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Johnsons last meeting sees broad agenda of issues

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ALEXANDRIA, Va. (7/18/08)—Presiding over her last agency open meeting, National Credit Union Administration (NCUA) Chairman JoAnn Johnson next week will guide her board through discussions of a broad array of topics. Slated for the July 24 meeting are a report on the state of the federal share insurance fund, action on a proposed definition change under prompt corrective action (PCA) rules, and a decision whether or not to pursue design of a new agency seal. The National Credit Union Share Insurance Fund (NCUSIF) accounting is not likely to hold major surprises. Earlier this week Johnson released mid-year data indicating the fund stands strong with an equity ratio estimated at 1.24% for June 30. The NCUA Board will also consider whether to adopt its proposed guidance on provisions in the Federal Credit Union Act that prohibit persons convicted of criminal offenses from participating in the affairs of a federally insured credit union. Federal bank and thrift agencies have provided guidance to their regulated financial institutions on the prohibitions and NCUA is considering following suit. A final item to be considered; a request from Horizon One FCU to convert to a community charter. Horizon One CEO Ann Garmon confirmed Thursday that the agenda item refers to her Indianapolis, Ind. credit union. Horizon One has almost $68 million in assets and 11,347 member. “I am really pleased to be able to be on this agenda. We have worked long and hard to get there,” Garmon said. The credit union currently has a multiple group membership, primarily involving transportation equipment. On the topic of NCUA chairmen, although board member-designate Michael Fryzel met with Johnson and senior NCUA staff during a two-day visit to Washington this week as part of his preparation for assumption of the NCUA chairmanship later this month, the agency said he is not expected to attend next week’s meeting. An agency spokesman said that Fryzel’s swearing-in date has not been finalized, but it will be before the end of July.

CUNA Mutual Group warns of info-reporting risks to CUs

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WASHINGTON (7/18/08)—Credit unions must guard against possible lawsuits by knowing how to properly report member information to credit bureaus, warns CUNA Mutual Group in a recent risk alert.
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The Fair Credit Reporting Act (FCRA) requires credit unions-- as furnishers of information to consumer reporting agencies--to report accurate information, conduct prompt investigations in the event of a dispute, and to correct any reporting errors. CUNA Mutual notes that lawsuits have cropped up in several states. The suits target credit unions for alleged mistakes made reporting member debts that had been discharged in bankruptcy. They contend that charged-off debt was reflected as still being owed. The resulting negative impact of such a mistake to a member could include lower credit scores and a resulting higher interest rate, higher costs in various in other types of consumer transactions, such as insurance, and denied credit, according to CMG. Other damages alleged in suits have included such things as embarrassment, defamation, mental anguish, emotional distress, and inconvenience, the alert adds. To avoid problems, CUNA Mutual recommends credit unions take the following steps:
* Know who at your credit union is responsible for assuring correct information is reported to credit bureaus. Have detailed procedures for handling credit reporting, bankruptcy credit reporting, disputes, and potential identity theft issues. Knowledge of proper terminology and coding for applicable data fields is essential. * Be familiar with, and understand, various codes used by credit bureaus you work with. Ensure proper codes are provided for each consumer. Adhere to industry standards for the reporting of accurate, complete, and timely credit information. * Assure that credit union staff works with credit bureau staff to ensure correct bankruptcy reporting. The bureaus may also have resources available that can audit and provide summaries to verify how information is being reported. * Check with the credit bureau on reporting procedures for an unusual situation or with questions on reporting. Bureaus are generally very willing to work with credit unions they serve because it keeps both parties out of regulatory trouble. * Have follow-up procedures in place for times when your credit union is notified that a reporting mistake has been made. Make necessary changes on your in-house system so misreporting does not resume the month after the manual change is made.
Valerie Moss, director of compliance information for the Credit Union National Association (CUNA), encourages credit unions to bone up on credit bureau reporting issues, especially the subject of the CMG alert. “CUNA’s compliance department has fielded questions from a number of credit unions lately on how to properly report bankruptcies to credit bureaus.”

Inside Washington (07/17/2008)

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* WASHINGTON (7/18/08)--The Senate Banking Committee is granting Sen. Charles Schumer’s (D-N.Y.) request to hold a hearing on the IndyMac failure (American Banker July 17). IndyMac was shut down last week by the Office of Thrift Supervision (OTS). The OTS and Schumer blame each other for the bank’s closing ... * WASHINGTON (7/18/08)--The Federal Reserve Board is trying to ensure that financial markets improve, and that lessons learned from the IndyMac bank failure are applied to create a system that is less prone to financial problems, Fed Chairman Ben Bernanke said Wednesday. The Fed leader was questioned Wednesday about which financial institutions would receive government aid in the case of a failure. The central bank has said it would give Fannie and Freddie access to its discount window. The Treasury also has said it would serve as a backstop Fannie and Freddie ... * WASHINGTON (7/18/08)--Cerberus Capital Management will retain its control of GMAC, the Federal Deposit Insurance Corp. said this week. The FDIC granted a 10-year extension of GMAC Bank's current ownership by extending the existing disposition requirement that was established in connection with the sale of a majority stake in GMAC, the bank said in a release ... * WASHINGTON (7/18/08)--Reps. Barney Frank (D-Mass.), Carolyn Maloney (D-N.Y.), Spencer Bachus (R-Ala.) and Judy Biggert (R-Ill.) have asked that the Farm Credit Administration (FCA) drop a proposal to grant Farm Credit System lenders the ability to finance non farm projects (American Banker July 17). The lawmakers argue that the proposal strays too far from the original purpose of the Farm Credit System. The administration has received eight comment letters on its proposal, which was released for comment June 16. Ken Auer, Farm Credit Council president/CEO, said the non farm projects would benefit rural America and farmers. He said the FCA plan would be a modest way to meet existing needs... * ALEXANDRIA, Va. (7/18/08)--The National Credit Union Administration’s (NCUA) website will have limited service and all telephone and network services will be unavailable from 7 p.m. ET Friday until approximately 9 a.m. ET Saturday. The local power company is cutting power to NCUA headquarters in Alexandria for utility maintenance. The outage includes all NCUA Internet server functions, such as 5300 Call Report uploads, Financial Performance Report requests, and Find a Credit Union queries...

All-borrower race gender data collection considered

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WASHINGTON (7/18/08)–A House Financial Services subcommittee continued its investigation Thursday into the value of a public reporting system on race and gender data of for all borrowers. The subcommittee on oversight and investigations, chaired by Rep. Mel Watt (D-N.C.), used as a springboard for this session a recent Government Accountability Office report. The June report took a look at the Federal Reserve Board’s Regulation B, which implements the Equal Credit Opportunity Act (ECOA) of 1974. The Fed’s rule generally bans lenders from collecting certain data from loan applicants, and race and gender are two of the categories of prohibition. The Fed maintains that a voluntary system of data collection, one that is not publicly disclosed, could lead to the very discriminatory practices it would be intended to discourage. However, the GAO report noted others argue that the Fed’s prohibition limits the capacity of researchers and regulators to identify possible discrimination in nonmortgage lending. Sandra Braunstein, director of the Fed’s division of consumer and community affairs, testifying before the subcommittee said the Fed’s concerns about inappropriate use of information relate to data that would be collected and held, not publicly reported. She said it also applied to a system under which there would be no consistent standards or approach to data collection. Under questioning by Watt, Braunstein said that gender and race information collected and reported under the Home Mortgage Disclosure Act (HMDA) for mortgage borrowers is a “useful screening tool in fair lending examinations.” When the chairman asked the Fed representative if HMDA is a deterrent to discriminatory lending practices, Braunstein replied, “I think that is fair to say.” In assessing the cost to the industry of HMDA compliance, Braunstein said she did not have specific figures but added, “it’s pretty significant.” She predicted that that it would take “HMDA costs plus” to “put in a robust system that would valuable to people” for other borrowers. “Small business data might be more complex than that for mortgage loans,” the Fed rep suggested. She noted that it would be the role of Congress, not the Fed, to weigh the benefits, detriments, and costs of a new reporting scheme. Other witnesses included:
* Orice Williams, director of GAO’s Financial Markets and Community Investment; * Ken Cavalluzzo, research analyst, Wisconsin Capital Management LLC; * Robert F. Gnaizda, general counsel, The Greenlining Institute; * Bill Himpler, executive vice president of federal affairs, American Financial Services Association; * Jorge Corralejo, chairman, Latino Chamber of Commerce of Greater Los Angeles; and * Ann Sullivan, president, Madison Services Group.
Use the resource link below to access more testimony