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Inside Washington (07/30/2010)

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* WASHINGTON (8/2/10)--The Transaction Account Guarantee (TAG) program, which provides unlimited deposit insurance coverage for non-interest-bearing checking accounts, has sparked some questions from financial industry representatives about how the government will carry out the extension of TAG coverage (American Banker July 30). The original TAG program was voluntary, but the recently enacted regulatory reform bill makes the program mandatory. Some worry that banks who do not need the coverage will still have to pay for it. While the law does not institute a fee for banks to pay for the coverage, some observers told Banker they are concerned that the Federal Deposit Insurance Corp.’s risk profile will increase if institutions that opt out of the program are covered. The agency could include zero-interest deposits in its ratio of reserves--which could raise premiums, the publication said. TAG was originally launched in 2008 and lawmakers gave banks until 2012 to continue receiving coverage under TAG. About 5,800 banks participate in the program ... * WASHINGTON (8/2/10)--Senate Banking Committee Chairman Christopher Dodd (D-Conn.) and Sen. Richard Shelby (R-Ala.), committee ranking Republican member, urged President Barack Obama to appoint a permanent director for the Federal Housing Finance Administration (FHFA). The position has been vacant since the agency was created two years ago (American Banker July 30). Also two years ago, when Fannie Mae and Freddie Mac were placed in conservatorship, policymakers did not create a plan for their futures, but Dodd and Shelby noted that the FHFA director would be in charge of the enterprises. FHFA has an acting director, Edward J. DeMarco, but a permanent one should be appointed, they said ... * WASHINGTON (8/2/10)--Financial institutions are prepping for the regulatory reform bill’s impact, according to American Banker (July 30). The publication likened the preparations to the strategy of hockey player Wayne Gretzky, who skated not to where the hockey puck had been, but rather “where it was going to be.” Chris Thompson, head of risk management at consulting firm Accenture, said the firm is advising its clients to look at the changes they have to make, and “how you take out costs and make profits more efficiently.” Often, financial institutions move too quickly to comply with new regulations and then go back later to offset the impact, he said. It will be hard to absorb the cost of compliance without taking some steps to cushion the blow, he told the publication. Some institutions, like Bank of America, told Banker they are assessing the rules before reacting to them. Other banks, like SunTrust, have revised early forecasts to reflect some reform costs ...

NCUA takes action on two CUs in conservatorship

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ALEXANDRIA, Va. (8/2/10)--The National Credit Union Administration (NCUA) last week was appointed liquidating agent of Fort Collins, Colo.-based Norbel CU, which was then purchased by Security Service FCU. And on Friday, the agency placed Family First FCU, Orem, Utah, into conservatorship. Security Service FCU, based in San Antonio, Texas, and which currently holds $5.6 billion in assets from 750,000 members, will acquire $120 million in assets and 16,098 members from Norbel. Security Service FCU President/CEO David Reynolds in a release said that the new members will “continue to receive seamless, uninterrupted service and will enjoy Security Service’s market-leading rates for deposit and loan products.” Although Security Service is based out of San Antonio, one-third of its members are situated in Colorado. The credit union also has several locations in Texas. In the conservatorship of Family First FCU, which NCUA attributed to a "declining financial condition," stemming from "problems in its loan portfolio," NCUA said its goal is to continue credit union service to the credit union's 19,476 members and ensure safe and sound credit union operations. The $139.5 million asset credit union provides service to people residing in Utah County, Utah. Members can conduct normal financial transactions at the credit union. For the full NCUA releases, use the resource links.

CUNA iCompliance Challengei covers Reg E overdraft notices

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WASHINGTON (8/2/10)--In the July edition of Compliance Challenge, the Credit Union National Association (CUNA) addresses questions regarding Regulation E. The new Regulation E overdraft rules for ATM and one-time debit card transactions require credit unions to provide members with the right to opt in, or affirmatively consent, to a credit union's overdraft service for ATM and one-time debit card transactions. Under Regulation E, credit union members must opt-in for overdraft protection by Aug. 15. According to CUNA, credit union websites may not be set up to compel a member to make an opt-in choice. While the credit union featured in the Compliance Challenge sought to display a pop-up screen that would request that members opt-in to overdraft services before moving on to the main home banking site, CUNA said that the member must be allowed to completely reject any overdraft service. CUNA suggested that the credit union provide an “ask me later” option that would remind the member of the availability of the overdraft program when they log on to the credit union site at a later time. While the pop-up screen proposal would have violated Reg E, CUNA said that a credit union whose overdraft confirmation notices are delayed by a computer error are not in violation of the rule. Credit unions that find themselves in this situation may charge overdraft fees to member accounts as long as they have adopted and follow reasonable procedures designed to ensure that overdraft fees are assessed only in connection with transactions paid after the confirmation notice has been mailed or delivered to the member. CUNA noted that the Fed’s recent clarifications to the Reg E overdraft rule recognized that there may be certain instances where financial institutions inadvertently assesses a fee before the confirmation is mailed or delivered. In these cases, the credit union’s adherence to the appropriate policies and procedures will save the institution from a compliance violation, CUNA said. For the full Compliance Challenge, use the resource link.

NCUA starts August with closed board meeting

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ALEXANDRIA, Va. (8/2/10)—The National Credit Union Administration (NCUA) will begin August with another closed board meeting, the 13th held this year. The meeting, which will take place on Tuesday at 8:30 A.M. E.T., follows a trio of closed board meetings held in July. According to the NCUA, the meeting will cover supervisory activities. For the full NCUA release, use the resource link.