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Overdraft opt-out clause identified as CUs biggest concern

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WASHINGTON (7/29/08)—About 155 credit union representatives tuned in for a Credit Union National Association (CUNA) audio conference Monday on proposed credit card and overdraft protection regulations. The National Credit Union Administration (NCUA), along with the Federal Reserve Board (Fed) and the Office of Thrift Supervision, has published a joint proposed rule that will prohibit a number of credit card practices and will impose restrictions on overdraft protection plans. The Fed has also published two separate but related proposals that amend Regulation Z, the Truth in Lending Act, and Regulation DD, the Truth in Savings Act (TISA). Audio conference participants were told that the NCUA has received about 75 comment letters on its proposal. A focus of concerns involves a provision requiring institutions to allow partial opt-outs for overdraft plans. The partial opt-out would allow consumers to choose to opt-out of ATM or debit card overdrafts while allowing overdraft coverage for checks. Other concerns involve provisions prohibiting overdraft fees if they results from a hold placed on a prior transaction, and a requirement that an opt-out right for an overdraft protection plan has to be provided for each periodic statement period in which an overdraft occurs. Representing the NCUA during the conference were: Matt Biliouris, NCUA program officer in the Office of Examination & Insurance; Tonya Green, NCUA staff attorney in the Office of General Counsel; and Ross Kendall, also a staff attorney in NCUA 's Office of General Counsel. A Fed attorney, Ky Tran-Trong, explained that the overdraft rules at least partially arises from a recognition that in some circumstances overdraft and credit card disclosures have been insufficient. Tran-Trong noted that the Fed will also eventually review rules on student loans, automobile loans, home equity lines of credit and that there has been significant consumer testing as part of this rulemaking process. The federal regulators anticipate finalizing their unfair and deceptive acts and practices (UDPA) by the end of this year. The Fed has said it received more than 30,000 comment letters on its UDAP proposal. Because credit unions are not covered by the Fed’s TISA proposal, the NCUA intends to issue its own TISA proposal for comment early next year. The Federal Trade Commission regulates UDAP for state credit unions. That agency has not issued a proposal, but it is expected that state credit unions will be required to conform to the joint rules on credit cards. Also participating on the CUNA audio conference, Alan Cameron, president of the Idaho CU League, address issues raise in the Consumer Advisory Council, of which he is a member. CUNA Deputy General Counsel Mary Dunn moderated the session.

Informational conference calls on CDFI certification

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WASHINGTON (7/29/08)--The U.S. Department of the Treasury’s Community Development Financial Institutions Fund (CDFI Fund) announced an upcoming series of conference calls regarding CDFI certification. The calls are intended to serves as a forum for potential certification applicants to ask questions of CDFI Fund staff about becoming a certified CDFI. Credit unions and other organizations may be CDFI certified to provide financing and related services to communities and populations that lack access to credit, capital and financial services. To become certified, an organization must: be a legal entity, have an eligible primary mission, be a financing entity, serve an eligible target market, be accountable to the target market, provide corresponding development services, and not be controlled by a government entity. Among other benefits, CDFI certification allows applicants to apply for financial assistance through the CDFI Program. The schedule of conference calls is outlined below:
* Aug. 21, 2-3 p.m. EDT; * Sept. 18, 2-3 p.m. EDT ; * Oct. 16, 2-3 p.m. EDT; and * Nov. 13, 2- 3 p.m. EST.
To access any of the conference calls, participants need to call (202) 927-2255 and enter in the pin number 178182. No prior registration is necessary. The phone number and pin number are the same for all of the conference calls. For more information about CDFI certification eligibility and the application process, use the resource link below.

HUD foreclosure regs may lag lawmaker expectations

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WASHINGTON (7/29/08)—The foreclosure prevention program passed this weekend by the Senate and last week by the House could take a year to become operational even though lawmakers expect it to be up and running in October. On Saturday, the Senate voted soundly in favor of the much-debated housing package designed to support a troubled housing market. It passed 72 to 13 in that chamber, and 272-152 last Wednesday in the House. President Bush is expected to sign the bill soon. However, a spokesperson for the Department of Housing and Urban Development (HUD) indicated that there is little chance that implementing regulations for the program that would let the Federal Housing Administration (FHA) insure foundering mortgage loans would be ready by October. (American Banker July 28) The legislation requires the regulations to be written jointly by HUD, the U.S. Treasury Department, the Federal Reserve Board, and the Federal Deposit Insurance Corp. Those rules would allow HUD’s FHA program to insure mortgages that exceed the value of a home after lenders and servicers have written down the principal to 87% of the current market value. The program is expected to help 400,000 borrowers avoid foreclosure. However, according to the American Banker article, the scope and structure necessary for implementing regulations are so broad that they will demand significant clearance procedures—which take time. Lawmakers immediately and vehemently objected to the idea of a delay. House Financial Services Committee Chairman Barney Frank (D-Mass.) said that the scope of the current social and economic crisis presented by burgeoning mortgage foreclosures makes following the normal bureaucratic procedures an “incompetence.” Also, Senate Banking Committee Chairman Christopher Dodd (D-Conn.) Saturday called on the heads of implementing agencies to explain why the foreclosure mitigation plans might not be operational when the effective date of the law is in October. (American Banker July 28) At Saturday press conference announcing the Senate’s affirmative vote on the legislative package, Dodd said he wanted the regulatory oversight board tasked with hammering out the rules to be in his office Tuesday to talk about getting the bill working.

NCUA liquidates 12.8 million asset CU

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ALEXANDRIA, Va. (7/29/08)—New London Security FCU, New London, Conn., was liquidated Monday by the National Credit Union Administration (NCUA). The agency said in its announcement that it closed the $12.7 million-asset credit union because it was determined to be insolvent with no prospects for restoring viable operations. According to 5300 Call Report data, the credit union had only about $68,000 in cash to cover $10 million in share deposits. The credit union didn’t have many loans, but had its funds tied up in securities. If there was difficulty in selling them, the credit union would have trouble covering member withdrawals. The NCUA’s Asset Management and Assistance Center will issue checks to individuals holding verified share accounts in the credit union. Through the National Credit Union Share Insurance Fund, credit union members’ deposits are insured to at least $100,000 per account. The credit union was chartered in 1936 and at the time of liquidation served 365 New London-area residents.

Inside Washington (07/28/2008)

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* WASHINGTON (7/29/08)--The projected budget deficit for the fiscal year beginning Oct. 1 will be $490 billion--about $83 billion more than President Bush projected in February (Bloomberg July 28). The shortfall may be reflected in the cost of distributing economic stimulus payments, the overall economic slowdown and expenses from wars in Afghanistan and Iraq. Dana Perino, White House press secretary, declined to comment on the projections at a press briefing Monday. A July 25 Bloomberg survey indicated that the deficit will be at $447 billion next year and $407 billion this year ... * WASHINGTON (7/29/08)--The Securities and Exchange Commission (SEC) is expected to broaden temporary limits on short-selling beyond 19 financial companies, it recently announced. The limits expire Tuesday (The Wall Street Journal July 28). Under short-selling, traders sell borrowed stock while assuming the price will decline, and the stock can be repurchased at a lower price. The SEC is working to make its short-selling rules permanent, and was expected to recommend options to commissioners this week ... * WASHINGTON (7/29/08)--Ken Wilson, a Goldman Sachs Group executive, will take a leave of absence to join the Treasury Department as a housing crisis adviser (Inside Washington July 28). The Federal Deposit Insurance Corp. also announced that Arthur Murton will act as interim chief operating officer until John Bovenzi, who is running IndyMac, returns to his post ... * WASHINGTON (7/29/08)--The U.S. Treasury Department issued a best practices report for residential covered bonds Monday. The document aims to provide clarity and homogeneity to the market, define a starting point for the U.S. covered bond market, and serve as a complement to the Federal Deposit Insurance Corp. final policy statement, the department said ... * WASHINGTON (7/29/08)--The Community Development Financial Institutions (CDFI) Fund announced Monday that organizations that are not certified CDFIs and intend to apply for financial assistance in 2009 must submit a certification application by Oct. 1. Certified CDFIs that intend to apply for financial assistance next year must submit a certification of material events by Oct. 1 ...

Federal regulators take over two banks

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WASHINGTON (7/28/08)--First National Bank of Nevada, Reno, Nevada, and First Heritage Bank, N.A., Newport Beach, Calif., were closed Friday by the Office of the Comptroller of the Currency (OCC), and the Federal Deposit Insurance Corporation (FDIC) was appointed receiver. First National Bank’s primary markets extended throughout Nevada and Arizona. The bank, with approximately $3.4 billion in assets, was chartered as a national bank in 1987. On June 30, 2008, an affiliate of the bank, known as the First National Bank of Arizona, Scottsdale, Arizona, was merged into First National Bank of Nevada. The OCC said it acted after finding that the bank was “undercapitalized and had experienced substantial dissipation of assets and earnings due to unsafe and unsound practices.” The regulator also said it found the bank had incurred and is likely to incur losses that “will deplete all or substantially all of its capital, and there is no reasonable prospect that the bank will become adequately capitalized without federal assistance.” “The bank’s unsafe and unsound practices also weakened the bank’s condition and seriously prejudiced the interests of the bank’s depositors and the deposit insurance fund,” according to the OCC. First Heritage Bank, with approximately $250 million in assets, was chartered as a national bank in 2005. The OCC said it acted after finding that the bank was “critically undercapitalized.” The OCC also said the bank had “incurred and is likely to incur losses that will deplete all or substantially all of its capital, and there is no reasonable prospect that the bank will become adequately capitalized without federal assistance.”