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CU supporter resigns from Congress

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WASHINGTON (7/11/12)--The resignation of Rep. Thaddeus McCotter (R-Mich.) leaves a void for credit unions in Michigan and the country, the Michigan Credit Union League (MCUL) said on Tuesday.

"Thad McCotter has been an important ally to the credit union movement," MCUL CEO David Adams added.

McCotter first served in the U.S. Congress in 2003, was a member of the House Financial Services Committee, and co-sponsored separate bills that would increase the credit union member business lending cap and grant credit unions greater access to supplemental capital. He also spoke at the Credit Union National Association's 2010 Governmental Affairs Conference.

McCotter last Friday announced he would resign from his seat after he did not gain the number of signatures needed to appear on a primary ballot.

The Michigan Bureau of Elections in May found only 277 of the 2,000 signatures McCotter turned in were valid, and the former congressman is being investigated for possible election fraud by Michigan state authorities.

CUNA urges Senate to take up ATM bill

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WASHINGTON (7/11/12)--While the U.S. House's unanimous passage of legislation that would ease duplicative ATM regulations is "an important milestone," Credit Union National Association (CUNA) President/CEO Bill Cheney said there is more work to be done.

The ATM bill, H.R. 4367, passed the House Monday night by a 371 to 0 vote. Cheney encouraged the Senate to take up the ATM regulation measure as soon as possible and provide credit unions with much needed regulatory relief.

The bill would eliminate portions of Regulation E that require credit unions and other financial institutions that provide ATM services to display a physical notice on the ATM that a fee will be charged. Under the legislation, ATMs would only be required to display the ATM disclosures on a screen.

The current ATM disclosure requirements are creating issues for credit unions and other financial institutions that continue to be subject to frivolous lawsuits. CUNA has noted that outside notices on ATMs are, in some cases, being intentionally removed or destroyed, without the financial institution's knowledge, and then pictures are then taken of the ATM to show noncompliance with disclosure rules. Some ATM users may then use this as evidence of apparent noncompliance and as grounds for lawsuits, and the total number of these lawsuits could be in the hundreds. Many credit unions are settling the suits to avoid the cost of litigation, CUNA has said.

After the House vote, Cheney said credit unions across the country appreciate the passage of H.R. 4367, and noted that consumers won't be adversely affected by the elimination of this redundant sign because the bill maintains the obligation that consumers opt-in to any ATM fees before a transaction is processed.

"CUNA is working with senators and their staff to move the ATM legislation through the Senate as quickly as possible, and we remain hopeful that the Senate will consider the bill soon," CUNA Senior Vice President of Legislative Affairs Ryan Donovan said.

FinCEN sets July 31 due diligence hearing

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WASHINGTON (7/11/12)--The Financial Crimes Enforcement Network (FinCEN) has scheduled a July 31 public hearing to collect additional comments on customer due diligence (CDD) regulations it proposed earlier this year.

The hearing is scheduled for  9:30 a.m. to 5:30 p.m. ET  at the U.S. Treasury office. FinCEN has invited regulators, members of the law enforcement community, finance industry representatives and others to attend or submit comments. The hearing will be the first in a series of hearings on the potential due diligence regulations, FinCEN said.

Saying it was concerned by a lack of uniformity and consistency in how financial institutions address their CDD policies, FinCEN in March released an Advanced Notice of Proposed Rulemaking (ANPR). It proposed to codify, clarify, consolidate and strengthen CDD rules. The proposed rule would apply to financial institutions, securities brokers and dealers, mutual fund brokers and dealers, futures commission merchants, and some introducing commodities brokers, and would require them to establish and maintain policies for monitoring the accounts they hold.

A key part of the FinCEN ANPR addresses standards for verifying the identity of each member/customer and understanding the "nature and purpose" of each account held at an institution to assess the likelihood of suspicious activity. The proposed FinCEN regulations would be one part of a broader U.S. Treasury strategy to enhance financial transparency to strengthen efforts to combat financial crimes.

The Credit Union National Association (CUNA) in a comment letter said that while it supports the objective to improve the tracking of money laundering and terrorist financing, the increased regulatory burdens and costs the proposed rules would create for credit unions would far outweigh the purported benefits to FinCEN. CUNA noted it can be difficult for some credit unions to obtain certain account information from their members, and said the FinCEN rules could conflict or interfere with member confidentiality standards, resulting in potential fiduciary or legal issues.

FinCEN should abandon the due diligence ANPR and, instead, work with the National Credit Union Administration and other federal financial regulators to further clarify current Bank Secrecy Act and anti-money laundering rules, CUNA suggested.

For more on the FinCEN ANPR, and CUNA's comment letter, use the resource links.

CFTC exempts most CUs from derivatives rules

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WASHINGTON (7/11/12)--The Commodity Futures Trading Commission (CFTC) on Tuesday approved a final rule to exempt, as end users, credit unions with under $10 billion in assets from the terms of pending derivatives regulations, and introduced a proposal that would also exempt certain larger credit unions from those same rules.

If the proposal, which the Credit Union National Association (CUNA) has already weighed in with the agency to support, is adopted, virtually all credit unions will avoid the CFTC's rules on derivatives. "This could be important particularly if regulations limiting the ability of credit unions to use plain vanilla instruments to hedge interest rates are further considered by the National Credit Union Administration," CUNA Deputy General Counsel Mary Dunn said.

The CFTC rule finalizes definitions of swaps, security-based swaps and security-based swap agreements. The new swap definitions are effective immediately, according to the CFTC.

Portions of the Dodd-Frank Wall Street Reform Act would bar certain institutions from engaging in swap transactions, and require institutions that engage in swaps to sell and buy them through federally registered clearinghouses and open markets. However, these regulations could not become effective until swaps were defined by federal regulators.

With the new definitions approved, some of the swap regulations could become effective in about 60 days, the CFTC said.

In addition, the CFTC approved a rule to provide an exemption for small financial institutions, under which credit unions and other end-user financial institutions with fewer than $10 billion in assets will not be subject to pending mandatory swaps clearing requirements. CUNA called for this exemption in a 2011 comment letter and supported it in subsequent discussions with policymakers.

CFTC Chairman Gary Gensler said the regulatory burdens faced by smaller institutions were discussed as the CFTC considered the exemption.

The exemption from the swap clearing requirements also could be extended to credit unions with more than $10 billion in assets under a separate CFTC proposal issued on Tuesday. That proposal would provide a so-called "cooperative exemption" for cooperative businesses if all of a given business's members are non-financial entities, financial entities to which the "small financial institution exemption" applies, or cooperatives. This definition would likely cover credit unions with more than $10 billion in assets that meet the exemption criteria, CUNA Assistant General Counsel Luke Martone said.

The proposed exemption will be open for public comment for 30 days after it is published in the Federal Register, and CUNA will submit a comment letter on the proposal.

Federal credit unions are allowed to enter into some types of over-the-counter agreements, which would meet the definition of "swaps," and some state credit unions have this authority as well. Relatively few credit unions use derivatives to hedge interest-rate risk.

Regulators warn of outsourced cloud computing risks

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WASHINGTON (7/11/12)--Credit unions and other financial institutions should clearly identify and mitigate legal, regulatory, and reputational risks before they decide to use cloud computing for data storage and other computing purposes, the Federal Financial Institutions Examination Council (FFIEC) said in a Tuesday release.

In cloud computing, data are not held in one central spot, but are shared among different servers and locations.

Outsourcing to cloud computing providers can help reduce costs and improve the flexibility, scalability and speed of data use and storage, the FFIEC said. However, credit unions and other institutions should perform adequate due diligence before any moves to such systems are made, and should be aware of cloud-specific security and regulatory issues.

Cloud computing is another form of outsourcing, with the same basic risk characteristics and risk management requirements as traditional forms of outsourcing, the FFIEC said.

Financial institutions should assess the strength of any cloud computing firm's internal controls, and examine their own data security standards, before moving forward, the FFIEC suggested. Cloud storage could increase the frequency and complexity of security incidents, the FFIEC noted. The regulators said financial institutions and cloud computing providers should ensure that their firms effectively monitor their systems for security-related threats, and be sure to have appropriate forensic strategies for investigation and evidence collection in the event of a security breach.

Cloud computing also can create new compliance issues if customer data are stored or processed overseas. Overseas data storage can make it more difficult for financial institutions to assess compliance. Also, due diligence may be more complex and difficult in an environment where the cloud computing service provider processes and stores data overseas, the FFIEC warned.

For the full FFIEC release, use the resource link.

Inside Washington (07/10/2012)

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  • WASHINGTON (7/11/12)--As part of its ongoing efforts to wind down and recover its remaining Capital Purchase Program (CPP) investments under the Troubled Asset Relief Program (TARP), the Department of the Treasury Monday said it will sell more preferred stock and subordinated debt CPP investments. Treasury has recovered $264 billion from TARP's bank programs through repayments, dividends, interest and other income--compared with the $245 billion initially invested. Treasury has remaining outstanding CPP investments in 325 banks.  Beginning July 23, the Treasury will auction the preferred stock and subordinated debt for First Western Financial, Denver; CBS Banc-Corp., Russellville, Ala.; Exchange Bank, Santa Rosa, Calif.; Market Street Bancshares, Mount Vernon, Ill.; Fidelity Financial, Wichita, Kan.; Marquette National, Chicago; Premier Financial Bancorp, Huntington, W. Va.; Diamond Bancorp, Washington, Mo.; Park Bancorp., Madison, Wis.; Trinity Capital, Los Alamos, N.M.; First Community Financial, Joliet, Ill.; and Commonwealth Bancshares,  Louisville, Ky. …
  • WASHINGTON (7/11/12)--Banks participating in the Small Business Lending Fund (SBLF) increased their business lending by $433 million during the first quarter, the Treasury Department announced Monday. Of the 281 participating banks, 84% increased their business lending over baseline levels, according to a report released by Treasury. More than 69% increased their business lending by 10% or more. The SBLF program is designed to increase lending to small businesses by making capital available to community banks and community development loan funds. It provided $30 billion to banks with less than $10 billion of assets, including banks that wished to repay TARP funds (News Now April 26). As of March 31, SBLF participants have increased their lending by $5.2 billion over their aggregate baseline, according to Treasury. The Credit Union National Association (CUNA) and credit unions are urging the U.S. Congress to increase credit unions member business lending (MBL) cap to 27.5% of assets from 12.25%. Doing so would open up more opportunity to offer MBLs, inject $13 billion in business loans into the economy and create as many as 140,000 new jobs, with no cost to taxpayers, CUNA said …
  • WASHINGTON (7/11/12)--Responding to criticism that the Consumer Financial Protection Bureau's (CFPB) complaint database is unfair, CFPB Director Richard Cordray said the database puts pressure on companies to compete for customer service. In an interview with American Banker (July 10), Cordray called the database part of "a free market of ideas" and said it is the agency's job to weed through unfounded complaints that critics claim the system encourages. Regarding delays on the qualified mortgage rule, Cordray told the Banker the mortgage market will be more negatively affected by a poorly crafted rule than any delays that would be necessitated to draft an effective rule …