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Small Calif. CU liquidation is 2009s sixth

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ALEXANDRIA, Va. (7/8/09)--California-based Watts United Credit Union on Monday was liquidated after the California Department of Financial Institutions determined that it was insolvent and had “no prospects for restoring viable operations.” In a statement released Tuesday, the National Credit Union Administration said that it will serve as the liquidating agent, and the NCUA Asset Management and Assistance Center will pay out funds to former Watts United members. The credit union, which was chartered to serve residents of the Watts neighborhood in Los Angeles, is the second federally insured credit union to shut its doors this year, according to the NCUA. A total of six credit unions have closed this year. The credit union held $800,000 in total deposits from just over 1,000 members prior to its liquidation.

Inside Washington (07/07/2009)

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* WASHINGTON (7/8/09)--Arguments in favor of keeping the thrift charter may be losing their strength as some financial observers question whether the thrift is needed. The Obama administration has proposed eliminating the charter and the Office of Thrift Supervision (OTS) as a part of its financial regulatory reform plan. Some lawmakers, including Rep. Barney Frank (D-Mass.), are against removing the charter and OTS. The charter has been abused, but it would be a mistake to abolish it altogether, Frank said (American Banker July 7). One argument for keeping the charter involves creating a charter focused solely on real estate lending. Such a charter could benefit consumers by ensuring that thrifts provide home mortgages and other consumer lending services, said John Bowman, OTS acting director. If the charter is kept, there could be wider interstate branching and more preemption powers. But both of those arguments for keeping the charter are losing steam, observers say ... * WASHINGTON (7/8/09)--The Federal Deposit Insurance Corp. (FDIC) Monday released a frequently-asked-questions document to explain swept fund rules. A sweep account involves the pre-arranged transfer of funds from a deposit account to an investment vehicle located outside the depository institution or another account or investment vehicle located within the depository institution. On Jan. 27, the FDIC finalized its rule “Processing of Deposit Accounts in the Event of an Insured Depository Institution Failure.” In addition to establishing practices for determining deposit and other account balances at a failed depository institution, the rule includes disclosure requirements for certain sweep accounts, effective July 1. According to the document, institutions must prominently disclose in writing to sweep account customers whether their swept funds are deposits within the meaning, FDIC said ... * WASHINGTON (7/8/09)--The House Financial Services Oversight and Investigations subcommittee announced a hearing scheduled for Monday, titled, “Preventing Unfair Trading by Government Officials,” but withdrew that announcement by days end. The hearing is expected to be resceduled, but no date has been set. The session is likely to focus on H.R. 682, the Stop Trading on Congressional Knowledge Act, introduced by Reps. Louise Slaughter (D-N.Y.) and Brian Baird (D-Wash.). A recent report by the Securities and Exchange Commission’s inspector general on alleged inappropriate trading also will be discussed...

Corp. CU update NCUA begins stabilization process

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ALEXANDRIA, Va. (6/8/09)--The National Credit Union Administration (NCUA) in its most recent update on the status of the corporate credit union system said that it has begun to use the Temporary Corporate Credit Union Stabilization Fund (TCCUSF) to cover corporate stabilization-related expenses. In a Tuesday press release, the NCUA said that the implementation of the TCCUSF will allow natural person credit unions to “reflect a fully restored National Credit Union Share Insurance Fund (NCUSIF) deposit on their June 30 call reports.” According to the release, the TCCUSF has relieved the NCUSIF “from any reserve requirements” related to U.S. Central FCU’s capital note by paying $1 billion into the NCUSIF. The TCCUSF will also now oversee the Temporary Corporate Credit Union Share Guarantee Program (TCUSGP) and the Temporary Corporate Credit Union Liquidity Guarantee Program (TCCULGP), the NCUA added. The majority of corporate credit unions have agreed to take part in the TCCULGP, the NCUA said. The NCUA also updated the status of U.S. Central and Western Corporate Federal Credit Union (WesCorp), reporting that “normal operations” at those two credit unions “continue without interruption.” WesCorp announced that it expects to recognize a 30% reduction in operating costs this year due to a number of cost cutting measures, including “consolidations and staff reductions,” the release said.

Longer compliance time needed on CARD Act provision CUNA

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WASHINGTON (7/8/09)—The Federal Reserve Board must give credit unions more time to comply with a provision of its expected rules to implement new credit card statutes if that provision is going to apply beyond credit cards, the Credit Union National Association (CUNA) urged the federal regulator Tuesday. CUNA has been working with the Fed to convey credit union concerns regarding a specific requirement in Section 106 of the Credit Card Accountability Responsibility and Disclosure Act of 2009 (CARD Act). That section prohibits creditors from claiming a payments is late unless that creditor adopts reasonable procedures to ensure that p e riodic statements are delivered to consumers no later than 21 days before the payment due date. “As we explained in…earlier discussions with your staff, Section 106 of the CARD Act is very problematic both because it is one of the very few provisions that apply to all open-end credit, not just credit cards, and because of the upcoming Aug. 20 effective date,” wrote CUNA. Addressing the letter to Sandra Braunstein, director of the Fed’s Division of Consumer and Community Affairs, CUNA wrote that if Section 106 is truly to cover all open-ended credit, the scope would be so broad that credit unions cannot realistically comply with the fast-approaching compliance date. The letter reiterated CUNA’s strong and long-standing support for the intent of the CARD Act, which is to eliminate predatory credit card practices. Credit unions back the changes, CUNA said, even though they will require significant adjustments over the next six weeks to ensure that credit card periodic statements are mailed at least 21 days in advance before a late charge may be assessed. “Credit unions are diligently working with their data processors to implement these changes prior to the August 20, 2009 effective date,” CUNA assured. However, if the section applies also to general lines of credit, lines of credit associated with share draft and checking accounts, signature loans, and home equity lines of credit and--of particular concern to credit unions--to multi-featured, open-end lending programs, a longer compliance timeframe is imperative, CUNA urged. CUNA President/CEO Dan Mica sent similar letters to Fed Governors Elizabeth Duke and Daniel Tarullo, who are the Fed board members responsible for consumer issues, and asked them to take a leadership role in urging a regulatory correction of the “urgent credit union issues.” Beyond the regulatory front, CUNA is also working with key federal lawmakers and their staffs to clarify whether it was the intent of Congress to apply section 106 beyond credit cards. The section was added by the Senate shortly before its passage of the extensive credit card bill. Therefore the scope of the provision beyond credit cards was not fully appreciated until after it was signed by the President on May 22, and CUNA and other interested parties had no opportunity to raise questions or express concerns prior to enactment. “We note that others have also not appreciated the broad scope of this provision. For example, on June 25th, the Office of Thrift Supervision published a summary of the CARD Act, which stated that Section 106 only applies to credit cards. This has undoubtedly created further confusion within the financial institutions industry,” the CUNA letter pointed out. Members of CUNA's Lending Council met with CUNA staff on Monday to provide additional information on the procedural burdens and costs that credit unions face in trying to devise ways to comply with the 21-day requirement applicable to their open-end lending programs." Use the resource links below to access CUNA’s entire letter, as well further CUNA background information on the provisions in the new CARD Act that are scheduled to go into effect on Aug. 20.

Senate subc. CLF cap vote could include interchange issues

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WASHINGTON (6/8/09)—The Senate Appropriations subcommittee on financial services and general government later today is expected to take up the Financial Services Appropriations Act for fiscal year 2010. A similar bill that was expected to pass the House last night, as currently written, would not cap the borrowing authority of the National Credit Union Administration’s (NCUA) Central Liquidity Facility (CLF), allowing the CLF to maintain its maximum amount of $40 billion through the 2010 fiscal year. Portions of the bill would also increase funding for the U.S. Treasury Department’s Community Development Financial Institutions fund and the U.S. Small Business Administration’s business loan account. There is speculation that Sen. Richard Durbin (D-Ill.) could use this bill as a platform for legislation that would impose government limits on the interchange fee rates set for credit and debit card processing. Early last month, Durbin introduced S. 1212, The Credit Card Fair Fee Act, which would establish a full-time panel of three Electronic Payment System Judges to intervene in disputes between card service providers and merchants regarding fees set for use of the electronic payments system. This panel would also be granted the power to determine access rates and terms and to impose civil money penalties on any party that is deemed to be out of compliance with its authorities. Similar legislation offered by Reps. John Conyers, Jr. (D-Mich.) and Bill Shuster (R-Pa.), known as H.R. 2695, the "Credit Card Fair Fee Act of 2009," would permit merchants to negotiate interchange fees with financial institutions via an antitrust exemption. However, under the terms of this bill, credit unions that fall under the NCUA’s regulatory authority, as well as other financial institutions with under $1 billion in total assets, would be exempted from the terms of the bill. H.R. 2695 has been referred to committee, but no further action had been taken at press time. The Credit Union National Association has consistently opposed any changes to the existing interchange fee system, and last month asked members of Congress to delay any legislative action until the results of the Government Accountability Office’s study of interchange fees can be fully analyzed. Reps. James Sensenbrenner Jr. (R-Wis.) and Jason Chaffetz (R-Utah) also recently urged their Republican colleagues not to cosponsor interchange legislation. (See related story: House members urge opposition to interchange cap News Now June 29.)