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NCUA opinion clarifies incidental powers

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WASHINGTON (7/7/08)—It makes some sense that a recent National Credit Union Administration (NCUA) opinion letter originated from an inquiry from Texas—a state known for its love and support of school-level sports. In answering a question from Texas Tech FCU, Lubbock, the NCUA stated it is within a federal credit union’s incidental powers to receive payments for gift cards and track payments for one of its members. The Texas credit union was checking to see if it could perform those functions related to gift cards to be offered by Texas Tech University’s athletic department for purchases of athletic event tickets, concession goods and related apparel at the university’s athletic store. The NCUA letter signing off on the activity said: “Essentially, under this proposal, the FCU would receive and transfer funds on behalf of its member, which are traditional financial services credit unions perform for their members but, in this instance, through the electronic media represented by the gift cards, a type of stored value card product.” In a footnote, the NCUA brings up the following membership issues:
* A threshold issue for the FCU and the Athletic Department is establishing the Athletic Department as a member. We are not aware whether the Athletic Department would be considered a separate legal entity from Texas Tech University and, as an alternative, we suggest you consult with NCUA’s regional office regarding having the FCU’s sponsor, Texas Tech University, join as a member of the FCU if it has not done so already and have it be the issuer. Another option, if the Athletic Department is not a separate legal entity and eligible in its own right for membership, might be that it could be eligible under the provision in your charter for an organization of persons who are already enumerated as eligible in your charter.
In the proposed arrangement, fans would access information about gift cards on the athletic department’s web site. When a fan initiates a card purchase, he or she would be transferred by an electronic link to the credit union’s website. Also on the topic of incidental powers, credit unions are being asked to comment on a recent NCUA plan to update its rule on incidental powers for federal credit unions. The proposal would add illustrations of permissible activities under the categories of correspondent services, operational programs, and finder activities, and the Credit Union National Association seeks credit union comment by July 15. Comments are due to the NCUA by July 28.

Comment sought on MBL rule changes

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WASHINGTON (7/7/08)—As part of its policy to review all existing regulations every three years, the National Credit Union Administration (NCUA) is seeking comment on how its member business lending (MBL) rules should be revised or clarified. The Credit Union National Association has issued a request for comments by August 14 on all aspects of the NCUA MBL rules, while highlighting the areas of specific interest to the agency. The NCUA issued the advance notice of proposed rulemaking at its May meeting and noted it is specifically reviewing the following provisions:
* Loan-to-value (LTV) ratio requirements; * Collateral and security requirements; * Credit union service organization (CUSO) involvement in the MBL process; * MBL loan participations; and * Waivers.
Comments are due to the agency by August 25. CUNA Deputy General Counsel Mary Dunn said CUNA, working with leagues and key committees and subcommittees, will be reaching out early in the comment period to other credit union officials with MBL expertise and concerns to ensure its comment letter addresses the range of MBL issues. Use the resource link below for more information on the NCUA proposal and for CUNA’s complete comment call.

Justice Dept. opposed to interchange bill

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WASHINGTON (7/7/08)—The U.S. Department of Justice last week voiced its opposition to a bill, the Credit Card Fair Fee Act (H.R. 5546), which would give a government-appointed tribunal power to set credit and debit card interchange rates. In a letter to Rep. Lamar Smith (R-Texas), who sought the department’s views, Principal Deputy Assistant Attorney General Keith Nelson wrote that H.R. 5546 “creates a broad immunity under the antitrust laws” for merchants and issuers jointly to negotiate interchange fees and terms of access to a credit and debit card network above a certain size. “The antitrust laws are the chief legal protector of the free-market principles on which the American economy is based. Companies free from competitive pressures have incentives to raise prices, reduce output, and limit investments in expansion and innovation to the detriment of the American consumer,” Nelson wrote. Nelson also warned that bill seeks to counter “perceived market power on the part of large credit card networks” by shifting power to merchants negotiating with those networks. “It would do this by exempting from the antitrust laws joint negotiations of merchants with any network electronic payment system that has been used for at least 20% of the combined dollar value of U.S. credit, signature-based debit, and PIN-based debit card payments. “From a policy perspective, the Department does not support legislatively establishing a buy-side monopoly (or monopsony) to counteract any existing market power,” the Justice letter said. It added that such a result also could increase harm to competition and consumers. The Credit Union National Association (CUNA) also opposes statutory and rulemaking changes that would regulate interchange fees as such action would adversely affect consumer options, competition and technological innovation. CUNA maintains that interchange fees allow business costs, including the risk of consumer nonpayment, to be shared by the payments participants. To read more points made by the Justice Department letter use the resource link below.

Inside Washington (07/04/2008)

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* WASHINGTON (7/7/08)--The Federal Deposit Insurance Corp. has sent a financial institution letter to banks regarding other real estate. “Continued weakness in the housing market and the rapid rise in foreclosures have increased the potential for higher levels of other real estate (ORE) held by FDIC-supervised institutions,” the agency said. “The letter reminds bank management of the importance of developing and implementing policies and procedures for acquiring, holding, and disposing of other real estate” ... * WASHINGTON (7/7/08)--Treasury Secretary Henry Paulson is backing an idea to create a receivership mechanism for investment banks that fail. A resolution process that helps the financial system curb the failure of a large firm is needed, he said (American Banker July 3). His comments match those made by Federal Deposit Insurance Corp. Chairman Sheila Bair, who two weeks ago said investment firms should have receivership processes similar to ones used by commercial banks. Paulson testifies Thursday in front of the House Financial Services Committee with Federal Reserve Board Chairman Ben Bernanke regarding the need for regulatory reform ... * WASHINGTON (7/7/08)--The Office of Thrift Supervision (OTS) has rejected Sen. Charles Schumer’s (D-N.Y.) request for data on IndyMac Bancorp (American Banker July 3). Schumer had asked the agency to provide him with information regarding his concerns about IndyMac’s solvency. IndyMac said Monday that depositors removed $100 million from the company when news of Schumer’s request surfaced. Schumer said the company’s problems result from management. OTS said it is in control of IndyMac’s condition ... * WASHINGTON (7/7/08)--The Treasury Department last week sent out 10.025 million economic stimulus payments to households, totaling $7.775 billion. So far, the department has sent out 104.875 million payments, totaling $86.079 billion. Payments will continue through mid-July ... * WASHINGTON (7/7/08)--Recovery of the financial market will likely be slow, Federal Reserve Board Gov. Frederic Mishkin said Wednesday (American Banker July 3). The markets are showing signs of progress, but a quick comeback is not likely, he told an economic forum in Israel. The troubled housing market has caused a weak labor market and consumers are struggling to obtain credit, he said. Mishkin will leave the Fed in August to return to Columbia University ...