be in session beginning on June 13. The Senate Banking Committee on Thursday will discuss National Flood Insurance Program reauthorization. Members of the House of Representatives are in their home districts this week, but the full Congress is scheduled to be in session beginning on June 13.

Compliance CUs have NFCC counseling line options

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WASHINGTON (6/7/11)—Credit unions will have free alternatives when the National Foundation for Credit Counseling’s (NFCC) begins charging for its CARD Act National Locator Line (NLL) phone service on July 1. For instance, GreenPath Debt Solutions will provide a similar service for free, according to the Credit Union National Association (CUNA). GreenPath is a CUNA strategic provider. Its service will satisfy Regulation Z requirements that a toll-free number be listed among the loan repayment disclosures to help members obtain information about credit counseling services. Money Management International is also offering a free counseling line. The NLL is a third-party service that provides credit union members and other financial services consumers with a list of local credit counselors. The NFCC last month said that it and various member agencies "can no longer bear the full cost” of operating the service. The NFCC-provided phone service will cost a minimum of $80 per month when prepaid for 12 months. Those that do not prepay will be charged $100 monthly. Credit unions and other financial institutions since Feb. 22, 2010 have been required to prominently display on their statements a toll-free number providing cardholders information about accessing debt management services and credit counseling with nonprofit credit counseling agencies. The requirement, which is a result of the Credit Card Accountability Responsibility and Disclosure (CARD) Act of 2009, allows creditors to either provide their own toll-free services or engage with third-party providers. CUNA Senior Compliance Counsel Mike McLain said that credit unions must decide whether to move to one of the above recommended services or to stay with the NFCC program before June credit card statements are processed. “Credit unions will need to perform their own due diligence to insure that the provider selected complies with Regulation Z requirements for the toll-free number consumers may use to obtain information about credit counseling,” McLain added. GreenPath finance director Thomas Butler said that GreenPath’s phone service will provide credit union members access to three NFCC providers. He added that a more robust version of a CARD Act compliant line that includes individual credit union-branded messaging, real time reporting, and other capabilities will be released in the near future.

FHFA reports loan mod foreclosure prevention drops

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WASHINGTON (6/7/11)—The total number of loan modifications made during the first quarter of 2011 dropped to 86,201 from 119,778 in the first quarter, the Federal Housing Finance Agency (FHFA) reported in Monday’s quarterly Foreclosure Prevention & Refinance Report. This is the third straight quarter that loan modifications have declined. The number of foreclosure prevention actions made during the first quarter of 2011 dropped to 171,531 from the previous quarter’s total of 208,416. However, refinancings made through the Obama Administration’s Home Affordable Refinance Program (HARP) increased 21% during the quarter, totaling 752,000 loans. The Federal Housing Finance Agency earlier this year extended the HARP program until June 30, 2012. It was set to expire at the end of this month. The FHFA reported that more than 36,300 Home Affordable Modification Program (HAMP) trials transitioned to permanent modifications during the first quarter, increasing the total number of active HAMP permanent modifications by 13%, totaling 320,500 during the quarter. The administration last year estimated that HAMP would modify as many as 4 million mortgages by 2012. Foreclosure starts declined while completed third-party and foreclosure sales increased in the first quarter. The report also noted that loans that were modified in 2010 have resulted in “deeper payment reductions for a greater proportion of borrowers than in earlier periods,” and the majority of these loans progressed from trial periods to full loan modifications. More than 1.6 million foreclosure prevention actions have been completed since late 2008, according to the report. For the full report, use the resource link.

Inside Washington (06/06/2011)

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* WASHINGTON (6/7/11)—Federal Reserve Board Gov. Daniel Tarullo on Friday defended an international proposal to levy an additional capital charge on the largest financial institutions. The Basel Committee on Banking Supervision has proposed a new set of capital standards that would require international financial institutions to hold a common equity ratio of at least 7% by 2019 (American Banker June 6). The committee also plans to add a capital surcharge for the largest banks. In a speech before the Peter G. Peterson Institute for International Economists, Tarullo dismissed arguments that the capital surcharge would hurt the economy. Banks say a capital surcharge would prevent them from earning the rate of return demanded by investors, forcing them to reduce their balance sheets and placing a drag on the economy. Tarullo said that logic is flawed. “To the extent that equity investors demand higher rates of return from financial firms than from non-financial firms, it is largely because financial firms are so much more highly leveraged,” he said. “Thus the risk of loss is greater, even as the prospect for outsized returns on the limited equity is improved” …

CUNA brings real life interchange stories to the Fed

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WASHINGTON (6/6/11)—Recommendations to improve the Federal Reserve Board’s debit interchange regulation was the subject of a meeting Friday of Credit Union National Association (CUNA) representatives with Fed General Counsel Scott Alvarez. This is the second session that CUNA had has with Alvarez on interchange issues. Jane Watkins, CEO of Richmond, Va.-based Virginia CU and Tom Dorety, president/CEO, Suncoast Schools FCU, Tampa, Fla. , relayed to Alvarez how the loss of interchange income that would result from the Fed’s proposed fee cap would impact their credit unions, their members and their communities. A Fed plan would set the cap at seven to 12 cents for issuers with more than $10 billion in assets. Watkins told News Now, “We described who our members are -- what they are like. For instance most (Virginia CU) members are dual wage-earning families with a combined income of about $50,000 a year, max.” She said imposing a fee on these members to make up the lost interchange income, as some credit unions may have to do, would pack a wallop. She said such a fee is not in her credit union’s plans. “A five-dollar fee for checking really has an impact on these families. In the current environment, capital is precious for our members.” Dorety said he represented sand state credit unions and their members, referring to the geographic areas acknowledged to be hardest hit by the country’s economic problems, specifically the housing crisis. He noted that conditions for his members are just starting to improve, and it would be a devastating time to hit them with a new fee. Dorety, too, called free checking a “mainstay” for his members, and said it is a main selling point that has helped his credit union increase its member base. That would be harmed by the interchange changes. The Fed’s fee cap would also reduce funding to his credit union’s charitable activities. The credit union is one of the top financial supporters of public schools in the counties it serves through it interchange income. Also at the meeting, CUNA Deputy General Counsel Mary Dunn focused on changes CUNA is urging the Fed to make in its proposal. Among the recommendations she urged were:
* Specific provisions on how the statutory exemption from the cap for debit card issuers with less than $10 billion in assets can be made to work; and * Raising the interchange ceiling for large issuers by including all allowable costs.
If the Fed is not legally able to exempt small issuers from the routing and exclusivity provisions, substantially delaying their effective date. Dunn also followed up on a letter sent by CUNA on May 2 to Fed Chairman Ben Bernanke on routing and exclusivity provisions included in the new interchange rules enacted in last year’s Dodd-Frank Wall Street Reform Act. While the interchange provisions regarding fees are required to take effect July 21 unless Congress approves a delay, the statute only requires the Fed to write rules on the exclusivity and routing provisions by July 21. It does not provide a specific effective date for the routing and exclusivity provisions. Dunn urged Alvarez that if the Fed board is not legally able to exempt small issuers from the routing and exclusivity provisions, the agency should substantially delay their effective date. CUNA has emphasized during the meeting that Congress focused on debit card costs for large issuers in the interchange statute, but wanted to protect debit card fee income for small issuers.

Cheney YouTube video urges interchange delay action

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WASHINGTON (6/6/11)--A new YouTube video posted by Credit Union National Association (CUNA) President/CEO Bill Cheney points to the massive data breach at Michaels stores as a prime example of why credit union members should urge Congress to delay the pending debit card interchange rules. Otherwise, Cheney said, credit unions will be left “holding the bag” when these breaches occur. Michaels, a nationwide big-box craft store, last month notified customers of data breaches that occurred throughout the country. Following these types of breaches, all merchants must do is notify affected customers. Credit unions and other financial institutions are ultimately required to gather additional information on the breach, reissue cards, cover transaction costs, refund funds to victims of fraud, and among other things, Cheney noted. Cheney also noted that while customers will likely have their debit cards reissued, at no cost, as a result, credit unions and other financial institutions, and not the retailer, will pay for the new cards. The Federal Reserve Board's proposed interchange regulations could limit debit card transaction fees to as little as seven to 12 cents per transaction. A proposed exemption for issuers with under $10 billion in assets is included in the proposal, but CUNA, leagues and credit unions have been emphasizing that the exemption is flawed and will not work in practice. Sens. Jon Tester (D-Mont.) and Bob Corker's (R-Tenn.) S. 575 would delay implementation of the debit interchange provisions by 15 months. A study of their impact on consumers, credit unions and other financial institutions, and merchants would also be ordered. Similar legislation has been offered in the House, but House members have said that they would wait for the Senate to act first on the interchange issue, since that legislation was first offered in the Senate. National Journal on Friday reported that a vote on this bill could come up for a vote in the U.S. Senate this week. Sixty votes are needed to approve the delay. CUNA, the leagues, and credit unions have been active ahead of a potential vote, with over 200,000 of them reaching out to email their legislators through CUNA's CapWiz program.

CUNA Reg CC changes could spike compliance costs

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WASHINGTON (6/6/11)—A Federal Reserve proposal to amend Regulation CC to increase next business day availability and encourage electronic check processing and returns “would substantially increase fraud-related and compliance costs if adopted,” the Credit Union National Association (CUNA) said in a Friday comment letter. CUNA is concerned by several aspects of the Fed proposal, which aims to facilitate the development of a fully-electronic check system. The proposal implements portions of the Dodd-Frank Act that increase next business day availability. Credit unions would need to make these changes by July 21. CUNA criticized portions of the proposal that would shorten the reasonable additional hold extension from 5 to 2 business days for most checks, saying that this decrease in time would likely increase check fraud risk and loss exposure for credit unions. Increased instances of fraud are also a risk presented by portions of the amendments that would force credit unions and other financial institutions to increase to $200 the amount of deposited funds that will be made available for next business day availability. CUNA said that increasing this threshold is consistent with Dodd-Frank Act requirements, but noted that the change could increase the amount of funds that are lost due to check fraud. The Fed’s requirement that expeditious check returns only be provided to institutions that receive returned checks electronically was also questioned, with CUNA noting that many smaller institutions “disproportionately rely on paper returns” and “have fewer resources to manage fraud risk and exposure.” CUNA did, however, support the proposed elimination of references to nonlocal checks as well as keeping case-by-case holds. For the full comment letter, use the resource link.

Inside Washington (06/03/2011)

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* WASHINGTON (6/6/11)--A letter signed by 89 House Democrats urging President Barack Obama to name Elizabeth Warren director of the Consumer Financial Protection Bureau by recess appointment, if necessary. was sent to the White House Thursday. The letter outlines threats by Republicans to hold up any nominee unless the bureau is drastically scaled back, leaving the president no choice other than making a recess appointment for the post. “Since you appointed Professor Warren to ‘stand up’ the bureau, she has laid the foundation as a strong advocate for consumers--something that seems to strike fear among those who are opposed to reform,” the letter states. “Regretfully, Republicans in the Senate have now made it clear that they oppose reform.” The letter was initiated by Rep. Carolyn Maloney (D-N.Y.), who led the effort to collect signatures … * ALEXANDRIA, Va. (6/6/11)--The National Credit Union Administration (NCUA) in a Friday release announced that it would post credit union comments on its proposed corporate credit union assessment prepayment plan. An NCUA representative told News Now that the agency initially decided to keep credit union comments private out of “concern that some comments might include sensitive business or financial information.” However, the agency has found that none of the comments it has received thus far contain sensitive information. The NCUA will begin releasing the comments to the public on June 10 … * WASHINGTON (6/6/11)--The Treasury Department on Thursday said it will begin selling off Small Business Administration (SBA) securities it acquired as part of the Troubled Asset Relief Program (TARP). Treasury originally invested in 31 SBA 7(a) securities with a value of roughly $368 million. The securities comprised 1,001 loans from 17 different industries. EARNEST Partners, which has acted as Treasury’s financial agent for the SBA 7(a) securities portfolio, will execute the securities disposition on behalf of Treasury …

Inside Washington (06/02/2011)

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* WASHINGTON (6/3/11)--An uneven regulatory environment is a primary factor behind the current credit crunch, witnesses told lawmakers at a House Small Business Committee hearing Wednesday. Federal Deposit Insurance Corp. regulators inconsistently apply regulations, Lynn Ozer, the executive vice president of Susquehanna Bank, Pottstown, Pa., told the committee (American Banker June 2). Ozer was testifying on behalf of the National Association of Government Guaranteed Lenders. William Hall, a member of the board of the International Franchise Association, said franchises are also having difficulty obtaining loans because of inconsistency by regulators. Rep. Allen West (R-Fla.) said that President Barack Obama assured Republicans in a meeting at the White House Wednesday morning that the federal government doesn’t have any effect on the ability of banks to lend … * WASHINGTON (6/3/11)--The Treasury Department has warned Small Business Lending Fund (SBLF) applicants that they will not qualify for funding if regulators have restricted them from paying dividends (American Banker June 2). Treasury sent questionnaires to all C corporation banks requesting whether can pay dividends on SBLF securities and, if not, whether they are working with their regulators to remove those restrictions. Dividend restrictions must be removed or waived by Aug. 1 for banks to qualify for the program. The notice is a reaction to pressure from lawmakers for greater oversight of the program, according to lawyers for applicants. Only healthy banks can qualify for the SBLF program, and the Treasury is required to confer with each applicant’s primary regulator before approving its application. Banks with dividend restrictions typically are limited by a regulatory order …

Cheney in op-ed Congress must pass interchange delay before its too late

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WASHINGTON (6/3/11)—With regulations that would set a cap on interchange fees charged during debit transactions set to come into effect in late July, Congress must, at the very least, recognize the severity of the situation for credit unions and their members and take another look "before it's too late,” argues Credit Union National Association (CUNA) President/CEO Bill Cheney in an op-ed being distributed to more than 400 news outlets across the country. The Federal Reserve Board's proposed interchange regulations could limit debit card transaction fees to as little as seven to 12 cents per transaction. A proposed exemption for issuers with under $10 billion in assets is included in the proposal, but CUNA, leagues and credit unions have been emphasizing that the exemption is flawed and will not work in practice. The interchange fee reduction would result in a $15 billion-plus windfall for merchants, Cheney noted, “with no evidence, and no requirement, that they pass their gain back to their customers.” Cheney explained in the op-ed that the “highly advanced and consumer-friendly” debit card network costs money to operate and, until recently, the merchants who used the system paid for it, usually at about 1% to 2% per transaction. Cheney's op-ed is being carried by a number of papers around the country that subscribe to the McClatchy-Tribune News Service. The existing fee structure has spurred the creation of an enormous variety of free payment cards from credit unions, community banks and major institutions, Cheney noted. But under the fee cap statute slipped into last year's Wall Street reform legislation by giant retailers, Cheney said, the $15-billion windfall for merchants is going to have to be made up by credit unions and others that issue debit cards. “For the big banks that may mean that customers pay more, get fewer services and/or shareholders make less profit. And even with their enormous resources, in some cases they have already raised their fees to address the reduced revenue. “In a credit union, however, it's all about the consumer-member--who is also the owner. As not-for-profit institutions, extra revenue gets channeled back to the credit unions' membership as higher savings yields, lower loan rates and lower fees. Last year, these savings to credit union members amounted to more than $6.5 billion,” Cheney said. Noting that the interchange provisions were added to the Dodd-Frank Wall Street Reform Act “with no serious review and very little debate,” Cheney said that “any regulation directly affecting so many Americans should have received proper study before it was passed.” House and Senate legislation that would delay interchange cap implementation and require a study of the cap’s impact on consumers, financial institutions, and merchants remain active in Congress. Merchants are fighting to maintain the status quo and let the interchange cap go forward, and a merchant op-ed appeared opposite Cheney’s editorial in the McClatchy-Tribune News Service on Thursday. CUNA and credit unions continue to fight for an interchange delay, and Cheney recently called on credit unions and their supporters to continue to press their local legislators for a delay. (For prior coverage of this push, use the resource link) Capitol Hill-based publication Roll Call reported that the next front in this debit interchange fight may be state legislatures, where pro-retailer groups are promoting legislation that would allow merchants to select which card providers they would work with based on fee structures. For the CUNA editorial and Roll Call’s recent coverage, use the resource links.

NCUA issues prohibition order to former CU CEO

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ALEXANDRIA, Va. (6/3/11)—The National Credit Union Administration (NCUA) on Thursday prohibited Stan Roberson, a former employee of Denver, Colo.-based Her Majesty’s CU, from future work at any federally insured financial institution. Violation of a prohibition order is a felony offense punishable by imprisonment and a fine of up to $1 million. Roberson, the former CEO of the credit union, was convicted of contempt of court and sentenced to 180 days in jail. Late last year, Roberson was sentenced to one year in jail for contempt of court and failing to produce documents for a securities investigation by the Colorado Division of Financial Services. Regulators have investigated the credit union in an attempt to determine whether it is legitimate or a fraud. The investigation was spawned by the credit union’s offering of certificates of deposit to consumers over the internet at interest rates above prevailing rates. Roberson also made several inconsistent statements during a discussion with the Credit Union Association of Colorado last year. The then-CEO claimed to be in charge of the only Virgin Islands-based credit union, and claimed that his credit union was a member of both the Credit Union Association of New York and the Credit Union National Association. The statements were false. The credit union is still in operation, is chartered in the U.S. Virgin Islands, and maintains a back office operation in Denver, Colo. However, the credit union is not chartered by the Colorado Division of Financial Services nor the NCUA. For the full release, use the resource link.

30- 15-year rates continue to set yearly lows

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WASHINGTON (6/3/11)--Thirty- and 15-year fixed-rate mortgages slid even further during the week ended June 2, again setting new yearly low points, with 30-year loans averaging 4.55% and 15-year loans averaging 3.74%. The previous lows for this year were set last week. Freddie Mac Vice President/Chief Economist Frank Nothaft said that the fixed mortgage rate reductions related to lower weekly U.S. Treasury yields, which dropped “amid financial market concerns that the current lull in the economy is continuing.” The housing market also remains slow, he added. Five-year adjustable rate mortgages (ARM) held steady during the week, again averaging 3.41%. One-year ARMs increased slightly, totaling 3.13%. Five-year ARMs averaged 3.94% this time last year, while one-year ARMs averaged 3.95%.

CFPB wants comment on lending savings privacy

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WASHINGTON (6/2/11)—Regulations addressing lending, savings, and consumer privacy are among those that will be taken over when a number of finance industry oversight tasks are transferred to the Consumer Financial Protection Bureau (CFPB) on July 21, and the CFPB is seeking public comment ahead of that deadline. The Equal Credit Opportunity Act and the Fair Credit Reporting Act, as well as regulations addressing electronic fund transfers, mortgage originator registration, and mortgage assistance relief services, will also come under the CFPB’s control later this year. The CFPB in the Federal Register listed 47 rules that will become its responsibility in late July. The CFPB is taking over authority of these and other rules from the National Credit Union Administration, the Federal Reserve, the Federal Deposit Insurance Corp., the Office of the Comptroller of the Currency, the Office of Thrift Supervision, the Federal Trade Commission, and the U.S. Department of Housing and Urban Development. The list was developed after conversations with these regulators, according to the CFPB. Comments will be accepted until June 30. A final list will be published before July 21, the CFPB said. The CFPB is already developing a simplified mortgage disclosure document that combines the complicated documents required under the Truth in Lending Act (TILA) and the Real Estate Settlement Procedures Act (RESPA) into a single page, two-sided disclosure. The CFPB last week discussed the form with the Credit Union National Association (CUNA) just before the comment deadline for the first draft of its combined form closed. Additional drafts are scheduled to be released, and CUNA has planned to meet with the CFPB when the second draft of its mortgage form is released later this month. For coverage of CUNA’s most recent meeting with the CFPB, and the full list, use the resource links.

Cheney writes Small Business Committee on MBL cap

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WASHINGTON (6/2/11)--Credit unions stand ready to help businesses grow and to create jobs – and could lend an additional $13 billion to small businesses in the first year if legislation to raise their authority to make business loans is passed, Credit Union National Association (CUNA) President/CEO Bill Cheney told members of the House Small Business Committee in a Wednesday letter. The letter was sent to committee chairman Rep. Sam Graves (R-Mo.) and ranking member Rep. Nydia Velazquez (D-N.Y.), and was submitted for the record of a Wednesday hearing entitled “Access to Capital: Can Small Businesses Access the Credit Necessary to Grow and Create Jobs?” H.R. 1418, which was introduced by Reps. Ed Royce (R-Calif.) and Carolyn McCarthy (D-N.Y.) earlier this year, would lift the credit union member business lending cap to 27.5% of total assets, creating as many as 140,000 new jobs at no cost to taxpayers. While the regulations that H.R. 1418 would address do not fall under the jurisdiction of the small business committee, Cheney encouraged committee members to support the legislation. The CUNA letter noted that “credit unions have proven the ability to do small business lending safely and soundly, demonstrating remarkably lower charge-off and delinquency rates than banks making business loans,” and added that credit unions have increased their work with small businesses in recent years as banks have limited their business lending portfolios. Cheney pointed out that, today, many credit unions are rapidly approaching the extant 12.25% cap on total business lending imposed by law on credit unions, while others choose not to engage in business lending because of the cap. In spite of the 12.25% cap, business lending is the fastest growing segment of credit union lending. For the full letter, use the resource link.

Foreign account report deadline extended for some

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WASHINGTON (6/2/11)--The Internal Revenue Service (IRS) and the Financial Crimes Enforcement Network (FinCEN) this week extended for some individuals the deadline for filing Reports of Foreign Bank and Financial Accounts (FBARs) until June 30, 2012. The reports were due to be filed on June 30 of this year. The FBAR filing extensions are limited to:
* Officers and employees of credit unions and other financial institutions that have “signature or other authority over and no financial interest in a foreign financial account of another entity more than 50% owned, directly or indirectly,” by their employing institution; and * Officers and employees with no financial interest in the foreign financial accounts over which they have signature authority or other authority.
FBAR forms are filed annually and are used to report a financial interest in, or signature or other authority over, bank accounts, securities, or other types of financial accounts in foreign countries. FBARs must be filed for accounts that hold over $10,000 in funds at any time during the year, and are required to be filed once per year. For the full release, use the resource link.

Inside Washington (06/01/2011)

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* WASHINGTON (6/2/11)--U.S. Reps. Jim Himes (D-Conn.) and Steve Womack (R-Ark.) have introduced a bill that would exempt privately held banks with less than 2,000 shareholders from filing quarterly reports with the Securities and Exchange Commission (SEC). The law currently requires all banks with at least 500 shareholders to register with the SEC, even if their stocks are not traded on a major exchange (American Banker June 1). The threshold for de-registering would be increased to 1,200 shareholders from 300 shareholders. Community bankers maintain that the current standards, in place since 1964, should be raised to better reflect investor interest in local banks. Bank financials are already available to the public through call reports, according to bankers, who say that registering with the SEC is redundant and costly. The bill is a companion to legislation introduced in the Senate by U.S. Sens. Kay Bailey Hutchison (R-Texas) and Mark Pryor (D-Ark.) in March … * WASHINGTON (6/2/11)--David J. Stockton, director of the Federal Reserve’s division of research and statistics, will retire Sept. 30 after 30 years of service at the Fed, including 11 years in his current role. Stockton oversees the division’s 325 employees and is responsible for briefing the Federal Open Market Committee on the outlook for the U.S. economy. In that capacity, he has served under two Federal Reserve Chairmen: Ben S. Bernanke and Alan Greenspan. Before joining the board staff in 1981, Stockton was an instructor and lecturer at Yale University, New Haven, Conn. He started at the board as an economist in the wages, prices and productivity section, with responsibility for forecasting and analyzing inflation … * WASHINGTON (6/2/11)--The Internal Revenue Service’s Advisory Committee on Tax-Exempt and Government Entities (ACT) will hold a public meeting on June 15 and submit its latest round of recommendations to IRS leadership. The ACT makes recommendations on operational policies and procedures regarding employee retirement plans, tax-exempt organizations, tax-exempt bonds and federal, state, local and Indian tribal governments. Reports from five ACT subgroups are on the agenda, including: Exempt Organizations: Group Exemptions--Creating a Higher Degree of Transparency, Accountability, and Responsibility; and Employee Plans: Recommendations Regarding Pension Outreach to the Small Business Community. ACT reports are available on the IRS website