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Inside Washington (07/25/2011)

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* WASHINGTON (7/26/11)--Last week, banking executives and state attorneys general met in Washington to work towards a settlement on bank foreclosure abuses. At issue is how much banks should pay and who should receive the payment. Initial terms, which emerged in March, were said to be $20 billion (New York Times July 25). Also to be addressed is how banks will be protected from future liability. Another issue is the potential liability related to the Mortgage Electronic Registry Systems (MERS), a company owned by the major banks, which was set up in the mid-1990s by the Mortgage Bankers Association, Fannie Mae and Freddie Mac. Its goal was to speed up the home loan process. Lawyers have questioned MERS’ ability to bring foreclosure proceedings because the system does not technically own the security or note underlying properties, as required. It would be unprecedented to release banks that own MERS from liability arising from claims that have not been investigated, according to attorneys the Times said … * WASHINGTON (7/26/11)--Floyd Stoner, the chief lobbyist for the American Bar Association, announced his retirement after 26 years with the organization (American Banker July 25). Before joining the ABA in 1985, Joiner was a political-science professor at Marquette University. Ken Clayton and James Ballentine will assume operational responsibilities next year for the congressional relations and public policy division at the ABA, with Clayton becoming chief counsel and senior vice president of legislative affairs, and Ballentine serving as senior vice president of congressional relations and political affairs …

CUNA Proposal could shut down interntl fund transfers

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WASHINGTON (7/26/11)—Many credit unions could cease offering international electronic fund transfer services to their members if a rule intended to protect consumers who use “remittance” services is put into effect without significant revisions, according to the Credit Union National Association (CUNA). CUNA’s Friday comment letter to the Federal Reserve Board highlighted the potential for “unintended consequences” as a result of the broad Regulation E rule drafted in response to Dodd-Frank Wall Street Reform and Consumer Protection Act requirements. Remittance transfers generally involve small amounts of money sent person-to-person through “closed loop” or “stand alone” systems such as Western Union or the World Council of Credit Unions’s (WOCCU) IRnet, comprised of 50 participating credit unions. The proposed rule expands the definition of “remittance transfers,” however, to apply to any consumer-initiated electronic transfer using “open networks,” such as international wire and international automated clearing house (ACH) transactions. International transactions using open networks typically involve three or more financial institutions and, once initiated, the transfer is usually beyond the credit union’s control. The CUNA letter noted the proposed rule’s application to open-network transactions would make credit unions responsible for a problem that occurs at any point in the international fund transfer, including fraud occurring in foreign countries. The resulting high cost of compliance would force many credit unions to discontinue international electronic fund transfer services, increasing costs for consumers who would be forced to shift to higher-cost services provided by storefronts and big banks. CUNA urged the Federal Reserve to exempt international wires and ACH transactions from the proposed rule and issue separate disclosure and error rules for those networks. If the agency does not follow that recommendation, then CUNA recommended that the Federal Reserve exempt transfers that are greater than $1,000 because more than 90% of transfers that are traditionally considered “remittances” are less than that dollar amount. The Fed also should exempt financial institutions that handle relatively few ACH transfers annually, according to CUNA. Most credit unions that provided input for CUNA’s comment letter make fewer than 200 international transactions each month. The letter noted that WOCCUs’s IRnet relies on “closed loop” providers and so would be able to comply with most proposed requirements, although CUNA urged the Federal Reserve to ease rules related to liability for fraud and the proposed “cancellation period” that would allow consumers to halt pending transfers. Critics of the proposed rule include the U.S. Small Business Administration, which has decried its potential negative impact on small businesses. In additional to its own comment letter, CUNA has also signed a joint letter with 10 other bank and credit union trade associations that have serious concerns about the proposed rule. The Consumer Financial Protection Bureau (CFPB), not the Federal Reserve Board, will be the agency finalizing the “remittance transfers” rule because regulatory jurisdiction over Regulation E transferred to the CFPB on July 21.

CUNA urges NCUA to revise golden parachute exception

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WASHINGTON (7/26/11)--The Credit Union National Association (CUNA) has asked the National Credit Union Administration (NCUA) to reconsider the treatment of 457(f) deferred compensation plans under its recent interim final technical corrections rule addressing its golden parachute and indemnification payments regulation. The NCUA’s interim final rule directly excludes only 457(b) plans from the “golden parachute” definition, and thereby from the golden parachute prohibitions adopted by the NCUA in July 2010. (See second resource link for more.) The rule does not address 457(f) plans, which may fall under a separate exception only if they meet the definition for “bona fide deferred compensation.” CUNA’s comment letter noted that NCUA has not offered a “compelling reason” to treat 457(f) plans differently than similar retirement compensation options. If the NCUA must restrict the golden parachute exception, CUNA recommended the rule should specifically exclude both 457(b) and 457(f) plans that meet the “bona fide deferred compensation” definition.

House Senate set hearings on CFPB and oversight issues

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WASHINGTON (7/26/11)--The House and Senate will move forward this week with hearings related to the Consumer Financial Protection Bureau (CFPB) and other oversight issues, all to the back drop of the Obama administration’s and U.S. Congress’ work to hammer out a plan to raise the debt ceiling limit. The House Small Business subcommittee on investigations, oversight and regulation is slated to examine the impact of the CFPB on small business in a hearing on Thursday. Dan Sokolov, CFPB deputy associate director for research, markets and regulations, Terry Jones, chairman of the Colorado Mortgage Lenders Association’s Legislative and Regulatory Affairs Committee, and Jess Sharp, executive director of the U.S. Chamber of Commerce’s Center for Capital Markets Competitiveness are scheduled to testify. The CFPB officially opened for business on July 21, marking the one-year anniversary of the Dodd-Frank Wall Street Reform and Consumer Protection Act. The House will consider the North American-Made Energy Act (H.R 2587), the Protecting Jobs from Government Interference Act and legislation related to the debt ceiling and the budget this week. The Senate schedule includes judicial nominations as well as debt ceiling legislation. Also of interest:
* A Senate Banking Committee hearing today will consider the nominations of Martin Gruenberg as chairman of the Federal Deposit Corporation; Thomas Curry to head the Office of the Comptroller of the Currency; and S. Roy Woodall Jr. as a member of the Financial Stability Oversight Council. * Also today, a Senate Finance Committee hearing will offer “Perspectives of Deficit Reduction: A Review of Key Issues.” * On Wednesday, the House Financial Services subcommittee on oversight and investigations will hold a hearing on “Oversight of the Credit Rating Agencies Post Dodd-Frank.”