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CFPB sets July 16 credit reporting hearing

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WASHINGTON (7/12/12)--Credit reporting will be the lone item on the agenda when the Consumer Financial Protection Bureau (CFPB) meets with credit unions and others at a planned July 16 field hearing in Detroit, Mich.

CFPB Director Richard Cordray is scheduled to speak at the hearing, which will also feature testimony from finance industry representatives, academics, and representatives from consumer-oriented groups.

Michigan Credit Union League President/CEO Dave Adams and local Michigan credit unions will also attend.

The CFPB has identified credit reporting agencies as one of the many entities it could regulate, but the agency has otherwise not addressed the credit reporting industry.

The Dodd-Frank Wall Street Reform Act transferred Fair Credit Reporting Act (FCRA) rulemaking authority to the CFPB as of July 21, 2011, and FCRA regulations were republished, with slight changes, as an interim final Regulation V rule five months later.

The CFPB fair credit regulation "substantially duplicates" most of the interagency FCRA regulations issued by the National Credit Union Administration (NCUA), the Federal Trade Commission (FTC), and federal banking agencies, as well as the stand-alone FTC regulations.

The CFPB does not currently have the authority to promulgate rules regarding FCRA provisions on: the disposal of consumer information, identity theft red flags, and rules on the duties of card issuers regarding changes of address.

CUNA last year advised credit unions to continue to refer to NCUA and FTC regulations, and not Reg V, for these provisions.

ICU MagazineI features CUNA on CUs trust funds

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WASHINGTON (7/12/12)--While credit unions lack full trust powers, they can open trust accounts for their members, Credit Union National Association (CUNA) Federal Compliance Counsel Colleen Kelly said in the July edition of Credit Union Magazine.

Federal credit unions are not permitted by law to administer trust accounts. While some states may legally allow state-chartered credit unions to administer trusts, it is unlikely that any credit unions do so, Kelly said. However, some credit unions do offer full trust services to their members through affiliated credit union service organizations, she noted. Credit unions simply hold trust account funds, and cannot disburse trust account funds.

Credit unions can offer either revocable trusts, such as a payable on death (POD) accounts, or irrevocable trusts. A written trust agreement establishes an irrevocable trust where the grantor gives up all power to revoke the trust.

POD trust accounts can be easily opened at credit unions, but other trust accounts can be more complicated.

Trust agreements are often lengthy legal documents, and Kim Bohannon, a compliance and risk management officer with TVA Employees CU, Knoxville, Tenn., recommends that members provide their credit union with a one-page declaration that includes simply the information the credit union needs to open the account. Information on the delcaration can include the title of the trust, the date on which the trust was executed and the names and contact information of the trustees, beneficiaries and others taking part in the trust.

Trust accounts are addressed in National Credit Union Administration (NCUA) share insurance regulations, Kelly said. Various combinations of trust account owners and beneficiaries can impact insurance coverage for trust accounts in different ways.

The Credit Union Magazine article reminds readers that the NCUA no longer limits insurance coverage to "qualified beneficiaries." As long as the beneficiary is a natural person, charity or nonprofit organization, the beneficiary will be insured separately, Kelly said.

For more of the Credit Union Magazine piece, use the resource link.

CUs need mortgage rule relief CUNA

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WASHINGTON (7/12/12)--The Credit Union National Association (CUNA) encouraged members of the U.S. Congress to support extending the compliance date for pending mortgage rules, and to urge the Consumer Financial Protection Bureau (CFPB) to exempt credit unions from the mortgage rules where possible, in a Wednesday statement.

The letter was submitted for the record ahead of a Wednesday U.S. House Financial Services financial institutions and consumer credit subcommittee hearing on the Dodd-Frank Wall Street Reform Act's impact on the mortgage market. The CFPB, which was created by the Dodd-Frank Act, earlier this week proposed a new, simplified mortgage disclosure form that combines elements of Real Estate Settlement Procedures Act (RESPA) and Truth in Lending Act (TILA) disclosure forms into a single document. New mortgage rules were also proposed to implement these RESPA/TILA changes, and CUNA's letter focused on these rules.

CUNA said it is still reviewing the 1,099 page proposal, but one initial concern is a CFPB claim that the proposed mortgage changes would not increase the cost of mortgage lending. "A dollar spent on regulatory compliance is a dollar diverted from lending. So, in fact, some mortgage reforms in the Dodd-Frank Act do negatively impact access to mortgage credit for consumers," CUNA said.

As it reviews the CFPB proposal, CUNA is also focusing on how the rule's proposed revision of the finance charge definition could impact credit unions. In the letter, CUNA said that expanding this definition could change home appraisal, escrow and ability-to-repay requirements in some cases.

CUNA said it generally supports the CFPB's proposed definition of a "qualified mortgage," and particularly backed portions that would treat qualified mortgages as a legal safe harbor. Without adequate safe harbor, credit unions could be faced with frivolous foreclosure defense litigation, CUNA said.

The CFPB is still determining a final compliance date for its proposed RESPA/TILA mortgage rules. The agency should give credit unions "as much time as possible" to comply with the rules, once they are finalized, CUNA said.

Overall, CUNA said, the CFPB should use the authority granted to it by Congress to exempt credit unions from new regulations as much as possible. CUNA said the CFPB has greater exemption authority than it has been exercising, and is concerned that the CFPB "seems to be picking and choosing" when to provide regulatory relief.

Inside Washington (07/11/2012)

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  • WASHINGTON (7/12/12)--The White House yesterday announced executive orders that will relaunch the U.S. Small Business Administration's (SBA) Small Loan Advantage Program and increase the maximum loan amount available under that program to $350,000. The cap was previously set at $250,000. Paperwork for disaster loans and other SBA loans would also be reduced under another executive order …
  • WASHINGTON (7/12/12)--Freddie Mac is exploring ways to reduce the amount it pays for force-placed insurance, according to an executive with the second-largest insurance carrier in the market. The government-sponsored enterprise is in discussion with a trade group to develop a lender-placed insurance cost solution to lower the cost to the investor program, John Dickson, a vice president of QBE First Insurance Services, at a hearing held by Florida's Office of Insurance Regulation last week (American Banker July 11). Under standard mortgage terms, borrowers are contractually obligated to maintain hazard insurance. In the event that homeowners fail to maintain such coverage, mortgage servicers are entitled to buy force-placed coverage on their behalf and bill the homeowners. Consumer advocates and insurance regulators in New York and California have criticized banks for reinsuring or collecting commissions on the policies they buy, saying the policies amount to kickbacks and inflate the price of coverage …
  • WASHINGTON (7/12/12)--Senate Banking Committee Chairman Tim Johnson (D-S.D.) Tuesday outlined the committee's plan for looking into allegations of potential widespread manipulation of the London interbank offered rate (LIBOR) and other rates. LIBOR is used by financial institutions to set interest rates on a variety of financial products including mortgages, student loans and credit cards. LIBOR for the U.S. dollar is set based on information provided by 18 global financial institutions, including several U.S. banks. "At my direction, the committee staff has begun to schedule bipartisan briefings with relevant parties to learn more about these allegations and related enforcement actions," Johnson said. "It is important that we understand how any manipulation may impact American consumers and the U.S. financial system." The Banking Committee will hold hearings in July with Treasury Secretary Timothy Geithner and Federal Reserve Chairman Benjamin Bernanke, Johnson said
  • WASHINGTON (7/12/12)--The National Flood Insurance Program (NFIP) is now officially extended until Sept. 30, 2017, after President Barack Obama signed the Biggert-Waters Flood Insurance Reform Act of 2012 into law on July 6. The NFIP bill calls for flood insurance reforms, including the phasing out of subsidies for many properties, raising the cap on annual premium increases, allowing multifamily properties to purchase NFIP policies, imposing minimum deductibles for flood claims, requiring the NFIP administrator to develop a plan for repaying the debt incurred from Hurricane Katrina, and establishing a technical mapping advisory council to deal with map modernization issues…
  • WASHINGTON (7/12/12)--The Federal Reserve on July 16 is scheduled to auction off $3 billion in 28-day term deposits through its Term Deposit Facility. The minimum bid will be $10,000, and the maximum bid amount, per institution, will be $1.25 billion. The awarded deposits will settle on July 19, and will mature on Aug. 16…