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CUNA urges Fed Address 21-day compliance issue

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WASHINGTON (7/31/09)--The Credit Union National Association (CUNA) in a Thursday letter urged Federal Reserve Board Chairman Ben Bernanke to delay the Aug. 20th compliance date of the 21-day rule as it applies to open end credit other than credit cards under the Fed's interim final rule to implement the Credit Card Accountability, Responsibility and Disclosure Act of 2009 (Credit CARD Act). Under the rule, credit unions and other creditors must mail or deliver a periodic statement to borrowers for open end credit 21 days before the payment is due. Otherwise, the creditor may not treat payments as late for any purpose, including filing a credit report even if the payment is late. CUNA noted that many credit unions will need to make dramatic changes to their systems to comply and it is impossible for them to make such changes by the August compliance date. CUNA called on the Fed to exercise its authority under the Truth in Lending Act to give credit unions more time to comply with the rule change, which takes effect on August 20. CUNA also urged the Fed to allow credit unions to continue to use consolidated statements by providing the payment due dates for the current month and the next month on each member’s monthly statement, thus providing the necessary 21-day notice. Credit unions would still need time to implement these changes, CUNA said. In the letter, CUNA President/CEO Dan Mica said that “credit unions are facing horrendous problems” as they work to comply with the 21-day notice provisions of the CARD Act, which affect general lines of credit, credit lines associated with share draft and checking accounts, signature loans, home equity lines of credit, and other loans that are permitted under open-ended lending. Credit unions, “including those with multi-featured plans,” would be forced to “dismantle consolidated statement systems” and other procedures that “have been in place for decades” to comply with the 21-day rule by providing separate account statements, Mica added. This process will be expensive for both credit unions and their membership, who would ultimately pay for these modifications, Mica said. Mica has also asked National Credit Union Administration chairman Michael Fryzel to communicate the concerns of credit unions to the Fed.

Inside Washington (07/30/2009)

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* WASHINGTON (7/31/09)--The District of Columbia and 46 states have complied with legislation Congress passed last year requiring states to create a national registry for mortgage originators. Three other states also could comply soon (American Banker July 30). The Nationwide Mortgage Licensing System established a standard process for all state-license originators to increase accountability and transparency. Twenty-six states are active in the registry. Seven more will participate this year and 13 will come online by January. California, Massachusetts and Pennsylvania have bills pending ... * WASHINGTON (7/31/09)--Legislation to allow cramdown--in which bankruptcy court judges are allowed to rework mortgages--could be revived if lenders don’t increase their mortgage modifications, House Financial Services Committee Chairman Barney Frank (D-Mass.) said in a statement. “People in the servicing industry and in the broader financial industry must understand that if this last effort to produce significant modifications fails, the argument for reviving the bankruptcy option will be extremely strong, and I think there is a substantial chance that the outcome will be different.” Sen. Dick Durbin (D-Ill.) earlier this year proposed legislation that would allow judges to modify mortgages. The legislation failed, but Durbin has said he would be ready to bring a similar measure to the Senate floor. The Credit Union National Association (CUNA) opposes cramdown, saying that it could lead to borrowers’ gaming of the system ... * WASHINGTON (7/31/09)--The Small Business Administration (SBA) should look at its preferred lenders to see if they are fulfilling SBA’s mission, said William Shear, director of the Government Accountability Office (GAO), at a House Small Business Committee hearing this week. He pointed to a February GAO report indicating that SBA lenders may not be detailing their examinations regarding potential borrowers’ credit. Also at the hearing, SBA Administrator Karen Mills said the agency had streamlined the 7(a) loan application process in response to criticisms that the 7(a) program’s paperwork burdened lenders. She also faced questions about the SBA’s disaster loan program--which has not been improved to handle another Hurricane Katrina, Shear said ... * WASHINGTON (7/31/09)--A recently released Government Accountability (GAO) report indicates that even the federal government is a bit behind in planning for a possible pandemic influenza occurrence. The July 29 report notes that the current H1N1 outbreak is a “powerful reminder” underscores that an influenza pandemic remains a real threat to the nation. GAO says a number of actions have been taken over the past three years to better prepare the country and its federal workforce for such and event, but there are still many gaps. Specifically, the GAO said, while federal agencies have taken action on 13 of GAO's 24 recommendations, 11 of the recommendations that GAO has made over the past three years have not been fully implemented …

Bill OKd by House would ease pressure on NCUA IG

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WASHINGTON (7/31/09)--The House on Wednesday approved H.R. 3330, the “Improved Oversight by Financial Inspectors General Act,” which raises the trigger for financial institution investigations by federal regulators, including the National Credit Union Administration (NCUA). Specifically, NCUA Inspector General William DeSarno told News Now that the legislation would “amend the Federal Credit Union Act to raise the threshold” for material loss reviews (MLRs) to $25 million, up from the current $10 million threshold. The new threshold would apply to situations in which there were recorded losses equal to at least 10 percent of the total assets of the credit union at the time that the NCUA initiated assistance or was appointed as the liquidating agent of the credit union. DeSarno said that the bill would “alleviate some of the pressure” on the NCUA’s limited resources, as all of the agency’s audit resources are devoted to material loss reviews at this time. The legislation, introduced by Rep. Steve Driehaus (D-Ohio), would, according to a release, “help ensure that financial Inspectors General have the resources and flexibility they need to get to the bottom of the most significant failures in the financial sector.“ Current regulations require that Inspectors General to conduct MLRs of failed banks with material losses of at least $25 million, but the legislation would increase this threshold to $200 million for banks. However, inspectors would still be able to review banks that have reported smaller losses if they find that the bank has failed “due to unusual circumstances, such as fraud,” the release said.

CU comment on CARD Act rules is urgent CUNA

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WASHINGTON (7/31/09)—As the Credit Union National Association (CUNA) continues to seek a regulatory or legislative remedy to a compliance problem associated with new Federal Reserve Board Credit CARD Act rules, CUNA also seeks credit union comment on the plan. CUNA President/CEO Dan Mica took the unusual step of personally encouraging credit unions to weigh in with the Fed on the issues surrounding the agency’s new interim final rule. (See related story: CUNA urges Fed: Address 21-day compliance issue.) The Fed recently issued that rule amending Regulation Z, the Truth in Lending Act, to implement the first stage of the Credit CARD Act, the full title of which is Credit Card Accountability, Responsibility and Disclosures Act of 2009. The new law is intended to establish fair practices for credit cards and other open-end credit plans. The Fed interim final rule requires creditors to adopt reasonable policies and procedures to ensure that periodic statements for any open-end consumer credit accounts are mailed or delivered at least 21 days before a payment is due. Failing that, a creditor is prohibited from charging a late fee or to otherwise consider the payment as late. The rule will also require creditors to provide a 45-day notice of a change in the interest rate or other significant changes to the terms of the credit card agreement. These provisions carry an Aug. 20 effective date and CUNA has sounded the alarm that such a short compliance timeframe for a complicated and entailed compliance process presents perhaps insurmountable problems for credit unions. About 2,500 credit union representatives tuned earlier this week for CUNA's audio conference on the requirements of the Credit CARD Act," which featured a Fed senior attorney and other experts to explore compliance issues. An archived version of the 90-minute session is available on the website. In its Comment Call, CUNA asks credit unions to outline operational problems associated with providing periodic statements at least 21 days before the due date. Specifically CUNA asks:
* How are these problems different for credit cards, as opposed to other open-end credit? * How much time will you need to comply with the new rule with regard to the 21-day requirement for credit cards and how much time will be needed for other types of open-end credit?
CUNA also asks credit unions to describe the operational problems associated with providing the 45-day change-in-terms notice: Will you be able to comply with these provisions by Aug. 20? If not, how much more time will you need? Also on Reg Z issues, CUNA is offering four upcoming “Regulation Z eBoot Camp eSchool” session.
* Aug. 27 session will take a look at the basics of Regulation Z; * Sept. 3 session will feature a discussion of changes to disclosures at account opening and with credit card applications and solicitations; * Sept. 10 session will provide a review of changes to the information required on periodic statements; and * Sept. 17 session will look at the required changes for advertising, change in terms notices, the Credit CARD Act, and the Unfair & Deceptive Credit Card Practices Act.
Use the resource links below to access registration for the CUNA Credit Card Act audio conference, the CUNA eBoot Camp, and the Comment Call.

House votes yes to flood insurance extension

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WASHINGTON (7/31/09)—The House agreed by voice vote to extend the National Flood Insurance Program (NFIP) through March 31, 2010. The program was set to expire on Sept. 30. The House bill (H.R. 3139), introduced earlier this month by Reps. Maxine Waters (D-Calif.) and Barney Frank (D-Mass.), also would give permanent authority to the director of the Federal Emergency Management Agency (FEMA) to provide assistance to any state or community. That power was first granted on a temporary basis. Waters is chairwoman of the House Financial Services subcommittee on housing and Frank is chairman of the parent committee. Frank and Waters have said they also plan to engage the Obama administration and FEMA officials in a reform process, to update the flood insurance program that was created in 1968. Currently, the NFIP provides over one trillion dollars of flood insurance to more than five and a half million American homes and businesses.

Red flags Another reprieve for state-chartereds

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WASHINGTON (7/31/09)—The Federal Trade Commission (FTC) announced it will launch a new educational program and further delay enforcement of its identity theft "red flags" rule--to Nov. 1. This is the third time the compliance date has been pushed backed by the FTC, an action which affects state-chartered credits unions. Federally chartered credit unions under a similar National Credit Union Administration identity theft rule had to comply by Nov. 1, 2008. The red flags rule was developed to implement parts of the Fair and Accurate Credit Transactions (FACT) Act of 2003. FACTA directed financial regulatory agencies, including the FTC, to promulgate rules requiring those under its supervision that have covered accounts to implement programs to identify, detect, and respond to patterns, practices, or specific activities that could indicate identity theft. A covered account generally is a consumer account or any other account the institution determines carries a foreseeable risk of identity theft. The FTC announced this week that in an attempt to help small businesses and “other entities” with compliance, it will “redouble” its education efforts and provide additional resources and guidance to clarify what businesses are covered by the rule and what must be done to comply. “Although many covered entities have already developed and implemented appropriate, risk-based programs, some – particularly small businesses and entities with a low risk of identity theft – remain uncertain about their obligations,” the FTC noted, explaining its latest delay. The FTC’s additional compliance guidance will include a special link for small and low-risk entities on commission’s “Red Flags Rule Website.” The agency already has posted FAQs that address how the FTC intends to enforce the Rule and other topics. The FTC release highlighted that the enforcement FAQ states that commission staff” would be unlikely to recommend bringing a law enforcement action if entities know their customers or clients individually, or if they perform services in or around their customers’ homes, or if they operate in sectors where identity theft is rare and they have not themselves been the target of identity theft.” Use the resource links below for more information.

CUs could help ease credit crunch under new bill CUNA

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WASHINGTON (7/31/09)—Proposed legislation that would lift the current member business lending (MBL) cap to 25% would allow credit unions to “help address a real need in a difficult economic time” and “provide economic stimulus without increasing the size of government or costing taxpayers a dime,” the Credit Union National Association (CUNA) said on Thursday. H.R. 3380, the “Promoting Lending for America’s Small Business Act,” which was introduced on Thursday by co-sponsors Rep. Paul Kanjorski (D-Pa.) and Rep. Ed Royce (R-Calif.), would double the current statutory MBL cap of 12.25%, and would exclude from the new 25% statutory cap loans of less than $250,000, business loans in underserved areas, and loans to non-profit religious institutions. The “bipartisan legislation,” if passed, “would enable credit unions to make more small business loans and create jobs at a time when our country needs a financial boost,” Kanjorski said in a release announcing the bill. Kanjorski said that the bill will use credit unions “as a resource to boost lending to small businesses” and to fill the void created by “commercial banks and other entities” that “have unfortunately pulled back their lending activities” as the economic crisis wears on. CUNA has consistently argued in support of raising the MBL cap, saying that lifting the cap would allow credit unions to aid the ongoing economic recovery by increasing the loan opportunities available to small businesses. National Credit Union Administration Chairman Michael Fryzel in a Thursday release said that the board “looks forward to working with Congress as the legislative process progresses to produce a bill that enhances safe, well-supervised and beneficial member business lending,” Federal Reserve Chairman Ben Bernanke recently said that legislation that would lift the MBL cap would be "worth looking at," and a CUNA representative in recent Senate testimony told legislators that lifting the MBL cap above 20% of assets would "safely and soundly" result in $10 billion in new small business loans within one year. Rep. Ron Kind (D-Wis.) indicated that there is a "growing sentiment" among members of Congress that the MBL cap should be lifted, and Sen. Charles Schumer (D-NY) earlier this year announced plans to develop legislation to address the MBL cap.