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Dodd urges regulators Protect consumers from new card abuses

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WASHINGTON (7/10/09)--In a letter sent Thursday to National Credit Union Administration Chair Michael Fryzel, Federal Deposit Insurance Corporation Chair Sheila Bair, Federal Reserve Chair Ben Bernanke, and other federal regulators, Sen. Chris Dodd (D-Conn.) asked regulators to “immediately notify” credit card issuers in their respective jurisdictions that they would be “held accountable” for recent interest rate increases. In the letter, Dodd also urged federal regulators to “do everything in [their] power to protect cardholders from abusive credit card practices. It has been recently reported that credit issuers, including Citigroup, have been raising their interest rates on existing lines of credit, presumably in an effort to increase profits before new credit card regulations take effect in the near future. Portions of the recently passed CARD Act require credit issuers to review accounts for which the interest rate has been raised every six months and, under certain circumstances, reduce the consumer’s interest rate. This portion of the Act is retroactive to January 1 of this year. Dodd asked federal regulators to remind credit issuers of this upcoming guideline, adding that “all interest rate increases that have taken place this year will become subject to the mandatory 6-month review.” Dodd also encouraged the Fed to “draft regulations that provide clear, robust requirements for the review of rate increases,” adding that he expected federal financial enforcement agencies to “hold the credit card companies strictly accountable for conducting thorough reviews and decreasing rates where warranted.”

Flood insurance extension proposed by Reps. Waters Frank

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WASHINGTON (7/10/09)—Reps. Maxine Waters (D-Calif.) and Barney Frank (D-Mass.) introduced a bill Thursday that will extend authorization for the National Flood Insurance Program (NFIP) through March 31, 2010. Without legislative action, the program will expire at the end of September. In announcing their bill, the two House legislators said they intend also to draft reforms to the flood insurance program to incorporate studies and other information not available when the program was last reviewed by Congress. Waters is chairwoman of the House Financial Services subcommittee on housing and Frank is chairman of the parent committee. Frank and Waters also said they plan to engage the Obama administration and Federal Emergency Management Agency—or FEMA—officials in the reform process, as well as invite recommendations from all interested parties. Created in 1968, the NFIP provides over one trillion dollars of flood insurance to more than five and a half million American homes and businesses. In a release, Water said, “We saw the importance of this program following Hurricane Katrina and other storms that have devastated the Gulf Coast. Letting the program expire in the middle of hurricane season would have serious repercussions for areas prone to flooding. A six-month extension is prudent and necessary.”

Fed could perform consumer protection role Vice Chair says

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WASHINGTON (7/10/09)--Federal Reserve Vice Chairman Donald Kohn on Thursday said that the Federal Reserve is well placed to perform the job of consumer protection, and also recommended that Congress should strengthen the Fed’s consumer protection authority. Speaking before a House subcommittee on domestic monetary policy and technology hearing on balancing the Fed’s independence with its role as a systemic risk regulator, Kohn said that limiting the Fed’s independence over monetary policy could “lead to higher long-term interest rates” and could raise the cost of borrowing by reducing the U.S. Treasury’s debt rating. Continuing to grant the Fed operational independence would also enable legislators “to look beyond the short term as they weigh the effects of their monetary policy actions on price stability and employment.” This sort of independence also “prevents governments from succumbing to the temptation to use the central bank to fund deficits,” Kohn added in a prepared statement. While he agreed that Congress should support the Fed’s independence, former Fed Governor Frederic Mishkin told the subcommittee that consumer protection is not in the “core mission” of the Fed, and allowing the Fed to take on this role could be harmful to its independence. According to Mishkin, the “skills and mindset” or a consumer protection regulator are “fundamentally different” from those required by a systemic regulator.” Both Mishkin and fellow former Fed official Lawrence Meyer agreed that the Fed’s consumer protection powers should be curtailed if it is given increased power as a regulator of systemic risk. The Obama Administration has called for the creation of an independent Consumer Financial Protection Agency (CFPA) that would have broad jurisdiction to ensure that consumers and investors are protected from financial abuses related to credit, savings and payment products. Rep. Barney Frank has also introduced a nearly identical concept, with some exceptions, into the House. (See related story: Frank's consumer protection plan has CRA difference News Now July 9.)

CUNA SAFE Act rule proposals need changes

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WASHINGTON (7/10/09)--In a comment letter published on Thursday the Credit Union National Association (CUNA) said that rules proposed by the National Credit Union Administration (NCUA) and other federal regulators that would implement the Secure and Fair Enforcement for Mortgage Licensing (SAFE) Act need to be tweaked before final implementation. Under the SAFE Act, employees of financial institutions or their subsidiaries that act as residential loan originators would be required to register with the Nationwide Mortgage Licensing System and Registry. These proposed guidelines would apply to federally insured credit unions. While CUNA does not believe that privately insured credit unions should necessarily be subject to these guidelines, they should “have the same access to the Registry as all other financial institutions that are subject to the proposed rules,” and that access should “not be affected or dependent on whether they are subject to these rules.” CUNA also called for credit union service organizations that are owned by one or more credit unions to be included under the SAFE Act rules “to the extent that their employees engage in mortgage lending activities.” Failure to do so would subject CUSOs to state registration and licensing requirements, resulting in “significant, additional burdens” that would “place them at a competitive disadvantage” when compared to “subsidiaries of other financial institutions.” CUNA does not believe it is necessary to require all employees to renew their registration during the time period from Nov. 1 and Dec. 31 each year since it would require employees to register twice within the first calendar year. The better approach, CUNA said, is to allow employees to renew one year after their initial registration, or better, the agencies should consider requiring renewals once every other year instead. Finally, CUNA said the rules should not apply to loan modifications. However, the comment letter added, the SAFE Act rules should apply to mortgage originators that refinance existing loans. Use the resource link below to access the complete CUNA comment letter.

NCUA releases 2009 directory of all FCUs

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ALEXANDRIA, Va. (7/10/09)—The National Credit Union Administration has released its 2009 Directory of Federally Insured Credit Unions. It contains a state-by-state alphabetical listing of all active federally insured credit unions as of Jan. 1. The directory, published annually, also lists all corporate credit unions, as it features national statistics on credit unions and corporate credit unions. Use the link below to access the directory.

Inside Washington (07/09/2009)

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* WASHINGTON (7/10/09)--The Federal Housing Finance Agency (FHFA) has released its first five-year strategic plan, which lists its three strategic goals as safety and soundness, housing mission and conservatorship. The document also features a resource management strategy that the agency will use in “fulfilling its mission to provide effective supervision, regulation and housing mission oversight of Fannie Mae, Freddie Mac and the Federal Home Loan Banks to promote their safety and soundness, support housing finance and affordable housing, and support a stable and liquid mortgage market,” according to an FHFA release… * WASHINGTON (7/10/09)--During a Wednesday hearing on President Barack Obama’s plan for a new consumer protection agency, members of the House Energy and Commerce Committee argued that the Federal Trade Commission (FTC) should retain its powers (American Banker July 9). The energy committee lost some of its powers in 2000 to the House Banking Committee, which was then renamed the Financial Services Committee. After the change, the Energy and House Financial Services committees have conflicted over what each is responsible for--including matters involving the FTC. Under Obama’s plan, the FTC and banking agencies would lose their authority over consumer protection issues. However, if the new consumer protection agency doesn’t act within 120 days on referrals, FTC or other banking agencies could pursue their own actions. Jon Leibowitz, FTC chairman, said consumers would benefit from the new consumer agency. The FTC would have “backstop authority” on financial matters concentrating on and doing more for consumers, he said ... * WASHINGTON (7/10/09)--The U.S. Court of Appeals for the District of Columbia District Court upheld a rule by the Office of Thrift Supervision that allows newly converted thrifts to strengthen the limit on the amount of stock one person can own. Shareholder Joseph Stilwell had challenged the rule, filing a petition in August asking a federal court to set the rule aside. The rule would allow subsidiaries of mutual holding companies to limit their minority stock for 10% of the total stock (American Banker July 9). Circuit Judge Brett Kavanaugh said the rule was “reasonable” ...