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Washington Archive

Washington

CUNA releases FTC mortgage ad rule analysis

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WASHINGTON (8/1/11)--The Credit Union National Association has released a final rule analysis of the Federal Trade Commission’s (FTC) final rule addressing unfair or deceptive acts and practices that may occur with regard to mortgage advertising. The FTC rule applies to state-chartered credit unions, and specifically targets mortgage lenders, brokers, and servicers; real estate agents and brokers; advertising agencies; home builders; lead generators; rate aggregators; and other entities under the FTC's jurisdiction. It does not impact federal credit unions, banks and thrifts. The final rule bans "all material misrepresentations in advertising about consumer mortgages," including misrepresentations in commercial communications and advertisements regarding any term of any mortgage credit product and also imposes new recordkeeping requirements. The FTC issued its proposed rule to ban deceptive mortgage advertising practices in September. The final rule becomes effective Aug. 19. For the final rule analysis, use the resource link.

Cheney touts CUs in Bloomberg Europe interview

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WASHINGTON (8/1/11)--The amount of total worldwide assets held by credit unions has doubled in the past 10 years, reaching $1.4 trillion, and credit unions continue to grow as more people learn about the “better deal” that they represent, Credit Union National Association (CUNA) President/CEO Bill Cheney said during a live Bloomberg TV interview last week.

Appearing on Bloomberg Europe’s "On the Move", Cheney reiterated that while credit unions were impacted by the financial crisis, they did not cause it, and noted that while banks remain hesitant to lend to their customers, credit unions continue to lend. Cheney was in Glasgow, Scotland for the World Council of Credit Unions World Credit Union Conference. He added that credit unions have a very close relationship with their member-owners, and are now reaping the benefits after they stepped forward to lend to their members during the crisis. Cheney also was asked about credit union work in the aftermath of Haiti’s devastating earthquake. He noted that while one-third of the credit unions in Haiti were lost, “the ones that remain are still there, doing everything they can to help their members.” Cheney told Bloomberg how he observed their rebuilding efforts firsthand while touring Haiti following the earthquake as part of a credit union delegation organized by WOCCU. A basic snapshot of credit unions was also covered during the interview, helping an international audience understand that CUs are not-for-profit financial cooperatives whose business model provides affordable financial services for consumers in the U.S. and worldwide.

Data breach bill brings plans to five

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WASHINGTON (8/1/11)—The Data Security Act of 2011, which was introduced by Sens. Tom Carper (D-Del.) and Roy Blunt (R-Mo.) last week, is now one of five plans for possible fixes to data security regulations. The Credit Union National Association worked with the legislators as they developed S. 1434. That bill would require financial institutions, retailers, and federal agencies to protect sensitive information and to notify consumers and conduct their own investigations in the event of a data breach. Federal authorities, law enforcement, and various consumer reporting agencies must be notified if the breach impacts more than 5000 consumers. Overall, the bill aims to replace various state-based data protection laws with one single federal standard. Carper said that while Americans have “reaped enormous benefits” from the rapid development of the information technology sector, “millions of Americans are at risk for identity theft because of the vulnerability surrounding sensitive personal information.” Blunt added that the bipartisan bill would “help ensure that businesses and government agencies have consistent, national standards across the board as we work to protect consumers’ personal information and prevent identity theft.” S. 1434 has been referred to the Senate Banking Committee, and CUNA will continue to monitor the legislation as it moves through Congress. Other data breach bills include Sen. Mark Pryor’s (D-Ark.) S. 1207 and Sen. Patrick Leahy’s (D-Vt.) S. 1151. Rep. Mary Bono Mack (R-Calif.) has also introduced data protection legislation in the House, and that bill is awaiting a vote in the House Energy and Commerce Committee. The Obama Administration has also released its own data breach proposal. The prospects for these data breach proposals are uncertain at this time due to the ongoing debt crisis talks and the potential congressional recess set to start in early August.

Compliance CUNA offers interchange webinar

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WASHINGTON (8/1/11)--The Credit Union National Association’s (CUNA) Center for Professional Development is offering a webinar on the Federal Reserve’s debit interchange rule ahead of that regulation’s October 1 effective date. The webinar, entitled “The Debit Interchange Rule from a Compliance Perspective,” will take place on Aug. 3 from 3:00 p.m. until 4:30 p.m. ET. Registration will cost $219, and the webinar will be archived. Kathy Thompson, CUNA’s senior vice president for compliance, said “credit unions are rolling up their sleeves to address the impact of the new debit interchange restrictions and requirements on their operations, and CUNA wants to help them understand what needs to be done and think through the compliance implications of possible changes to products and services.” The webinar will:
* Provide an overview of the provisions of the new regulation that are effective October 1; * Discuss some of the still-unknown issues and possible impact on members; * Focus on the exclusivity and routing provisions and what credit unions must do to comply by April 1, 2012; and * Provide some compliance cautions as credit unions look for other sources of revenue and ways to compete.
Andrea Stritzke, vice president of PolicyWorks, will discuss operational considerations, and Thomas Riha, CEO of PayFusion, will share his expertise on payment network issues. Thompson will provide the CUNA Washington perspective on the regulation. The Fed's final rule caps large issuer debit interchange fees at 21 cents, and allows an additional five basis points per transaction may be charged to cover fraud losses. An extra penny may be charged by financial institutions that are in compliance with Fed established fraud prevention standards. “Although we are hopeful that a two-tiered debit fee interchange system as envisioned in the law will survive in reality, not just theory, credit unions need to understand the regulation, start to address the exclusivity requirements, and think about how their related product offerings may look a year from now,” Thompson said. To register for the webinar, use the resource link.

Inside Washington (07/29/2011)

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* WASHINGTON (8/1/11)--The Senate Banking Committee will conduct a hearing Thursday on the nomination of Richard Cordray to lead the new Consumer Financial Protection Bureau (CFPB). Earlier this month President Barack Obama nominated Cordray, a former Ohio attorney general, to be the bureau’s first director. Republicans appear intent on blocking Cordray’s confirmation unless changes are made to the structure of the bureau that Democrats oppose. “With next week’s hearing, I will begin the process of moving Cordray’s nomination forward to confirmation,” Senate Banking Committee Chairman Tim Johnson said in a statement. “The CFPB opened its doors as an independent agency on July 21, and it is off to a strong start promoting an equitable and transparent consumer financial marketplace. However, until it has a director, the CFPB will not be able to use its full powers to protect consumers and level the playing field for community banks and credit unions.” The agency cannot regulate non-bank lenders such as payday lenders until it has a director in place … * WASHINGTON (8/1/11)--Despite improvements in their financial results, Fannie Mae and Freddie Mac will require continued capital injections from the Treasury Department to avoid being unwound by their conservator, the Federal Housing Finance Agency, according to the rating agency Fitch Inc. (American Banker July 29). The government-sponsored enterprises have been drawing on average $2 billion to $3 billion a quarter since 2010, according to analysts at Barclays Capital. Fannie and Freddie could continue operations if the U.S. debt ceiling is not raised by Tuesday. But raising the ceiling without a budget deal would leave not only Fannie and Freddie vulnerable, but also the mortgage market …

Judge dismisses suit against former WesCorp directors

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LOS ANGELES (7/29/11)—A federal district court judge has granted a motion to dismiss the case brought by the National Credit Union Administration (NCUA) against Western Corporate FCU’s former directors. U.S. District Court Judge George Wu this week dismissed complaints by the NCUA that alleged breach of fiduciary duties against WesCorp’s former directors. The suit had named former directors Bill Cheney(president/CEO of the Credit Union National Association), Gordon Dames, Robert Harvey, James Jordan, Timothy Kramer, Robin Lentz, John Merlo, Warren Nakamura, Brian Osberg, David Rhamey and Sharon Updike. However, the judge has denied a request by the failed corporate’s officers to dismiss separate charges against them. The NCUA suit names Robert A. Siravo (WesCorp's former president/CEO), Todd M. Lane (former chief financial officer), Thomas E. Swedberg (former vice president, human resources), and Bob Burrell (former chief investment officer) and alleges breaches of fiduciary duties. The NCUA has further alleged Siravo and Swedberg manipulated the WesCorp’s Supplemental Executive Retirement Plans (SERP) to increase pay-outs and that Lane was "enriched" by executing an early payout agreement in exchange for his SERP rights. The NCUA brought its lawsuits against the officers and directors in its role of conservator for Wescorp. The suit against the officers will continue to proceed toward trial, although the judge, in oral comments, did raise some concerns and questions about the NCUA's case against the officers as well. The next step is the “discovery” phase, through which each side gathers additional evidence. Wu has set a scheduling conference for Aug. 25.

CFPB to release third draft of combined mortgage form

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WASHINGTON (7/29/11)--The third draft of the Consumer Financial Protection Bureau’s combined form for Truth in Lending Act (TILA) and Real Estate Settlement Procedures Act (RESPA) disclosures will be released next week, the CFPB said in a Thursday release. The combined form is required under the Dodd-Frank Act and is intended to reduce mortgage lender regulatory burden and make mortgage disclosures less confusing to consumers. The CFPB has released and collected comment on two separate drafts of a simplified mortgage disclosure form. The agency said it has received more than 18,000 comments since the first draft of the combined form was released in May. The CFPB previewed some of the issues it will look at more closely in this third draft of its new mortgage form. Those issues include:
* Rephrasing the way that borrowers are warned of potential issues with interest rates and monthly loan payments; and * Determining “the appropriate level of detail of fee disclosures for consumers.” The CFPB said that commenters “were divided over the benefits of greater itemization of fees versus a simpler, more concise format” on the second page of the form.
The CFPB will also move the “important dates” section of the form onto the front page, and will put sections of the form addressing mortgage points “on its own subject line for better clarity.” The Credit Union National Association (CUNA), leagues and credit unions have worked with the CFPB on this project. For instance, CUNA in May met with the CFPB to discuss the first stage of the streamlining process and additional meetings are in the works. CUNA has urged the CFPB to continue to reach out to stakeholders as it moves forward with this and other projects. The CFPB, in blog posts and official reports, has said it is "committed to remaining attentive" to the concerns of credit unions and other small financial institutions, and looks forward to addressing the concerns of credit unions and community banks throughout the development of CFPB priorities. For the CFPB release, use the resource link.

Today is NCUA prepayment participation deadline

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ALEXANDRIA, Va. (7/29/11)—Credit unions that wish to take part in the National Credit Union Administration’s (NCUA) voluntary Corporate Stabilization Fund assessment prepayment plan must notify the agency of their intent by the end of the day. Credit unions that wish to take part in the plan may pledge a minimum of $1,000, or 5 basis points (bp) of March 31, 2011 insured shares, whichever is greater. The maximum that can be committed is 48 bp of those same shares. The agency has set the target size of the program at $500 million, and will not move forward with the plan if less than $500 million is pledged by credit unions. If credit unions pledge funding beyond the NCUA’s proposed $500 million target program size, each credit union’s payment will be a prorated portion of its total fund commitment. The prepayment plan could reduce the 2011 regular assessment from about 25 bp to about 18.5 bp. NCUA Chairman Debbie Matz has emphasized that participation in the prepayment plan is voluntary, and said that the agency is neither encouraging nor discouraging credit union participation in the program. A recent Credit Union National Association (CUNA) white paper noted that the prepayment plan was not as large as CUNA had hoped, but it could prove vital for some credit unions. CUNA has encouraged credit unions to consider the extent to which the program will benefit them and whether they should participate. CUNA Chief Economist Bill Hampel said that some credit unions have told CUNA that they will participate, while others have indicated that they will not. “We really don’t have a good read on how this will come out” he said. The agency will tally the total amount of credit union commitments on Aug. 9, and, if it moves forward with the plan, will debit the prorated amounts that have been pledged from credit union accounts on Aug. 18. The NCUA is expected to set its 2011 Temporary Corporate Credit Union Stabilization Fund assessment at an Aug. 29 meeting. For CUNA’s white paper, use the resource link.

CUNA on CNN Money Debt debate unsettling markets

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WASHINGTON (7/29/11)--Credit Union National Association (CUNA) Chief Economist Bill Hampel told CNNMoney.com that the Congressional rhetoric surrounding the debt ceiling debate, which has reached a fever pitch in recent days, “is creating high level of uncertainty among market participants," adding that financial markets will "remain jittery until a deal is done." A House vote on Rep. John Boehner’s (R-Ohio) version of cap lift legislation was slated for last night, but was ultimately postponed late in the evening. Sen. Harry Reid (D-Nev.) has said that the House bill would not pass the Democrat-controlled Senate. The Congressional Budget Office reported that Boehner’s proposal would increase the debt cap by $2.5 trillion and reduce the deficit by as much as $1.1 trillion through a series of steps to be taken between 2012 and 2021. President Obama and federal lawmakers have until early August to increase the government's statutory borrowing authority or risk defaulting on the nation's debt. Debt cap negotiations "always go down to the last minute and get resolved. But there is a nagging doubt this time around," Hampel said. The Dow Jones Industrial Average dropped for the fifth straight day on Thursday, falling 62 points to a total of around 12440. CUNA continues to closely monitor debt cap debate developments, with a close eye on any possible changes that could threaten the federal credit union tax status. CUNA Senior Vice President of Legislative Affairs John Magill repeated that there has been no indication that the credit union exemption is being considered in the debt ceiling debate. "Preserving the federal credit union tax status remains a top CUNA priority and the volatility surrounding the debt ceiling negotiations makes it prudent for CUNA to remain on the alert. "However, neither the Democrat's preferred debt package nor the Republican's plan takes aim at credit unions at this point," Magill said.

NACHA seeking comment on operating rule issues

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WASHINGTON (7/29/11)--Credit unions can provide the Electronic Payments Association (NACHA) with comment on a proposal that would require written authorization for debit entries to a business account, and other proposed rule changes that are meant to eliminate problems caused by some NACHA operating rules, via a new comment call. NACHA is asking for credit union views on proposed changes to the scope of accounts receivable conversion rules and return reason codes. Removing the current requirement that an originating depository financial institutions (ODFI) or originator must suffer a loss in order to dishonor an untimely return, and other changes to rules that impact ODFIs, have also been proposed. For the full comment call, use the resource link.

Inside Washington (07/28/2011)

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* WASHINGTON (7/29/11)--A provision of the Dodd-Frank Act that requires elimination of references to credit ratings in most bank regulations has proven difficult to implement, regulators told the House subcommittee on financial oversight on Wednesday. The law requires regulators to substitute references to credit ratings with other standards of creditworthiness. But regulators said finding alternatives has been difficult, and those they have found are not necessarily superior to credit ratings. Among the alternatives the Federal Reserve is considering are market-based indicators such as bond spreads, approaches that rely on balance-sheet financial ratios, and internal risk assessments by banks, according to Mark Van Der Weide, senior associate director of the Federal Reserve Board’s division of banking supervision (American Banker July 28). The Credit Union National Association (CUNA) has said it is concerned with the potential unintended effects of the National Credit Union Administration's (NCUA) proposal to completely prohibit credit unions from relying on credit ratings to assess credit risk. CUNA, in a recent comment letter, argued that the Dodd-Frank Act “does not require that regulators preclude the institutions they oversee from relying on credit ratings.” * WASHINGTON (7/29/11)—Plaintiffs’ attorneys have moved to unseal records in a key class action suit regarding bank overdraft practices. If it is granted, Wednesday’s motion in Larsen v. Union Bank N.A. could prompt greater public scrutiny of banks’ motives for handling transactions in sequences that produce more overdraft charges (American Banker July 28). The plaintiffs intend to make similar requests to unseal court records for other banks, said Bruce Rogow, co-lead counsel for the plaintiffs. Lawrence King, the judge in the case, also supported a methodology for determining damages that was key to a $203 million ruling against Wells Fargo & Co. in a California-specific overdraft suit. The court’s references to the California case may prove damaging for bank defendants in the Union Bank case. Northern California District Court Judge William Alsup ruled against Wells Fargo. That case has been appealed.

CUs should think globally Matz tells WOCCU conference

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GLASGOW, Scotland (7/28/11)--National Credit Union Administration (NCUA) Chairman Debbie Matz encouraged credit unions to “think globally about how to prepare for uncertainty, reach new markets, and better serve consumers” in a speech before the World Council of Credit Unions' (WOCCU) World Credit Union Conference. Matz took the opportunity to reiterate her support—before an international audience-–for easing supplemental capital standards for credit unions and allowing some credit unions to exclude zero-risk assets from their total assets, saying that these two changes “would give well-managed credit unions the flexibility to better manage capital-to-asset ratios under varying economic conditions.” Matz also discussed credit union consolidation, noting that while many "believe ‘small’ means better service, consolidation does have some virtues." Credit union consolidation “allows credit unions to better compete, broaden their geographic reach, and take advantage of economies of scale," she added. Credit unions can grow and enter new markets by applying their traditional community-finding and community-building skills to burgeoning urban communities and tapping into unbanked populations, Matz said. Market share could also be increased by educating and working with younger populations, she added. While consumers between the ages of 25 and 44 do the most borrowing from financial institutions, the average age of American credit union members is currently 47. “Ultimately this trend must be reversed if credit unions are to survive,” Matz said. Citing a Credit Union National Association (CUNA) survey that found that 69% of consumers between 18 and 24 years of age are “not at all familiar” with credit unions, Matz added that “credit unions will have to be creative in order to attract and retain the consumer base of tomorrow.” The NCUA leader said that one way to bring in new members is to give them more mobile banking options. “Younger consumers don’t just desire this service from financial institutions; they demand it,” she said, adding that “credit unions will have to embrace these technologies” going forward. For the full NCUA release, use the resource link.

FHFA seeking damages from UBS sales to GSEs

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WASHINGTON (7/28/11)--The Federal Housing Finance Agency (FHFA) has brought a suit against UBS Americas in an attempt to recover losses and damages sustained by Fannie Mae and Freddie Mac. The two government-sponsored entities invested $4.5 billion in residential private-label mortgage-backed securities that were sold by UBS. The suit was brought in the federal district court for the Southern District of New York and names UBS Americas, Inc., UBS Real Estate Securities Inc., UBS Securities, LLC, Mortgage Asset Securitization Transactions, Inc., and former UBS executives David Martin, Per Dyrvick, Hugh Corcoran, and Peter Slagowitz as defendants. In the suit, the FHFA alleges that UBS “made numerous material misstatements and omissions about the mortgage loans underlying the private-label [securities], including the creditworthiness of the borrowers and the quality of the origination and underwriting practices used to evaluate and approve such loans.” The FHFA added that UBS “failed to conduct adequate due diligence.” FHFA Acting Director Edward DeMarco said that the FHFA’s suit is “consistent” with the FHFA’s responsibilities as conservator of Fannie and Freddie. The agency indicated that additional lawsuits could follow. The National Credit Union Administration (NCUA) has brought its own securities-related suits, seeking $1.5 billion in combined damages from RBS Securities and J.P. Morgan Securities, LLC. Similar to the FHFA, the NCUA has alleged that these securities firms materially misrepresented securities that were sold to corporate credit unions U.S. Central, Western Corporate, Southwest Corporate, Members United Corporate, and Constitution Corporate. The NCUA has said that as many as seven additional court actions could be taken. For the FHFA’s statement and more on the NCUA’s recent actions, use the resource links.

Date to take Warrens spot at CFPB

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WASHINGTON (7/28/11)--Raj Date, who currently serves as the Consumer Financial Protection Bureau’s associate director of research, markets & regulations, will take on the role of special adviser to U.S. Treasury Secretary Tim Geithner when current adviser Elizabeth Warren leaves the CFPB on Aug. 1. Date, a Harvard Law graduate who has also worked for Capital One and Deutsche Bank, and founded the financial research nonprofit Cambridge Winter Center, will lead the CFPB’s day-to-day operations in his new position. The Treasury indicated that Warren would return to her prior position at Harvard in August. Geithner in a Treasury release praised Warren for her work in “standing up” the CFPB, simplifying mortgage and credit card disclosures, and protecting military families from deceptive financial practices, among other things. Date was brought into the CFPB by Warren last year. Another Warren recommendation, Richard Cordray, was tapped by President Barack Obama to lead the CFPB last week. Warren herself was long thought to be the frontrunner for the CFPB’s top post, but a number of key Republicans opposed Warren for the CFPB position, raising doubts about the ability of her nomination to clear the US Senate. Cordray's nomination also will require Senate confirmation and is not assured. Some in Congress are calling for structural changes to the CFPB before agreeing to confirm a director. While the CFPB still lacks an official director, the agency began its work on July 21. Authority over several consumer-related regulations has been transferred to the CFPB, and the agency has begun to communicate directly with the organizations it is now overseeing. The CFPB has also begun to accept consumer credit card complaints, and is working to address other consumer-related issues. Interim rules that will cover confidentiality, how testimony of records are made available to the public, and related Privacy Act and Freedom of Information Act requirements should soon be in the offing, and other administrative and internal CFPB matters are also being handled at this time, according to the agency. For more on the CFPB’s new regulatory responsibilities, use the resource link.

NACHA seeks CU information on P2P payments

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WASHINGTON (7/28/11)--Credit unions can provide their input on the challenges and advantages presented by the many ways that person-to-person (P2P) payments may be made over automated clearing house (ACH) networks via a comment call issued by the Electronic Payments Association (NACHA). The comment call, which has also been released by the Credit Union National Association (CUNA), presents nine different options for P2P payments that can be made by smartphones, including using prepaid accounts with a given retailer, mobile check scanning, and person-to-person payments that are made online. The comment call asks credit unions to detail which P2P options they use, and to list any advantages or disadvantages to using those options. Credit unions may also suggest potential improvements to NACHA’s operating rules, or the ACH network in general, that would make P2P options easier to use. The comment call also asks if credit union members have experienced any difficulties when they attempted to sign up for mobile P2P payment options. Comments to CUNA must be sent by Aug. 5. NACHA will accept comments until Aug. 12. For the full comment call, use the resource link.

Inside Washington (07/27/2011)

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* WASHINGTON (7/28/11)—The House Financial Services Committee Wednesday announced its schedule for the first week of August. On Wednesday, Aug. 3, the panel’s subcommittee on insurance, housing and community opportunity will conduct a hearing on the single- and multi-family programs of the Federal Housing Administration (FHA) and the Rural Housing Service (RHS), and also will study legislative proposals to improve the financial condition of FHA, RHS and Ginnie Mae. On Thursday, Aug. 4, the full committee will host U.S. Securities and Exchange Commission (SEC) Chair Mary Schapiro as it examines the structure and operations of the SEC and the need for reform. On Friday, Aug. 5, the full committee will study exposure of U.S. banks to the European Union’s debt crisis; Witnesses will be announced at a later date. … * ALEXANDRIA, Va. (7/28/11)—The National Credit Union Administration (NCUA) has issued a guidance letter to corporate credit unions on annual reporting and internal controls assessments based on rules adopted earlier this year. The audit and reporting requirements are effective Jan. 1, 2012 and make the corporate credit union requirements similar to those required of banks and other U.S. corporations, as set forth in sections of the 2002 Sarbanes-Oxley Act. … * WASHINGTON (7/28/11)--Business executives, preparing contingency plans in the event of a crisis, this week urged political leaders to end the stalemate over the debt crisis. Wall Street executives sent a joint letter to President Barack Obama and congressional leaders asking them “to act with unity” in negotiating a settlement. On Tuesday, the U.S. Chamber of Commerce and financial industry trade groups such as the Securities Industry and Financial Markets Assocation and the Financial Services Roundtable called on Congress to intervene. Unlike in previous debates about healthcare and financial reform, most of the financial community has tried to step delicately and avoid picking particular partisan plans. (Los Angeles Times July 27). The likelihood that the U.S. would miss payments on on its bonds and default is remote, financial experts said. Such an outcome would be disastrous. A more likely scenario is that a temporary deal would be made to lift the debt ceiling, according to the Times. If a makeshift plan is made, the U.S. is unlikely to retain its AAA grade with bond rating companies …

NCUA addresses asset reduction via Feds EBA program

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ALEXANDRIA, Va. (7/28/11)—The National Credit Union Administration (NCUA) sent a letter to federally insured credit unions (11-CU-10), intended to educate those unions who are members of corporate credit unions, on the Federal Reserve Bank Excess Balance Account (“EBA”) Program. The NCUA letter said that as the corporates share their business plans with their member credit unions, many of these plans note a “considerable reduction in asset size (that) will dictate lower amounts of contributed capital from member credit unions” to meet regulatory capital requirements. One tool some CCUs are considering as a means to reduce asset size, the letter said, is the Fed’s EBA plan, and the letter included a fact sheet on the program. The NCUA explained that in 2009 the Fed established limited-purpose accounts at Federal Reserve Banks (FRBs) for the purpose of maintaining excess reserve balances. The EBAs are intended to allow eligible institutions, which includes member consumer credit unions, to earn interest on their excess balances in an account relationship directly with a FRB without significantly disrupting established business relationships with their correspondents credit unions. The NCUA letter also provides information on:
* How EBAs work; and * Due diligence requirements.
Use the resource link to access the NCUA letter.

CUNA monitors debt-ceiling talks for CU impact

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WASHINGTON (7/28/11)—Tensions mount on all fronts as the government continues its push-and-pull fight to work out a plan to increase the nation’s debt ceiling. The Credit Union National Association (CUNA) is closely monitoring developments as the U.S. Congress wrestles to write the formula of how deep the funding cuts and how high the revenue raisers will be in a final plan. That equation is the key element behind the partisan jabbing that is seen as delaying progress on a resolution. CUNA remains vigilant to detecting any possible development that could threaten the federal credit union tax status. To date, there has been no indication that the credit union exemption is being considered in the debt ceiling debate, reports John Magill, CUNA senior vice president of legislative affairs. “Preserving the federal credit union tax status remains a top CUNA priority and the volatility surrounding the debt ceiling negotiations makes it prudent for CUNA to remain on the alert. “However, neither the Democrat’s preferred debt package nor the Republican’s plan takes aim at credit unions at this point,” Magill says. President Obama and federal lawmakers have until early August to increase the government’s statutory borrowing authority or risk defaulting on the nation’s debt. So far, CUNA Chief Economist Bill Hampel points out, the broader financial markets are not reacting as if there is significant risk of the debt ceiling not being raised in some fashion. “The general consensus is that investors believe that by the last minute, something will be done to raise the debt ceiling. This is because the financial markets understand the catastrophic consequences of not raising the ceiling: a possible default on the debt, and/or having to balance the budget cold turkey on Aug. 3, which would require immediately cutting federal spending by about 35%. Either of these would throw the economy into another recession that could make the last one look mild,” Hampel says. He adds that even if policymakers miss the debt ceiling deadline by a few days, the upset in the financial marketplace--demonstrated by falling stock values and rising interest rates--likely would force lawmakers and the administration into agreement quickly. “The effects would—one can hope--be so short-lived that credit union members would unlikely have much time to react. However, within the context of an extended crisis savings rates could drop, loan rates could rise—and consumers could shift funds around. “The best bet for credit unions would be to stay liquid just in case,” Hampel adds.

Credit ratings get Washington spotlight

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WASHINGTON (7/27/11)—Any new credit rating standards that are developed must be able to quickly reflect market changes and “adjust for new information,” the Federal Reserve said in a credit rating report released on Tuesday. The report, required by the Dodd-Frank Wall Street Reform Act, makes the case for ratings reforms, noting that “credit ratings have proven in a number of important situations to have several shortcomings, including issues related to possible conflicts of interest and weaknesses in modeling.” Any new standards must “not increase the risk of regulatory arbitrage as new financial methods and structures are developed” and also “have broad applicability and be sensitive to the risk posed by different exposures,” the report added. The Dodd-Frank Act requires federal financial regulators to replace references to or requirements in their regulations regarding credit ratings with new standards of creditworthiness as established by each agency. The National Credit Union Administration (NCUA) has proposed replacing the current requirement that a security be assigned a specific grade (such as AA, A, or BB) to be a permissible investment, with the requirement that the security satisfy a narrative standard on credit quality. The narrative must generally include an internal analysis of the issuer of a given security, with a statement showing that the credit union considers the security provider to be capable of meeting its financial commitments. The NCUA was the first federal agency to publicly release newly developed credit ratings standards. The Credit Union National Association (CUNA) has said that these ratings changes, which have not been finalized, may create issues for credit unions. Credit ratings "can be useful to credit unions as part of a comprehensive approach to assessing credit risk," CUNA said, adding that the NCUA should consider permitting credit unions to rely on credit ratings "as long as the credit union also conducts further reasonable and appropriate due diligence." Credit rating agencies are the topic of a House Financial Services Committee Subcommittee on Oversight and Investigations hearing scheduled for 10:00 a.m.(ET) today. For the Fed report, a CUNA letter to the NCUA on credit ratings, and more on today’s House hearing, use the resource links.

FSOC FDIC nominees see some bipartisan committee support

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WASHINGTON (7/27/11)—President Barack Obama’s nominees for Federal Deposit Insurance Corp. chairman, Comptroller of the Currency, and Financial Stability Oversight Council member could face a potentially easy path to their new positions if Tuesday’s even-tempered Senate Banking Committee confirmation hearing is any indication. Senators spoke with FDIC nominee Martin Gruenberg, potential Comptroller of the Currency Thomas Curry, and FSOC nominee S. Roy Woodall Jr. during the Tuesday hearing. Committee Chair Sen. Tim Johnson (D-S.D.) in his opening statement noted that the three nominees are “well qualified,” adding that the nation needs “strong leadership” at from its financial regulators as the country recovers from recent economic troubles. Discussions of both too big to fail and smaller institutions, credit access, and general economic and financial services topics made up the bulk of the hearing. Sen. Bob Corker (R-Tenn.) sought reassurances that Gruenberg would work with the Senate on addressing too big to fail institutions and FDIC examiner consistency, and the FDIC nominee said that working with smaller institutions would be a priority during his chairmanship. Senator Robert Menendez (D-N.J.) said he is concerned that still-developing reforms to the definition of a qualified residential mortgage (QRM) may harm the housing market if the definition is not broad enough. Gruenberg said that the final QRM definition, once agreed to, must balance concerns over consumer credit access and financial market security concerns. The Credit Union National Association and others, including a bipartisan group of lawmakers, have criticized a proposal to require a 20% down payment for a loan to be defined as a QRM, saying that this change would shut out responsible homebuyers and further cripple the housing market. For an archived video of the hearing, use the resource link.

FSOC report covers recent future financial issues

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WASHINGTON (7/27/11)--The present state of the U.S. financial system and some of the issues that could shape the system going forward are addressed in the Financial Stability Oversight Council’s (FSOC) first ever annual report. The FSOC was created when the Dodd-Frank Act was signed into law just over one year ago. The report identifies declining real estate prices, a sudden increase in term premiums on U.S. government debt, and an escalation of the European sovereign debt crisis as issues that could trouble the economy going forward. The council, which provides a forum for discussion between various regulatory agencies, is comprised of National Credit Union Administration Chairman Debbie Matz, Treasury Secretary and FSOC Chairman Tim Geithner, Federal Reserve Chairman Ben Bernanke, Acting Comptroller of the Currency John Walsh, Securities and Exchange Commission Chairman Mary Schapiro, and Federal Deposit Insurance Corp. Chairman Sheila Bair, and representatives from the Commodity Futures Trading Commission and the Federal Housing Finance Agency. The council will also oversee the resolution of troubled financial institutions. Matz was one of the 10 FSOC members that attested to the report, and added that the release of the FSOC report “marks an important milestone. “The FSOC is a critical institution that will have an important role in financial stability for many years to come,” she added. For the full FSOC report, use the resource link.

Truth in savings mortgage registration move from NCUA to CFPB

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WASHINGTON (7/27/11)--Truth in Savings, mortgage loan originator registration, and the privacy of consumer financial information are among the rules that have been transferred to the oversight of the Consumer Financial Protection Bureau from the National Credit Union Administration since the new agency began its work on July 21, the CFPB noted in a Federal Register document. The transfer of authority was designated by the Dodd-Frank Wall Street Reform Act. Other rulemaking priorities that the CFPB has taken over from the NCUA include:
*Portions of Fair Credit Reporting rules; *Insurance requirements; *Rules addressing some types of loans and lines of credit that are extended to credit union members, but only as applied to non-federally chartered housing creditors under the Alternative Mortgage Transaction Parity Act (AMTPA).
The Credit Union National Association (CUNA) has said that recent AMTPA changes would only impact a minimal number of state-chartered credit unions. The CFPB has contacted the CEOs of the firms that it now oversees, and has also begun to accept consumer credit card complaints. The agency soon will have the capacity to deal with other issues. A series of interim rules that will cover confidentiality, how testimony of records are made available to the public, and related Privacy Act and Freedom of Information Act requirements will also be issued by the CFPB in the future, and the agency will also detail how its own investigative procedures and administrative enforcements will proceed. Other administrative and internal CFPB matters are also being handled at this time, the CFPB recently said. For the CFPB’s list of new regulatory responsibilities, use the resource link.

CUNA Q-and-A clarifies corp liquidation letter

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WASHINGTON (7/27/11)--In response to certain credit union concerns regarding a recent agency communication related to liquidation of two bridge corporate credit unions, the Credit Union National Association (CUNA) has secured further information from the National Credit Union Administration (NCUA) in the form of a Q-and-A. The NCUA recently sent letters to credit unions belonging to Western Bridge Corporate FCU and U.S. Central Bridge Corporate FCU, which have approved plans to reorganize as United Resources FCU and—for U.S. Central’s payment business—as PayNet. Those transitions will involve the liquidation of the two bridges and the creation of two new corporate charters, the NCUA letter stated. Credit unions with certificates of deposit (CDs) in Western Bridge or U.S. Central Bridge that mature after the date of their bridge’s liquidation will be paid the full principal amount of the CD at the time of liquidation. The credit union will also receive interest accrued and payable to the account on the CD up to the point of liquidation. To help stabilize corporate credit unions in crisis in 2009, the NCUA asked credit unions who were members to leave or deposit funds with their corporates. The agency also announced the Temporary Corporate CU Share Guarantee Program. That program, currently slated to run through the end of 2012, provided credit unions with a federal guarantee for any shares that were in excess of the $250,000 federal share insurance cap. A number of credit unions have expressed concerns because some of the CDs that will be liquidated had maturities well into next year. The yields anticipated through maturity are significantly higher than any re-investment rate a credit union is likely to find in the current market. “The dismay is understandable,” said CUNA Chief Economist Bill Hampel. “Credit unions believe they stepped up to the plate to provide liquidity in a time of need, and are now troubled to learn they will earn a lower total return than they calculated based on the ending date of the guarantee program.” Because of the concern expressed by credit unions, CUNA posed a question to NCUA about the payout of CDs at the two liquidating bridges: Q: Did NCUA consider continuing the higher dividend rates until original maturity, or paying off the CDs at a premium to cover the reduced investment yield the depositing credit unions would receive when they reinvest the funds? NCUA: The legal obligation under the Temporary Corporate Credit Union Share Guarantee program stipulated NCUA would pay all principal plus interest accrued to the account at the time of liquidation. This practice is consistent with how NCUA pays out shares under its deposit insurance program. The temporary guarantee did not stipulate it would pay future dividends from the point of liquidation. The NCUA board deliberated whether to extend the liability to the Corporate Stabilization Fund to pay dividends beyond the legal requirement, but concluded that such an action would add unwarranted costs to the Corporate System Resolution Plan. Had the NCUA Board decided to extend the liability to the maturity of the CDs, all federally-insured credit unions would have paid increased assessments over time. Member advisory councils for Western Bridge and US Central Bridge developed the business plans for the proposed United Resources Corporate and PayNet Corporate charters. These member-driven business plans stipulated that the new charters would not assume the affected CDs. Accordingly, once the certificates become part of the bridge liquidation estate, it will trigger NCUA’s obligation to pay out the CDs under the procedures of the temporary guarantee. Q: Why did NCUA decide not to cover the higher yields until original maturity or until the end of the Temporary Corporate Credit Union Share Guarantee program? NCUA: A decision to cover the affected CDs would have added costs to the corporate stabilization fund and exceeded the legal requirements of the Temporary Corporate Credit Union Share Guarantee program. Thus, if NCUA had paid the dividends beyond the legal obligation, approximately 7,300 federally insured credit unions would have borne the costs for the benefit of 200 credit unions, including corporates, with the CDs. This was one of the considerations which served as the basis for not paying out liabilities beyond the guarantee obligation. Q: How much would it have cost the agency to cover the higher yields until maturity or the end of the program by paying off all the CDs at a premium? NCUA: The associated premium to satisfy all future dividends would have been approximately $30 million. This was one of the considerations which served as the basis for not paying out liabilities beyond the guarantee obligation. Q: Roughly what proportion of the CDs that will be paid off before maturity were purchased by credit unions after the Temporary Corporate Credit Union Share Guarantee became effective and NCUA requested credit unions continue to provide liquidity to the conserved corporates? NCUA: CDs with maturities beyond the expected dates of resolution and purchased after the Temporary Corporate Credit Union Share Guarantee became effective represent 26 percent of the $30 million premium discussed in the question above. Said another way, nearly 74 percent of the premium ($22 million) is associated with CDs that were purchased prior to the Temporary Share Guarantee and were subject to loss of principal had NCUA not implemented the program. Many of these credit unions had tens, if not hundreds, of millions of dollars in certificates that largely would have been uninsured. Q: How much would it have cost to cover the higher yields just on those CDs that were purchased after the time of the Temporary Share Guarantee? NCUA: The premium associated with CDs purchased after the Temporary Share Guarantee became effective in January 2009 would be approximately $8 million.

Improve CDRLF rules by streamlining CUNA

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WASHINGTON (7/27/11)--The Credit Union National Association (CUNA) supports efforts to improve the process for “low-income” credit unions to apply for loans and technical assistance grants from the Community Development Revolving Loan Fund (CDRLF) and offered suggestions to streamline the process of applying for loans and grants. In a comment letter sent Monday, CUNA’s urged the National Credit Union Administration (NCUA) to minimize reporting and monitoring burdens on “low-income” credit unions seeking CDRLF assistance by using existing reports whenever possible. The CUNA letter said the NCUA’s proposed rule change aimed at reorganizing CDRLF regulations should also provide greater flexibility in terms and conditions. Recommended changes include:
* A non-exhaustive list of permissible loan fund uses, such as developing new products or community partnerships; * An increase in the maximum loan limit, currently set at $300,000; * A reference to the CDRLF Interest Rate Policy and a specific interest rate on the notice of funding; and, * Removal of the current requirement for matching funds.
CUNA expressed concern that requiring financial projections would increase the cost of seeking CDRLF assistance. But CUNA offered support for the removal of the current requirement for a Community Needs Plan, which would be replaced by a narrative on the intended uses of funds.

Inside Washington (07/26/2011)

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* WASHINGTON (7/27/11)--In its merger with the Office of Thrift Supervision (OTS)--mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act--the Office of the Comptroller of the Currency (OCC) has inherited the unfamiliar job of handling a lawsuit involving the closing of United Western Bank, a thrift it never regulated. United Western Bank filed suit against regulators in February, claiming the OTS was wrong to seize it and asking the judge for reinstatement (American Banker July 26). United Western alleged the OTS and the Federal Deposit Insurance Corp. seized the thrift before giving it enough time to recover. In June, U.S. District Court Judge Amy Berman Jackson ruled the suit against the OTS--now the OCC--could proceed. Jackson granted the Federal Deposit Insurance Corp.’s request to exit the case, but allowed the United Western to pursue its claims against OTS, because a statute specifically allows a bank to challenge the OTS director’s decision to appoint a receiver in the District Court. The outcome of the case could determine if similar suits will follow. Thomas Vartanian, a partner at Dechert LLP, speculated that the OCC, while not the party accused of any wrongdoing, would pursue the case based on principle … * WASHINGTON (7/27/11)--The Financial Crimes Enforcement Network (FinCEN) Tuesday issued its final rule amending Bank Secrecy Act regulations on prepaid access. The rule puts in place suspicious activity reporting, and customer and transactional information collection requirements on providers and sellers of certain types of prepaid access similar to other categories of money service businesses. Under the final ruled “stored value” has been renamed as “prepaid access.” The rule adopts a targeted approach to regulating sellers of prepaid access products, focusing on the sale of prepaid access products with features or values that pose heightened money laundering risks. Products of $1,000 or less and payroll products that can’t be used internationally, do not permit transfers among users and cannot be reloaded from a non-depository source are exempted from the rule. Closed-loop, prepaid-access products sold in amounts of $2,000 or less are also exempted. The rule excludes government funded and pre-tax flexible spending for health and dependent care funded prepaid access programs …

Inside Washington (07/25/2011)

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* WASHINGTON (7/26/11)--Last week, banking executives and state attorneys general met in Washington to work towards a settlement on bank foreclosure abuses. At issue is how much banks should pay and who should receive the payment. Initial terms, which emerged in March, were said to be $20 billion (New York Times July 25). Also to be addressed is how banks will be protected from future liability. Another issue is the potential liability related to the Mortgage Electronic Registry Systems (MERS), a company owned by the major banks, which was set up in the mid-1990s by the Mortgage Bankers Association, Fannie Mae and Freddie Mac. Its goal was to speed up the home loan process. Lawyers have questioned MERS’ ability to bring foreclosure proceedings because the system does not technically own the security or note underlying properties, as required. It would be unprecedented to release banks that own MERS from liability arising from claims that have not been investigated, according to attorneys the Times said … * WASHINGTON (7/26/11)--Floyd Stoner, the chief lobbyist for the American Bar Association, announced his retirement after 26 years with the organization (American Banker July 25). Before joining the ABA in 1985, Joiner was a political-science professor at Marquette University. Ken Clayton and James Ballentine will assume operational responsibilities next year for the congressional relations and public policy division at the ABA, with Clayton becoming chief counsel and senior vice president of legislative affairs, and Ballentine serving as senior vice president of congressional relations and political affairs …

CUNA Proposal could shut down interntl fund transfers

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WASHINGTON (7/26/11)—Many credit unions could cease offering international electronic fund transfer services to their members if a rule intended to protect consumers who use “remittance” services is put into effect without significant revisions, according to the Credit Union National Association (CUNA). CUNA’s Friday comment letter to the Federal Reserve Board highlighted the potential for “unintended consequences” as a result of the broad Regulation E rule drafted in response to Dodd-Frank Wall Street Reform and Consumer Protection Act requirements. Remittance transfers generally involve small amounts of money sent person-to-person through “closed loop” or “stand alone” systems such as Western Union or the World Council of Credit Unions’s (WOCCU) IRnet, comprised of 50 participating credit unions. The proposed rule expands the definition of “remittance transfers,” however, to apply to any consumer-initiated electronic transfer using “open networks,” such as international wire and international automated clearing house (ACH) transactions. International transactions using open networks typically involve three or more financial institutions and, once initiated, the transfer is usually beyond the credit union’s control. The CUNA letter noted the proposed rule’s application to open-network transactions would make credit unions responsible for a problem that occurs at any point in the international fund transfer, including fraud occurring in foreign countries. The resulting high cost of compliance would force many credit unions to discontinue international electronic fund transfer services, increasing costs for consumers who would be forced to shift to higher-cost services provided by storefronts and big banks. CUNA urged the Federal Reserve to exempt international wires and ACH transactions from the proposed rule and issue separate disclosure and error rules for those networks. If the agency does not follow that recommendation, then CUNA recommended that the Federal Reserve exempt transfers that are greater than $1,000 because more than 90% of transfers that are traditionally considered “remittances” are less than that dollar amount. The Fed also should exempt financial institutions that handle relatively few ACH transfers annually, according to CUNA. Most credit unions that provided input for CUNA’s comment letter make fewer than 200 international transactions each month. The letter noted that WOCCUs’s IRnet relies on “closed loop” providers and so would be able to comply with most proposed requirements, although CUNA urged the Federal Reserve to ease rules related to liability for fraud and the proposed “cancellation period” that would allow consumers to halt pending transfers. Critics of the proposed rule include the U.S. Small Business Administration, which has decried its potential negative impact on small businesses. In additional to its own comment letter, CUNA has also signed a joint letter with 10 other bank and credit union trade associations that have serious concerns about the proposed rule. The Consumer Financial Protection Bureau (CFPB), not the Federal Reserve Board, will be the agency finalizing the “remittance transfers” rule because regulatory jurisdiction over Regulation E transferred to the CFPB on July 21.

CUNA urges NCUA to revise golden parachute exception

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WASHINGTON (7/26/11)--The Credit Union National Association (CUNA) has asked the National Credit Union Administration (NCUA) to reconsider the treatment of 457(f) deferred compensation plans under its recent interim final technical corrections rule addressing its golden parachute and indemnification payments regulation. The NCUA’s interim final rule directly excludes only 457(b) plans from the “golden parachute” definition, and thereby from the golden parachute prohibitions adopted by the NCUA in July 2010. (See second resource link for more.) The rule does not address 457(f) plans, which may fall under a separate exception only if they meet the definition for “bona fide deferred compensation.” CUNA’s comment letter noted that NCUA has not offered a “compelling reason” to treat 457(f) plans differently than similar retirement compensation options. If the NCUA must restrict the golden parachute exception, CUNA recommended the rule should specifically exclude both 457(b) and 457(f) plans that meet the “bona fide deferred compensation” definition.

House Senate set hearings on CFPB and oversight issues

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WASHINGTON (7/26/11)--The House and Senate will move forward this week with hearings related to the Consumer Financial Protection Bureau (CFPB) and other oversight issues, all to the back drop of the Obama administration’s and U.S. Congress’ work to hammer out a plan to raise the debt ceiling limit. The House Small Business subcommittee on investigations, oversight and regulation is slated to examine the impact of the CFPB on small business in a hearing on Thursday. Dan Sokolov, CFPB deputy associate director for research, markets and regulations, Terry Jones, chairman of the Colorado Mortgage Lenders Association’s Legislative and Regulatory Affairs Committee, and Jess Sharp, executive director of the U.S. Chamber of Commerce’s Center for Capital Markets Competitiveness are scheduled to testify. The CFPB officially opened for business on July 21, marking the one-year anniversary of the Dodd-Frank Wall Street Reform and Consumer Protection Act. The House will consider the North American-Made Energy Act (H.R 2587), the Protecting Jobs from Government Interference Act and legislation related to the debt ceiling and the budget this week. The Senate schedule includes judicial nominations as well as debt ceiling legislation. Also of interest:
* A Senate Banking Committee hearing today will consider the nominations of Martin Gruenberg as chairman of the Federal Deposit Corporation; Thomas Curry to head the Office of the Comptroller of the Currency; and S. Roy Woodall Jr. as a member of the Financial Stability Oversight Council. * Also today, a Senate Finance Committee hearing will offer “Perspectives of Deficit Reduction: A Review of Key Issues.” * On Wednesday, the House Financial Services subcommittee on oversight and investigations will hold a hearing on “Oversight of the Credit Rating Agencies Post Dodd-Frank.”

House approves CFPB changes

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WASHINGTON (7/25/11)—Legislation that would increase leadership of the Consumer Financial Protection Bureau (CFPB) from a single director to a five-member commission, reform some operational rules, and make other key CFPB changes passed the House of Representatives by a 241-173 vote last week. The legislation (H.R. 1315) would also adjust the voting threshold needed for the Financial Stability Oversight Council to set aside or stay a CFPB issued rule to a simple majority, expand the FSOC’s review authority of CFPB rules, and require the CFPB leader to be confirmed by congress before any regulatory responsibilities could be transferred o that agency. The Credit Union National Association’s role in the larger financial reform debate was noted by legislators on both sides of the vote. House Financial Services Committee ranking member Barney Frank (D-Mass.), who opposed H.R. 1315, said that many of the problems that led to the CFPB’s creation “came from the unregulated, not from the financial institutions. And one of the things we do (in the Dodd-Frank bill), which is supported by the Credit Union National Association, is to cover the unregulated so that community banks and credit unions which did not cause this problem are protected from the pressures of unfair competition by the unregulated.” H.R. 1315 chief sponsor Sean Duffy (R-Wis.) said that his bill has “Main Street” not “Wall Street” appeal. He said that in addition to community banker support, “We go a step further,” and went on to cite Wisconsin CU League and CUNA backing for the provision that could reduce credit union burdens. Duffy called credit unions, “all people who didn't have any role in this financial crisis, all people in our communities who are looking out for consumers…” CUNA has supported part of H.R. 1315 that would make it easier for the FSOC to stay or set aside potentially burdensome CFPB rules, saying that that change would balance consumer protection with safety and soundness concerns. Although H.R. 1315 passed on a bipartisan House vote, the Senate prospects for the legislation are in doubt.

Mortgage regs must ensure consumers access to credit CUNA says

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WASHINGTON (7/25/11)--The Credit Union National Association has urged the Federal Reserve to clarify portions of proposed Truth in Lending Act (TILA) changes to “ensure continued consumer access to mortgage credit at fair rates and to avoid unnecessary regulatory burden and unintended consequences.” The Fed changes, which are required under the Dodd-Frank Act, would expand TILA’s ability-to-repay requirements to cover any consumer credit transaction secured by a dwelling, other than open-end credit plans, timeshare plans, reverse mortgages, or temporary loans. CUNA in a Friday comment letter said it generally supports the proposal, but asked the Fed to clarify portions of the proposal addressing lower-documentation loans. A proposed “evasion” prohibition could also be clarified, as the prohibition, as written, could lead some credit unions to believe they cannot offer many open-end mortgage products to their members. While it backed the Fed’s ability-to-repay analysis standards, CUNA added that these standards will cause few issues for credit unions, as they “have historically engaged in safe and sound mortgage underwriting. “Requiring all mortgage lenders to follow similar ability-to-repay mortgage underwriting criteria will help eliminate abusive practices” and make it easier for consumers to compare mortgage products, CUNA added. CUNA also encouraged the Fed to delay the compliance date for these requirements. For the full comment letter, use the resource link.

Senate approves Year of Co-op resolution

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WASHINGTON (7/25/11)--The U.S. Senate on Friday officially joined the United Nations in observing 2012 as the International Year of Cooperatives (IYC) by passing a resolution. The resolution was introduced earlier this year by Sens. Tim Johnson (D-S.D.) and Thad Cochran (R-Miss). The Credit Union National Association (CUNA) earlier this year wrote senators seeking their support for the resolution, which promotes the establishment of a 2012 International Year of Cooperatives committee and generally highlights the benefits that cooperative businesses provide to the nation. The IYC will officially begin on Oct. 31, 2011 when the U.N. Secretary General gives a speech before the United Nations General Assembly. Recognition events will then extend throughout the remainder of 2011 and into 2012. The theme for the international year is "Cooperative Enterprises Build a Better World." CUNA and the World Council of Credit Unions have already dovetailed that theme with this year's International Credit Union Day on Oct. 18, whose theme is "Credit Unions Build a Better World." CUNA last month approved its own recognition resolution, pledging to "lead efforts to engage the credit union community in the promotion of International Year of Cooperative Activities." CUNA is also taking part in a National Cooperative Business Association-led steering committee that will work to raise the profile of cooperatives, improve access to cooperative business, and reach out to government officials and the youth of the world to educate them on cooperative business. The 7,400 U.S.-based credit unions represent the largest segment of the more than 29,000 American cooperative businesses, holding nearly $1 trillion in assets and serving more than 92 million consumers.

Alternative mortgage changes would not harm CUs CUNA

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WASHINGTON (7/25/11)--The Consumer Financial Protection Bureau’s interim final rule that amends the Alternative Mortgage Transaction Parity Act (AMTPA), which became effective on July 22, would only impact a minimal number of state-chartered credit unions, the Credit Union National Association said. So-called “alternative-mortgage transactions” are transactions in which the interest rate or finance charge may be adjusted or renegotiated. Mortgages that feature adjustable interest rates, negative amortizations, balloon payments, shared equity, or shared appreciation are among these alternative transactions. Under AMTPA, state-chartered credit unions are permitted to take part in these types of mortgages, regardless of their home state’s laws. However, the mortgages must also meet standards set by the National Credit Union Administration. The CFPB’s AMTPA changes would remove portions of the Act that allowed credit unions and other institutions to make negative amortization or balloon payment mortgages. Some other preemption authorities that were granted under the Act would also be scaled back, as AMTPA would only preempt state laws that limit interest rate or finance charge changes. AMTPA also would not preempt state laws addressing late fees, rate increases due to late payment, prepayment penalties, interest-only payment periods, and negative amortization, According to CUNA, state-chartered credit unions that are permitted to follow federal mortgage regulations, or credit unions that elected to opt out of AMTPA, will not be impacted by the changes. CUNA has communicated with credit unions on the issue, and continues to monitor the progress of the AMTPA changes. The CFPB is accepting public comment on the AMTPA changes until Sept. 22. For more, use the resource link.

CDFI Saguache County CU placed under conservatorship

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ALEXANDRIA, Va. (7/25/11)--The National Credit Union Administration (NCUA) assumed control of the operations of $17/7 million-asset Saguache County CU Friday. The credit union is a state-chartered and federally insured credit union, and headquartered in Moffat, Colo. The Commissioner of the Colorado Division of Financial Services appointed the NCUA as conservator for Saguache County and took that step due to the credit union’s declining financial condition. While continuing normal member services, the NCUA will work to resolve issues affecting the institution’s safety and soundness. Saguache County Credit Union was identified as a Community Development Financial Institution by the NCUA, and is described as a full-service credit union that serves the residents of Saguache County, Colo. Its 3,165 members can continue to conduct normal financial transactions at each of Saguache County’s three branch locations during the conservatorship. The Federal Credit Union Act authorizes the NCUA Board to accept appointment as conservator when necessary to conserve the assets of a federally insured credit union, protect members’ interests, or protect the NCUSIF. Saguache County is the ninth federally insured credit union placed into conservatorship during 2011.

Conserved Arrowhead Central CU reports 2Q improvements

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ALEXANDRIA, Va. (7/25/11)—The National Credit Union Administration (NCUA) reported Friday that Arrowhead Central CU of San Bernardino, Calif., operating under conservatorship of the agency, posted improved financial results for the second quarter of the year. As of June 30, reported net income of $11.3 million and improved its net worth to 5.06% of assets, up from 3.44% at Dec. 31, 2010. Total assets at the end of the second quarter were $681 million compared to $808 million for the same period last year. The NCUA said trends are moving upward at an accelerated pace through continued focus on “diligent expense management, operational efficiencies and improved lending results.” Since June 2010, the NCUA said, the agency as interim management team, and Arrowhead Central employees have worked to “dramatically” improve the credit union’s financial condition and maintain services for the credit union’s more than 124,000 members. “The priority has always been to restore the credit union’s net worth and to remain operational for its members,” said Jane Walters, NCUA Region II Director. “We are working to not only improve Arrowhead’s financial condition, but to implement ways to bring more value to its membership. We are working to develop more member-friendly products and service excellence, to maintain a strong presence in the community, and to help our members share in our success with their own financial growth. We see significant progress in all of these efforts, and we are very encouraged by the credit union’s positive financial results.” Arrowhead Central, established in 1949, is a full-service financial institution and one of the area’s largest credit unions.

Inside Washington (07/22/2011)

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* WASHINGTON (7/25/11)--On the one-year anniversary of the Dodd-Frank Act, Democrats and regulators warned Congress that Republican efforts to cut funding and limit regulatory changes would undermine the law’s intent (American Banker July 22). Although the financial industry would prefer to have fewer regulations, regulators need resources to clarify the law’s requirements for financial firms, Rep. Barney Frank (D-Mass.) told the Senate Banking Committee. Frank said “the worst of all worlds” would be to have regulations that regulators did not have resources to hire the right people to enforce or obtain the necessary technology to carry out. Gary Gensler, chairman of the Commodity Futures Exchange Commission (CFTC), said his agency is charged with regulating a market that is seven times larger than it has previously overseen. However without sufficient funds, the CFTC will have fewer resources to police the market, he said. The Securities and Exchange Commission (SEC) also needs more resources for its increased responsibilities or the industry will suffer for the agency’s lack of effectiveness, SEC Chairman Mary Schapiro said … * WASHINGTON (7/25/11)--An audit of the Federal Reserve’s emergency lending programs by the Government Accountability Office (GAO) did not find any significant accounting or financial reporting issues with the emergency programs the Fed took to deploy trillions of dollars to hold up the faltering financial system. The audit, mandated by the Dodd-Frank Act and released Thursday, did reveal some conflicts that arose when the Fed undertook actions during the financial crisis (American Banker July 22). For example, William C. Dudley, the president of the Federal Reserve Bank of New York who was a senior official there in 2008, owned stock in American International Group, one of the financial giants that was bailed out by the Fed during the crisis. Dudley maintained ownership of the shares while working on the bailout. The GAO report did not mention Dudley by name, but Sen. Bernie Sanders (I-Vt.), who led the audit, identified him as the unnamed official in the report. The GAO also recommended that the Fed develop more rigorous policies for hiring independent contractors to manage investments. The report found that lines of authority between the Fed’s Board of Governors in Washington and the 12 regional Fed banks lacked clarity during the crisis …

Treasury reports busy opening for CFPB

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WASHINGTON (7/22/11)--The Consumer Financial Protection Bureau (CFPB) began its first official business day on Thursday by sending a letter of introduction to the CEOs of the financial institutions that it now oversees. The U.S. Treasury, parent agency to the CFPB, said that the letters “outline the agency’s approach to supervision and examination” and “mark the beginning of the CFPB’s regular communications with the institutions it supervises.” The CFPB is also ready to accept consumer credit card complaints and prepared to offer referrals to financially troubled homeowners to home counseling services. The agency soon will have the capacity to deal with other issues. Federal consumer financial laws will now be enforced by the CFPB, the Treasury added. The CFPB is getting ready to publish a final list of the regulations it will enforce and it will release a series of interim rules that will cover confidentiality, how testimony of records are made available to the public, and related Privacy Act and Freedom of Information Act requirements. The CFPB will also detail how its own investigative procedures and administrative enforcements will proceed. Other administrative and internal CFPB matters are being handled at this time, the CFPB added. The agency was established by the Dodd-Frank Wall Street Reform Act, which was signed into law one year ago yesterday. NCUA Chairman Debbie Matz marked the occasion at Thursday’s open board meeting, saying that the Dodd-Frank Act has “begun to achieve its desired results of promoting a stronger, safer, more stable financial system. “The actions of NCUA and other regulators, together and independently, are correcting many of the weaknesses laid bare by the financial crisis,” she added. Also relating to the CFPB late yesterday, the House voted 241-173 in favor of establishing a five-member, bipartisan commission to manage the bureau, rather than having a single director at its head as the Dodd-Frank Act now requires. The Credit Union National Assocaiton has suggested that if Congress adopts a law requiring a five-member panel, one panel member, at least, should have credit union experience. See News Now Monday for more on the bill. For the Treasury and NCUA releases, use the resource links.

CUSOs would file financials to NCUA under proposal

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ALEXANDRIA, Va. (7/22/11)—Credit union service organizations (CUSOs) would be required to file their yearly financial reports directly to the National Credit Union Administration (NCUA) under a proposal released on Thursday. Financials would also need to be forwarded to appropriate state supervisors. Any CUSO subsidiary would also have to comply with the regulation if it is adopted as a final rule. The NCUA currently has the authority to inspect the financials and records of some CUSOs, but that authority is not universal. The majority of financial information on CUSOs is provided to the NCUA by natural person credit unions that obtain services from the CUSOs. NCUA staff noted that this is an “inefficient” system, and the agency added that the lack of detailed CUSO information “restricts NCUA’s ability to conduct offsite monitoring and evaluate systemic risks posed by CUSOs.” The agency in a release said that the proposal, if enacted, would “enhance protections to consumers, credit unions and the National Credit Union Share Insurance Fund (NCUSIF).” NCUA Chairman Debbie Matz said that while recognized this is a controversial change, it is needed. Board member Gigi Hyland added that this change allows the NCUA to increase its knowledge of the system without adding any new authorities. The Credit Union National Association (CUNA) said that it will work with its Examination and Supervision Subcommittee, the leagues, and the CUNA CFO Council to analyze the impact of the proposal and develop comments. The NCUA during the July open meeting also combined the roles of deputy executive director and chief operating officer into a single position and amended its rule to clarify that remittance transfers are permissible financial services for federal credit unions. Both of these changes were required by congressional actions. For more on the NCUA meeting, use the resource link.

CUs have just one week to comply with Registry rule

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WASHINGTON (7/22/11)—With the compliance deadline just one week away for a statutory requirement that credit unions and their employees who are “mortgage loan originators” (MLOs) must register on a nationwide licensing system, some credit unions may be contacted by their federal or state regulator just double-checking that they are on top of the requirements, said Kathy Thompson, head of the Credit Union National Association‘s compliance department. Effective July 29, the Secure and Fair Enforcement for Mortgage Licensing Act (SAFE Act) requires MLOs to have registered on the Nationwide Mortgage Licensing System & Registry (NMLS), and for MLOs to start putting their unique NMLS-assigned identifier number on appropriate mortgage documents. As a brief refresher, Thompson reminds that if a credit union offers residential mortgage loans and employs individuals required to be federally registered as mortgage loan originators, the credit union must be registered with NMLS. Residential mortgage loans include first mortgages, second mortgages, home equity lines of credit (HELOCs), refinanced mortgage loans, reverse mortgages and land purchased for the construction of a residence. A credit union must determine what employees meet the definition of mortgage loan originator, a term that is defined as an individual who takes a residential mortgage loan application and offers or negotiates terms of a residential mortgage loan for compensation or gain. These MLOs must disclose their identifying number to members applying for a loan. The SAFE Act does provide a de minimus exception from registration if someone who would otherwise be an MLO makes five or fewer mortgage loans during a 12-month period. Thompson added, “If credit unions have any compliance questions about the new requirements, there are plenty of resources available, and their league certainly is ready to help with any implementation issues.” Thompson noted that effective Aug. 1, consumers will be able to get some information about the loan officer from the NMLS public site based on the MLO identifier number, so it’s very important that credit unions that make mortgage loans are ready to go starting in a week. Use the resource links below for more information. Also, visit CUNA's CompBlog, which features a July 21 Safe Act posting, to be followed by another this morning.

CUNA NCUA budget reduction moves in right direction

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ALEXANDRIA, Va. (7/22/11)—The National Credit Union Administration’s (NCUA) decision to reduce its 2011 operating budget by $2 million is “a step in the right direction,” the Credit Union National Association (CUNA) said following the agency’s Thursday open board meeting. The $2 million decrease represents a 1% reduction in the NCUA’s 2011
Click to view larger image After what staff called a thorough agency-wide budget review, the NCUA approved a plan to reduce its operating budget for the remainder of 2011 by $2 million. The savings will translate into excess cash, which the NCUA says it will use offset budget requirements for 2012. (CUNA Photo)
budget, which was set at $225 million late last year. Even with the reduction, CUNA noted that the NCUA’s 2011 budget is still $23 million more than the agency spent in 2010. The budget reduction is the result of adjustments to the employee pay and benefit budget, administrative and contracting costs, travel, and other standard business expenses. The agency has added five new full-time employees this year, with two of them serving as regional lending specialists to assist with risk assessment and member business loans in the NCUA’s Region II. Noting that more can still be done, CUNA President/CEO Bill Cheney encouraged the agency to "continue a close review of its operations and look for other potential areas where expenses can be cut without detracting from its mission of safety and soundness as it develops its 2012 budget." The agency addressed other issues during the meeting, with the board unanimously agreeing to borrow $4 billion from the U.S. Treasury for its Temporary Corporate Credit Union Stabilization Fund (TCCUSF). The borrowed funds will be used to retire Asset Management Estate promissory notes to the bridge corporates and to pay off any expenses related to the winding down of those bridge corporates. The $4 billion is out of the $5.5 billion NCUA plans to borrow from the Treasury for the TCCUSF. The agency added that the National Credit Union Share Insurance Fund held a $1.2 billion reserve balance and showed a 1.28% equity ratio in June. NCUA staff reported that 19% of total credit union assets are held in CAMEL code 3, 4 and 5 credit unions, and added that the total number of CAMEL code 3 credit unions decreased by 16 between May and June. The total percentage of shares held in CAMEL Code 3 and CAMEL Code 4/5 credit unions also declined, dropping nearly 1 percentage point and .24 percentage points, respectively. Corporate capital calculation rules were also amended during the meeting. The NCUA moved to aid corporates that are shedding assets from their businesses by allowing them to choose to “reset the clock” on their 12-month moving averages for assets under both the Moving Daily Average Net Assets and the Moving Monthly Average Net Risk-Weighted Assets calculations. For more on the NCUA meeting, use the resource link.

Home prices increase for second straight month FHFA

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WASHINGTON (7/22/11)—Home prices nationwide increased by an average of 0.4% in May, the most recent month for which data is available, representing the second straight month of progress for previously plummeting home values. The Federal Housing Finance Agency in a release noted that home prices increased by .2% during April. Homes in the mountain region of the U.S. showed the greatest growth, increasing by 2% in May. Other regions showed more modest gains, while prices in the Mid-Atlantic and West South Central regions continued to dip. The relatively good news is tempered by FHFA statistics that show a 6.3% drop in home prices since May 2010. Nationwide, home prices have fallen by an average of 19.6% since April 2007. The FHFA uses the purchase price of homes with Fannie Mae- or Freddie Mac-backed mortgages to calculate its monthly index. Thirty- and 15-year mortgage rates have also increased, with Freddie Mac reporting averages of 4.52% and 3.65%, respectively, for the week ended July 21. Both of these rates increased by 0.7% when compared against the previous weekly average. Five- and one-year adjustable mortgage rates remained relatively steady, averaging 3.27% and 2.97%, respectively. Freddie Mac chief economist Frank Nothaft said that the steady mortgage results were due to mixed economic reports. Nothaft also noted that single-family housing starts were up 9.4% in June, and existing home sales dropped by 0.8%. For the FHFA and Freddie Mac releases, use the resource links.

NCUA Prepayment Plan webinar now available online

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ALEXANDRIA, Va. (7/22/11)—There were more than 2,000 participants to the National Credit Union Administration’s (NCUA) July 11 webinar on the Voluntary Prepayment of Corporate Stabilization Fund Assessments program and now an archived version of that session has been posted to the agency’s website. The prepayment plan was adopted by the NCUA board June 29 and would permit voluntary prepayments up to a total of $500 million in Corporate Stabilization Fund assessments. The plan responds to credit union stakeholder requests to explore a mechanism that would allow prepaid assessments for the Temporary Corporate Credit Union Stabilization Fund. Credit unions have until July 29 to determine whether to participate in the voluntary initiative. Use the links for more information on the plan and to access the online webinar.

Inside Washington (07/21/2011)

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* WASHINGTON (7/22/11)--The Federal Reserve Board is seeking comment on a notice outlining the regulations previously issued by the Office of Thrift Supervision (OTS) that the Federal Reserve will continue to enforce after assuming supervisory responsibility for savings and loan holding companies (SLHCs). Under the Dodd-Frank Wall Street Reform Act, supervisory and rule-writing authority for SLHCs and their non-depository subsidiaries transferred from the OTS to the Fed Thursday; the Fed requests comment by Aug. 31 and intends to issue an interim final rule soon that will include technical, nomenclature, and other changes to certain OTS regulations to accommodate the transfer of supervisory authority to the Fed board and to address modifications made by the Dodd-Frank Act. … * WASHINGTON (7/22/11)--In a final rule issued Wednesday, the Office of the Comptroller of the Currency (OCC) said operating subsidiaries of national banks must follow state consumer protection laws (American Banker July 21). The OCC revised language critics said ignored the aims of the Dodd-Frank Act. The OCC’s initial interpretation maintained that national banks can bypass any state law that “obstructs, impairs or conditions” the banking business. State advocates said that standard is too broad. Dodd-Frank says state laws that “prevent or significantly interfere” with banking can be avoided. In Wednesday’s final rule, the agency acknowledged the two standards are not the same, though the difference may be small. “To the extent that an existing preemption precedent is exclusively reliant on the phrase ‘obstructs, impairs, or conditions’ as the basis for a pre-emption determination, we believe that validity of the precedent would need to be re-examined to ascertain whether the determination is consistent with the new standard,” the rule said …

NCUA removes net worth rule from todays agenda

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ALEXANDRIA, Va. (7/21/11)--A proposed rule relating to credit union service organizations, corporate credit union-related accounting issues, stabilization fund borrowing, and reviewing the 2011 operating budget are on today’s National Credit Union Administration (NCUA) board meeting agenda, as is an interim final rule addressing remittance transfers. Discussion of a final rule that revises "net worth" for natural person credit unions and the "equity ratio" for the National Credit Union Share Insurance Fund (NCUSIF) will not be on the agenda of today’s NCUA open board meeting, which is scheduled to begin at 10:00 a.m. ET. The Credit Union National Association (CUNA) had supported some of the proposed revisions, which were proposed at NCUA’s March open meeting. Among the provisions CUNA supported in its comment letter to NCUA filed in May were amendments to allow NCUA's Section 208 Assistance made to troubled credit unions to qualify as regulatory net worth. CUNA also supported a key change to the NCUSIF’s “equity ratio” definition to clarify that the NCUSIF equity ratio must be based solely on the financial statements of the NCUSIF without consolidation with other statements, such as those of conserved credit unions or the Central Liquidity Facility. CUNA strongly opposed a provision that would have added language to the definition of a credit union’s net worth to require “bargain purchase gain” be deducted from a target credit unions net worth when it is merged with another credit union. CUNA was concerned that the proposal would result in a decrease in the combined credit union’s net worth. CUNA recently wrote the agency to urge deletion of the proposal or to seek further comments from the credit union system before proceeding on that provision. The agency will also discuss combining the roles of deputy executive director and chief operating officer into a single position, and the monthly insurance fund report will be presented. For the full agenda, use the resource link.

Limiting CU burden from Dodd-Frank remains CUNA priority one year later

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WASHINGTON (7/21/11)--With the one-year anniversary of Dodd-Frank Wall Street Reform Act enactment coming today, the Credit Union National Association notes that its priority over the past year, and into the future, remains limiting the impact of related regulations on credit unions. A number of Dodd-Frank provisions also become effective today. The largest Dodd-Frank issue for credit unions, and CUNA, is the Federal Reserve’s debit interchange fee cap. While credit union input ultimately helped lessen the impact of the Fed’s final rule for both larger and smaller institutions by altering the rule, CUNA continues to encourage Congress to keep a watchful eye on the implementation process. CUNA is pressing the networks to ensure a two-tiered system is provided that will allow small issuers such as most credit unions to obtain more debit fee income than will be permitted for large issuers under the Fed’s final rule. CUNA is also planning to work with the Fed as it monitors the impact of the interchange rule on credit unions and other institutions. Title XIV of the Act, which addresses mortgage regulations, is another point of emphasis for credit unions and CUNA. Portions of this title that cover mortgage servicing and some mortgage appraisal activities are currently effective. Many other mortgage-related changes, including changes to disclosure requirements, underwriting standards, and new high-cost mortgage standards are set to become effective in the future. These rules have staggered effective dates. More pressing for credit unions are portions of the Dodd-Frank Act that come into effect today. As of today:
* The limit on next-day availability for deposited checks will increase to $200. The previous limit was $100. * The Truth in Lending Act and Consumer Leasing Act will also apply to consumer credit transactions and consumer leases of up to $50,000. This $50,000 cap will increase to $50,800 on January 1, and can be adjusted further in the future. The previous cap was $25,000.
While the official compliance date for credit score notice changes is listed as July 21, the changes were not published until July 15, so by law they cannot become effective until August 15. Still, CUNA has recommended that credit unions begin complying with these changes, which require additional information to be provided on risk based pricing and adverse action notices that are released to credit union members. For more on these changes, use the resource link to access CUNA’s Compliance Blog. The Consumer Financial Protection Bureau also officially begins its work today. The agency begins its work without a leader, and amid congressional threats to its future funding. Still, it is intact, and will take on oversight of the Equal Credit Opportunity Act and the Fair Credit Reporting Act, as well as regulations addressing electronic fund transfers, mortgage originator registration, and mortgage assistance relief services, today. Authority over 47 separate financial rules is being transferred to the CFPB from the National Credit Union Administration, the Federal Reserve, the Federal Deposit Insurance Corp., the Office of the Comptroller of the Currency, the Office of Thrift Supervision, the Federal Trade Commission, and the U.S. Department of Housing and Urban Development. CFPB representatives have said that the agency is "committed to remaining attentive" to the concerns of credit unions and will work to address the concerns of credit unions and other small issuers as it develops and amends regulations. CUNA earlier this month called on the CFPB to consider the differences between member-owned financial cooperatives such as credit unions and for-profit banks that put the interests of their shareholders first as it continues with its work.

CFPB Consumers may not receive true credit score

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WASHINGTON (7/21/11)--A Consumer Financial Protection Bureau study has found some discrepancies between the credit scores that are provided to consumers and the scores that lenders and other businesses sometimes use to judge a consumer’s creditworthiness. The CFPB in its study noted that while many consumers may believe that the score provided to them via a free yearly credit report or a paid-for credit score service is their only credit score, a range of credit scores, from a variety of sources, are available. While some of these scores are used by both consumers and lenders, many of the scores used by lenders to determine creditworthiness are never disclosed to consumers. Potentially inaccurate credit scores could cause consumers to apply for loans they are not qualified for, which could result in the payment of pointless application fees and a lowering of their credit score. Inaccurate scores could also result in consumers that have underestimated their own creditworthiness accepting poor loan terms. The agency is planning to “quantify the differences between the credit scores available to consumers and those used by creditors” in a follow up study. That pending study will also provide more details on how discrepancies in credit scores can harm consumers. Consumers that are rejected for loans or other financial products will as of July 21 have free access to the credit score that was used to make the decision. (See related story: Rejected consumers now can access free credit scores) For the CFPB study, use the resource link.

House bill would audit FDIC closure policy

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WASHINGTON (7/21/11)--A bill intended to bring more transparency to the Federal Deposit Insurance Corp.’s (FDIC) bank closure procedures was approved Wednesday by voice vote by the House Financial Services Committee. “Bank failures have hit states all across the country, posing a serious problem that’s negatively affecting our communities and stifling economic growth,” said the bill’s chief sponsor, Rep. Lynn Westmoreland (R-Ga.), in a release that also noted there were 140 bank failures in 2009 and 157 in 2010. Comparatively, 28 federally insured credit unions failed both in 2010 and 2009. Of the bank failures Westmoreland said, “We need to figure out exactly what is causing such a high number of banks across the country to fail. My bill (H.R. 2056) starts that process with an audit of the FDIC’s policies and procedures, including controversial practices like paper losses and loss-share agreements.” The committee release also said banks suffer from a regulatory “mixed messages problem,” where examiners fail to adhere to a regulator’s guidance. Westmoreland’s bill also would: * Facilitate coordination between the Inspector Generals of the FDIC, Federal Reserve, and the U.S. Treasury Department; * Require the FDIC Inspector General to submit the results of the required study and any recommendations to Congress within a year of enactment; and * Request that the Government Accountability Office, the investigative arm of the U.S. Congress, study the causes of high levels of bank failures and the “counter cyclical impact of fair value accounting standards” Westmoreland also noted that Georgia has been particularly hard hit with bank failures, with 67 closures since 2008. He added that local businesses are struggling with a resultant shortage of credit. The Credit Union National Association (CUNA) backs an increase in credit union member business lending (MBL) as a means to help small businesses access as much as $13 billion in new credit and add 140,000 new jobs to the economy—all at no cost to taxpayers. Legislation is pending in both the House and Senate to increase the MBL cap to 27.5% of total assets, up from the current 12.25%. The committee also voted on the following bills:
* H.R. 1539, Asset-Backed Market Stabilization Act of 2011 was approved 31-19; * H.R. 2527, Baseball Hall of Fame Commemorative Coin Act was approved by voice vote; and * H.R. 1751, CJ’s Home Protection Act of 2011 was approved by voice vote.
Use the resource link for more on those bills.

Foreign account reports may now be e-filed FinCEN

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WASHINGTON (7/20/11)--Foreign Bank and Financial Account Reports (FBAR) can now be filed electronically, the Financial Crimes Enforcement Network (FinCEN) reported this week. FinCEN’s filing system will accept Forms TD F 90-22.1 online. This new computer-based filing system will provide “a quicker, cheaper, more secure, and more reliable way for individuals to file FBARs,” FinCEN said. FBAR forms are filed annually and are used to report a financial interest in, or signature or other authority over, bank accounts, securities, or other types of financial accounts in foreign countries. FBARs must be filed for accounts that hold over $10,000 in funds at any time during the year, and are required to be filed once per year. However, FinCEN said that the electronic filing options are somewhat limited for the time being. For now, electronically filed FBARs may only have one signature per form. For example, married couples that wish to file a joint FBAR may only do so with the paper forms. Each spouse would be required to file their own FBAR if they choose to file them electronically. FBARs cannot currently be created and filed using tax preparation software, but FinCEN said it is “working to create that convenience and capability.” For the FinCEN FBAR release, use the resource link.

CU reg burden focus of CUNA Hill letter CU testimony

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WASHINGTON (7/20/11)—Making it easier for the Financial Stability Oversight Council (FSOC) to stay or set aside potentially burdensome Consumer Financial Protection Bureau (CFPB) rules would balance consumer protection with safety and soundness concerns, the Credit Union National Association (CUNA) said in a letter to Speaker of the House John Boehner (R-Ohio) and House Minority Leader Nancy Pelosi (D-Calif.). The FSOC is comprised of National Credit Union Administration (NCUA) Chairman Debbie Matz, Treasury Secretary and FSOC Chairman Tim Geithner, Federal Reserve Chairman Ben Bernanke, and other regulators. The council, which held its first meeting in October of 2010, is charged with monitoring the financial system, overseeing the resolution of troubled financial institutions and providing a forum for discussion between financial regulatory agencies. A bill (H.R. 1315) scheduled to be considered by the House this week would reduce the voting threshold needed for the FSOC to stay or set aside rules finalized by the CFPB from a two-thirds vote to a majority vote. The CFPB director would not be part of that vote. “Given the financial crisis from which we are struggling to emerge, the threshold to prevent harmful regulation from going into effect should not be as high as a two-thirds vote of the financial regulators,” CUNA said in support of that provision of the pending legislation. Potential regulatory issues could also be avoided if the CFPB, as suggested by CUNA, creates its own department whose function would be to monitor regulatory burden. Such an office could be tied to the CFPB’s Office of Community Banks and Credit Unions, and could work with the National Credit Union Administration (NCUA) and other prudential regulators to assess the regulatory burdens face by credit unions and other financial institutions, the CUNA letter said. The CFPB was also the central topic of a Tuesday Senate Banking Committee hearing entitled “Enhanced Consumer Protection After the Financial Crisis.” Truliant FCU president/CEO Marcus Schaefer told the committee that while a consumer protection-focused regulator is a necessary part of the U.S. financial landscape, regulators should recognize that broadly implemented regulation can negatively impact the consumer-friendly practices of credit unions. Schaefer, testifying on behalf of Truliant, is also chairman of the CUNA Federal Credit Union Subcommittee. “Seemingly small regulatory dictates can have a large impact on [credit unions and other small institutions] and ignore their ‘local knowledge’ of how best to communicate with members,” Schaefer added. He also warned that “there may be unintended consequences to consumer-friendly institutions as the ‘bad actors’ are reined in by ‘one-size-fits-all’ regulations.” The CEO of the $1.5 billion, 180,000 member, Winston Salem, N.C.-based credit union testified alongside Center for Responsible Lending president Michael Calhoun, SpiritBank CEO Albert Kelly, Jacksonville Area Legal Aid representative Lynn Drysdale, U.S. Chamber of Commerce representative Andrew Pincus, and Georgetown University law professor Adam Levitin. The CFPB will take on oversight of the Equal Credit Opportunity Act and the Fair Credit Reporting Act, as well as regulations addressing electronic fund transfers, mortgage originator registration, and mortgage assistance relief services, on that date. The CFPB is taking over authority of these and other rules from the National Credit Union Administration, the Federal Reserve, the Federal Deposit Insurance Corp., the Office of the Comptroller of the Currency, the Office of Thrift Supervision, the Federal Trade Commission, and the U.S. Department of Housing and Urban Development. President Barack Obama named Richard Cordray as his nominee for CFPB director on Monday. (See related July 19 story: Obama announces Cordray as CFPB nominee.) For CUNA’s letter to Congress and more on the Senate hearing, use the resource links.

CU comment sought on credit-risk retention plan

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WASHINGTON (7/20/11)—The Credit Union National Association (CUNA) is seeking comment on a proposed credit-risk retention rule that would require securitizers to retain an economic interest in the credit risk of assets they securitize. The proposal was issued jointly by the U.S. Treasury Department, Federal Reserve Board, Federal Deposit Insurance Corporation, Federal Housing Finance Agency, Securities and Exchange Commission, and the U.S. Department of Housing and Urban Development as required under the Dodd-Frank Wall Street Reform Act. Congress intended that the agencies implement rules requiring credit securitizers to maintain “skin in the game” by retaining not less than a 5% economic interest in any asset, such as mortgage loans, other loans or leases, that the securitizer transfers, sells or conveys to a third party to securitize into an asset-backed security (ABS). Originators--including credit unions and credit union service organizations--generally would be exempt from the requirements if they contribute less than 20% of the loans or other collateral to the ABS pool. However, if any originator contributes 20% or more of the collateral, the proposed rules permit the securitizer to allocate a portion of its risk retention requirement to the originator in the same percentage amount as its contribution to the asset pool. Furthermore, the originator would have to hold its allocated share of the risk retention in the same manner as would have been required of the securitizer and subject to the same restrictions on transferring, hedging, and financing the retained interest. There are two major exemptions to this requirements: securities backed by assets consisting entirely of qualified residential mortgages (QRMs); and, securities backed by certain commercial mortgages, commercial loans, and automobile loans meeting specific underwriting standards. For credit unions, the most problematic aspect of this proposal is the QRM definition, although the agencies continue to seek comments on this and other aspects of the proposed rules. The proposed rule would define a QRM as follows:
* A QRM must be secured by a first lien on a one-to-four family property to be purchased or refinanced, and have a maturity date of not more than thirty years. At least one unit must be the principal dwelling of a borrower; * A QRM must meet the following stringent underwriting standards: * The borrower cannot currently be 30 days past due on any debt obligation, and cannot have been 60 or more days past due on any debt obligation in the preceding 24 months; * The borrower must not, within the preceding 36 months, have been a debtor in a bankruptcy proceeding, had property repossessed or foreclosed upon, engaged in a short sale or deed-in-lieu of foreclosure, or have been subject to Federal or State judgment for collection of any unpaid debt; * The borrower must provide a 20% down payment in the case of a purchase transaction, and private mortgage insurance cannot be used to support the down payment; *The mortgage must have maximum front-end and back-end debt-to-income ratios of 28% and 36%, respectively; * The mortgage must have a maximum loan-to-value ratio of 80 percent in the case of a purchase transaction, 75% on a refinance transaction, and 70% on cash-out refinance loans; * The total points and fees paid by the borrower in connection with the mortgage cannot exceed three percent of the total loan amount; and * A QRM mortgage cannot have payment terms that allow for interest-only payments or negative amortization, nor can the QRM mortgage permit a balloon payment.
CUNA is seeking credit union comment on the QRM definition and other aspects of the credit-risk retention proposal by July 26. The agency comment deadline is Aug. 1--extended from the original due date of June 20. CUNA has been working as part of the Coalition for Sensible Housing to oppose the proposed QRM standard. The coalition has issued a white paper, released on June 22, warning that the proposed definition threatens to harm credit-worthy borrowers and frustrate a recovery of the nation’s housing market. CUNA has also argued that the proposal goes beyond what Dodd-Frank intended, and would also have a negative impact on credit unions. CUNA Deputy General Counsel Mary Dunn, earlier this week, participated in a CUNA Mutual Group webinar to outline issues that most affect credit unions. An archived version of the webinar is expected to be available later this week. Use the resource links below to access the CUNA Comment Call and the coalition white paper.

Inside Washington (07/19/2011)

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* WASHINGTON (7/20/11)--Three House members from Colorado are sponsoring a bill to allow community banks with less than $10 billion in assets to amortize losses on commercial real estate (CRE) for seven years (American Banker July 19). The bill’s sponsors--Democrat Ed Perlmutter and Republicans Scott Tipton and Mike Coffman--believe the pushing out of CRE losses would free up capital that would otherwise be eroded by losses, giving community banks more capacity to lend. This is Perlmutter’s second attempt to move the Capital Access for Main Street Act through Congress. Last year, he attached the proposal to the small-business bill that created the $30 billion Small Business Lending Fund. The amendment was struck down in the Senate. The current version was assigned to the House Financial Services Committee … * WASHINGTON (7/20/11)--The House Financial Services Committee has scheduled a markup today to vote on four bills. The bill numbers and titles are: H.R. 2056, To instruct the Inspector General of the Federal Deposit Insurance Corp. to study the impact of insured depository institution failures, and for other purposes; H.R. 1539, Asset-Backed Market Stabilization Act; H.R. 2527, Baseball Hall of Fame Commemorative Coin Act; and H.R. 1751, CJ’s Home Protection Act. The session is slated to begin at 10 a.m. (ET) … * WASHINGTON (7/20/11)--The U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN) Monday released a final rule intended to more clearly define what businesses qualify under FinCEN rules as Money Services Businesses (MSBs) and that subject to anti-money laundering rules under the Bank Secrecy Act. FinCEN also has alerted subscribers of its publications, SAR Activity Review--Trends, Tips & Issues and The SAR Activity Review--By the Numbers, that it will launch a reader survey to “assess the value” of its editorial products. “Through the survey, we hope to learn more about (subscribers’) needs and identify opportunities to improve these products,” FinCEN said in a release. The survey will be conducted by an independent research firm and results will be reported to FinCEN only in the aggregate. Visit FinCEN’s online newsroom for more information on the MSB definition and the readers’ survey …

NCUA prohibits ex-exec from future CU work

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ALEXANDRIA, Va. (7/20/11)--Amy Shufelt-Cure, a former president of Hudson, N.Y.-based Columbia Greene FCU, has been banned from future work at any federally insured financial institution by the National Credit Union Administration. Shufelt-Cure received the ban after she was sentenced to probation and ordered to pay $29,000 in restitution to the credit union. She was found guilty of petit larceny, the NCUA reported. Violation of a prohibition order is a felony offense punishable by imprisonment and up to $1 million in fines. For the full NCUA release, use the resource link.

NCUA seeks 629M in damages from RBS Securities

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ALEXANDRIA, Va. (7/19/11)--The National Credit Union Administration (NCUA) is seeking $629 million in damages from RBS Securities, again alleging that that firm violated federal and state securities laws when it sold securities to Western Corporate FCU. This is the third suit of its kind. Similar suits have been filed against RBS Securities and J.P. Morgan Securities, LLC in Kansas federal district court. Those suits related to securities that were purchased by U.S. Central FCU, based in Lenexa, Kansas. The NCUA in its suit has claimed that RBS’ sellers and underwriters “made numerous material misrepresentations in the offering documents. “These misrepresentations caused WesCorp to believe the risk of loss associated with the investment was minimal, when in fact the risk was substantial. The mortgage-backed securities experienced dramatic, unprecedented declines in value, effectively rendering WesCorp insolvent,” the agency added. The NCUA said the suits are intended to "recover losses from the purchase of securities that caused the failures" of five large wholesale credit unions. Those institutions are U.S. Central, WesCorp, Southwest Corporate, Members United Corporate, and Constitution Corporate. The agency is currently requesting $1.5 billion in combined damages, and has said that as many as seven additional court actions could be taken. Any recoveries from these actions will reduce the total losses resulting from the failure of the five corporate credit unions and would help to reduce the amount of future corporate credit union stabilization fund assessments on credit unions, the NCUA has said. NCUA Chairman Debbie Matz said that it is the agency’s “statutory duty to replenish the insurance fund that protects consumer deposits by seeking recoveries. “Those who caused the problems in the wholesale credit unions should pay for the losses now being paid by retail credit unions,” Matz added. The Credit Union National Association (CUNA) has encouraged the NCUA to take "all reasonable actions" available to pursue effective restitution from securities firms who "share the culpability for the events that led to the corporate failures."

Obama announces Cordray as CFPB nominee

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WASHINGTON (7/19/11)--President Barack Obama on Monday announced Richard Cordray as his nominee to serve as Consumer Financial Protection Bureau (CFPB) director, adding that he looked forward to working with the new agency. Cordray has been serving as the CFPB's assistant director for enforcement, and has also served as the attorney general of Ohio and that state’s treasurer. Ohio Credit Union League representatives told News Now that the league worked closely with Cordray at the county and state levels as he developed a financial literacy campaign and encouraged younger Ohioans to plan for their financial futures through the “small savers” campaign. Obama said that CFPB architect Elizabeth Warren recommended Cordray for the post. Warren herself in a Monday statement said that Cordray “has a proven track record of fighting for families during his time as head of the CFPB enforcement division, as attorney general of Ohio, and throughout his career” and will be “a strong leader” for the CFPB. A number of key Republicans had opposed Warren for the CFPB position, raising doubts about the ability of her nomination to clear the US Senate. Cordray's nomination also will require Senate confirmation and is not assured. Some in Congress are calling for structural changes to the CFPB before agreeing to confirm a director. Created by the Dodd-Frank financial reform law, the CFPB is scheduled to become operational on Thursday. The new agency will take on oversight of the Equal Credit Opportunity Act and the Fair Credit Reporting Act, as well as regulations addressing electronic fund transfers, mortgage originator registration, and mortgage assistance relief services, on that date. The CFPB is taking over authority of these and other rules from the National Credit Union Administration, the Federal Reserve, the Federal Deposit Insurance Corp., the Office of the Comptroller of the Currency, the Office of Thrift Supervision, the Federal Trade Commission, and the U.S. Department of Housing and Urban Development. The agency also plans to release separate reports on remittances and credit scores on Thursday. The remittance report, according to the agency, will focus on ways to improve transparency and disclosures and on consumer remittance history. The credit score report will focus on differences between the credit scores that are provided to individual consumers for informational purposes and the credit scores that financial institutions use to determine eligibility for loans and other financial products. The Credit Union National Association was updated on the CFPB's progress during a Monday conference call, and a release detailing the CFPB’s work over the past year has also been published. For that release, use the resource link.

Consumer protection in House Senate this week

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WASHINGTON (7/19/11)--The House and Senate return to Washington this week with the debt ceiling debate still looming large, and weeks to go before their traditional August recess. Credit union watchers will want to focus first on today’s Senate Banking Committee hearing on enhancing consumer financial protection. Truliant FCU President/CEO Marcus Schaefer will testify alongside witnesses from the U.S. Chamber of Commerce and the Center for Responsible Lending, among others. The House Financial Services Committee will hold a Tuesday markup session, and the Senate Banking Committee has scheduled a Thursday hearing to review the Wall Street Reform Act. Deputy Treasury Secretary Neal Wolin, Federal Reserve Chairman Ben Bernanke, Securities and Exchange Commission Chairman Mary Schapiro, and other federal regulators will testify during that hearing. The Consumer Financial Protection Safety and Soundness Improvement Act (H.R. 1315), which would modify the voting procedure of the Financial Stability Oversight Council (FSOC) when voting to stay or set aside rules finalized by the Consumer Financial Protection Bureau (CFPB), is on the Wednesday House schedule. The Credit Union National Association (CUNA) in April testimony supported allowing the FSOC to take action if a CFPB regulation would be unreasonably burdensome for financial institutions or the burden to financial institutions outweighs the benefit to consumers. The House this week is also set to consider the Cut, Cap and Balance Act (H.R. 2560), the FAA Reauthorization Act (H.R. 2553), the Consumer Financial Protection Safety and Soundness Improvement Act (H.R. 1315) and the Legislative Branch Appropriations Act (H.R. 2551). In the Senate, debate will focus on the Military Construction Appropriations Act (H.R.2055) and potentially a debt ceiling proposal.

Inside Washington (07/18/2011)

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* WASHINGTON (7/19/11)--Sen. Chris Coons (D-Del.) recently congratulated $338 million asset Dover (Del.) FCU, Dover, Del. on its first Small Business Administration (SBA) loan.
“Getting our economy moving again means giving small business owners the tools they need to turn their ideas into reality,” said Coons (pictured fourth from the right). “By helping promising entrepreneurs get access to the capital they need to grow, we are helping more Delawareans get back to work. That’s why these SBA loans are so important.” Dover FCU received SBA certification earlier this year, providing access to additional capital to help entrepreneurs open and expand businesses. SBA loans are part of a business products and services portfolio launched by the credit union in April. CUNA and credit unions are pressing Congress to increase credit unions’ member business lending (MBL) cap to 27.5% of assets from 12.25%. Doing so would open up more opportunity to offer MBLs, inject $13 billion in loans into the economy and create as many as 140,000 new jobs, with no cost to taxpayers, CUNA said. (Photo provided by Dover FCU) …

NEW President to nominate Richard Cordray as CFPB director

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WASHINGTON (7/18/11)--President Obama on Sunday announced his intent to nominate former Ohio attorney general Richard Cordray to head the Consumer Financial Protection Bureau.

Cordray has been serving as the CFPB's assistant director for enforcement. In choosing Cordray to be the CFPB director, President Obama opted not to nominate the CFPB's architect, Elizabeth Warren, who has been serving as special advisor to the US Treasury secreatry and assistant to the president.

A number of key Republicans had opposed Warren for the CFPB position, raising doubts about the ability of her nominaton to clear the US Senate. Cordray's nomination also will require Senate confirmation and is not assured. Some in Congress are callling for structural changes to the CFPB before agreeing to confirm a director.

In a statement issued yesterday, Warren said she was "very pleased for the CFPB" with the President's choice of Cordray. "Rich has a proven track record of fighting for families during his time as head of the CFPB enforcement division, as Attorney General of Ohio, and throughout his career. He was one of the first senior executives I recruited for the agency, and his hard work and deep commitment make it clear that he can make many important contributions in leading this agency. He will make a stellar director."

Created by the Dodd-Frank financial reform law, the CFPB is scheduled to become operational later this week, on July 21.

CUNA covers interchange in first regulatory podcast

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WASHINGTON (7/18/11)--Credit Union National Association (CUNA) Deputy General Counsel Mary Dunn has covered the latest debit interchange developments, and background information on the Federal Reserve’s debit interchange fee cap, in a recently released CUNA podcast. The podcast is the first in a regular series. Future podcasts will focus on National Credit Union Administration, Federal Reserve, and Consumer Financial Protection Bureau rulemakings, as well as other related regulatory developments. The podcast covered key changes in the final Fed rule. The rule, which was released last month, would cap large issuer debit interchange fees at 21 cents, to cover network connectivity, hardware, software, and labor costs, as well as costs related to network processing and transaction monitoring. An additional five basis points per transaction may be charged to cover fraud losses. A separate interim final rule proposed would allow an additional penny to be charged if financial institutions are in compliance with Fed established fraud prevention standards. Debit card issuers with less than $10 billion in assets are exempt from the direct impact of the cap provisions. Prepaid cards and government-issued cards are also exempted. Dunn in the podcast thanked credit unions and leagues for their strong grassroots advocacy work, which ultimately changed the tenor of the Fed’s final rule. She also noted that CUNA is urging Visa and MasterCard to implement the required two-tiered system, and is working with them to ensure that they are committed to this system. CUNA will work to ensure that small issuers receive as much interchange income as possible, Dunn added. CUNA members may listen to the podcast via their Web browser or download the podcast for replay on their mobile device. The Fed is accepting public comment on the interim final rule through Sept. 30, and CUNA has released its own comment call on the rule. For the podcast, CUNA’s interchange final rule analysis, and more on interchange, use the resource links.

House Financial Services July schedule released

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WASHINGTON (7/18/11)--The House Financial Services Committee will again convene on Wednesday when it holds a markup session for pending legislation at 10 a.m. ET, committee Chairman Spencer Bachus (R-Ala.) said in a Friday release. The schedule for the remainder of July was also released on Friday. The highest profile hearing will take place at 10 a.m. ET on Thursday, July 28, when U.S. Treasury Secretary Timothy Geithner delivers the first yearly Financial Stability Oversight Council report and covers the status of the international financial system. That hearing will take place before the full House Financial Services Committee at 9:30 a.m. ET. The status of the Federal Insurance Office will be covered during an insurance, housing, and community opportunity subcommittee hearing later that day. The financial institutions and consumer credit subcommittee will discuss the rent-to-own industry at 10 a.m. ET on Tuesday, July 26, and the domestic and monetary policy subcommittee will follow with a 2 p.m. ET hearing monetary policy’s impact on the economy. The relationship between the health of the U.S. housing finance system and global financial stability will be examined during a Wednesday, July 27 morning hearing before the international and monetary policy subcommittee. The oversight and investigations subcommittee has set a hearing on credit rating agencies for later that day. Bachus said that the committee “will continue promoting policies that encourage growth, investment and new jobs,” and will continue to focus on financial services industry oversight. The committee in its release stressed that all scheduled hearings are subject to change. The House is set to begin its August recess on Aug. 8, and is not scheduled to return until Sept. 5.

CUNA calls for comments on IRS Form 990 changes

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WASHINGTON (7/18/11)--Should the Internal Revenue Service’s (IRS) employee compensation-reporting thresholds be changed? The Credit Union National Association (CUNA) is seeking credit union input for this and other questions related to the IRS’s recent changes to its Form 990. State-chartered credit unions are required to file Form 990 with the IRS annually, although a few states still permit group 990 filings. Federal credit unions are not required to file, since they are not subject to unrelated business income taxes. The IRS made widespread changes to its Form 990 in 2008, and continues to gradually revise portions of the form. The IRS requires Form 990 filers to disclose the names and compensation of certain key employees, their highest compensated employees, any independent contractors that work for the firm, and former high ranking or key employees. However, the reporting thresholds for these positions differ somewhat from position to position. Some have criticized these reporting requirements, claiming that they decrease transparency. Others believe a single, uniform reporting threshold should be adopted. The IRS and CUNA are also seeking input for portions of Form 990 that relate to net asset reconciliation, audited financial statement reporting and related organization reporting. The IRS will accept public comments until Aug. 1. Comments should be sent to CUNA by July 25. For the full comment call, use the resource link.

NCUA considering TDR proposal

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ALEXANDRIA, Va. (7/18/11)--National Credit Union Administration (NCUA) Board Member Gigi Hyland has hinted that the agency could soon release an Interpretive Ruling and Policy Statement (IRPS) addressing Troubled Debt Restructurings (TDR). Hyland in July’s edition of The NCUA Report said that the proposal would recommend that credit unions adopt charge-off, loan grading and modification frequency standards that are similar to those currently used by banks. TDR loans, which have very specific accounting and reporting requirements, sometimes occur as a result of loan modifications. The financial statement notes and call report data associated with TDRs are also unique. Credit unions would be advised to create and implement their own limits on the number and frequency of loan extensions, loan deferrals, loan renewals and loan rewrites, according to Hyland. She added that the potential guidance “would emphasize the need for comprehensive and effective risk management, reporting and internal controls related to these types of loans.” The IRPS would also encourage credit unions to “adopt standards prohibiting additional advances that finance the unpaid interest and fees on these loans,” she said. A similar approach could also be applied to closed-end and open-end loans that are secured by one- to four-family residential dwellings, she added. The agency addressed TDR-related issues in a webinar earlier this year. For July’s NCUA report, use the resource link.

Inside Washington (07/15/2011)

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* WASHINGTON (7/18/11)-- Agility Recovery Solutions and the U.S. Small Business Administration will host a free webinar Tuesday at 2 p.m. (CT) about what business owners learned after nearly losing their companies to small scale disasters like a sprinkler system malfunction or catastrophic events. Agility Recovery CEO Bob Boyd will share real stories of entrepreneurs whose business continuity strategies emerged while recovering from major disasters. He’ll also outline some practical applications of disaster preparedness tips, focusing on the concept of not only putting a plan together, but testing it periodically. Attendees can register online. Agility Recovery is a CUNA Strategic Services provider … * WASHINGTON (7/18/11)--The new Office of Financial Research (OFR) has made significant progress, despite not having a permanent director, Richard Berner, a counselor to Treasury Secretary Timothy Geithner, said Thursday. Berner told members of a House Financial Services subcommittee that the OFR, created by the Dodd-Frank Act, is “working diligently to satisfy its statutory mandates and mission.” Among the OFR’s responsibilities: collect data on behalf of the Financial Stability Oversight Council; standardize collected data; perform research; and develop risk management and monitoring tools. The search for an OFR Director is ongoing, Berner said. In the meantime, Treasury Secretary Timothy Geithner has authority to direct the planning and implementation of the OFR … * WASHINGTON (7/18/11)--Federal regulators may reconsider a proposal to limit Wall Street control of the derivatives market. Last fall, the Commodity Futures Trading Commission proposed rules that would prohibit firms from controlling more than 20% of a derivatives exchange or trading facility. Regulators are now considering lowering the cap (The New York Times July 15). The purpose of the rule was to eliminate the monopolies that played a critical role in the financial crisis. However, Wall Street has lobbied against many of the regulatory changes passed by Congress following the crisis. Regulators recently agreed to delay the derivatives rules for up to six months. As Wall Street regulators soften their proposals, federal prosecutors say the proposals may not be strong enough. The Justice Department has been investigating possible anticompetitive practices in the derivatives industry, the Times reported late last year …

Obama threatens to veto CFPB funding cuts

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WASHINGTON (7/15/11)--Limiting the Federal Reserve’s funding of the Consumer Financial Protection Bureau (CFPB) to $200 million in 2012, as proposed in H.R. 2434, would "severely undercut" the agency's oversight responsibilities, the Office on Management and Budget said in a recent release. The funding limit for 2012 is $600 million. Under the bill, the CFPB would be subjected to the annual appropriations process beginning in 2013. The Dodd-Frank Act prescribes that the CFPB receive a percentage of the Federal Reserve budget and is not subject to the appropriations process. “Not only would the bill's funding limitation severely curtail hiring and start-up investments that are already underway, but it would also impede supervision, limit the Bureau's consumer response services, prevent the ramping up of citizen financial literacy improvements, and delay the implementation of financial protection programs for older Americans,” the administration release added. The administration statement added that President Barack Obama would likely veto legislative attempts to undermine the Dodd-Frank Act “through funding limits or other restrictions,” The administration also objected to proposed cuts in the Community Development Financial Institutions (CDFI) Fund budget. Community development credit unions are among those that have received grants under the CDFI fund. Further financial restrictions for the Department of the Treasury, the Internal Revenue Service, the Securities and Exchange Commission, and the Financial Research Fund are also proposed in the legislation. H.R. 2434, the Financial Services and General Government Appropriations Act, passed the House Appropriations Committee in late June. For the administration release, use the resource link.

Inside Washington (07/14/2011)

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* WASHINGTON (7/15/11)--Community banks and other for-profit financial institutions will now be permitted to pay interest on commercial checking accounts after the Federal Reserve on Thursday released a final rule that repeals Regulation Q. The Fed in its release noted that the majority of commenters opposed the repeal, saying that it would have “'devastating' effects on smaller and community banks.” The repeal will be effective as of July 21 … * WASHINGTON (7/15/11)--Consumer Financial Protection Bureau (CFPB) architect Elizabeth Warren’s third appearance before a congressional committee was more even tempered than her previous Hill trips, which became contentious. However, Warren did face questions on whether the CFPB would move to ban certain types of mortgages. Warren said that the agency’s work would not focus on eliminating financial instruments, but rather on tightening up the disclosures that are provided to consumers so that those consumers can make more informed decisions. “I want to start with the concept of, ‘Let’s get some real disclosure and see if we can get these markets working,’” she said. She also provided general information on the CFPB’s current and future projects, including creating a combined Truth in Lending Act/Real Estate Settlement Procedures Act disclosure form, defining large non-bank market participants, and large bank supervision. The CFPB will officially launch on July 21…

CUNA seeks comment on NCUA golden parachute rules

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WASHINGTON (7/15/11)--The Credit Union National Association (CUNA) has asked credit unions to comment on whether the list of Section 457 deferred compensation plans that are shielded from the National Credit Union Administration’s (NCUA) new executive compensation prohibitions should be expanded beyond 457(b) and 457(f) deferred compensation plans. The NCUA in May approved a final rule that prohibits golden parachute and indemnification payments. The golden parachute prohibitions would apply if the credit union in question is insolvent, in conservatorship, has a CAMEL 4 or 5 rating or is otherwise in "troubled condition." "Bona fide" deferred compensation plans, general institution-wide severance pay plans, and other assorted employee benefits will not be impacted by the prohibition. The NCUA rules came into effect on June 27, and only new contracts that were entered into after that date will be impacted. Current contracts held by credit union executives will not be affected, unless they are revised. The NCUA allows 457(f) plans to be offered to employees, provided the plans meet the “bona fide” criteria set forth by the agency. The Internal Revenue Service currently allows 457(b) plans to be amended to allow designated Roth IRA contributions and in-plan rollovers to designated Roth accounts. For CUNA’s full comment call, use the resource link.

Net worth equity ratio rule leads July NCUA meeting

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ALEXANDRIA, Va. (7/15/11)--The final version of the National Credit Union Administration's (NCUA) proposed revisions to "net worth" and "equity ratio" definitions will lead the agenda when the agency holds its next open board meeting at 10:00 A.M. ET on July 21. The NCUA in March proposed amending the Federal Credit Union Act's definition of "net worth" for natural-person credit unions under NCUA's Prompt Corrective Action authorities to allow the NCUA's Section 208 Assistance made to troubled credit unions to qualify as regulatory net worth. The NCUA proposal also included a "technical correction" to its regulatory definition of "net worth." This technical correction would generally decrease the amount of a combined credit union's "net worth" in a credit union merger. The agency also proposed equity ratio changes that clarify that the National Credit Union Share Insurance Fund's (NCUSIF) equity ratio must be based solely on the financial statements of the NCUSIF alone, without consolidation with other statements such as those of conserved credit unions. The Credit Union National Association generally supported these changes, but told the NCUA that portions of the agency's proposal addressing so-called "bargain purchase gains" should not be finalized until they can be studied further by accounting professionals. An interim final rule addressing remittance transfers and a proposed rule related to credit union service organizations are also on the agenda. Stabilization fund borrowing, reprogramming the NCUA’s 2011 operating budget, and corporate credit union-related accounting issues will also be discussed during the meeting. The monthly insurance fund report will also be presented. The agency will also discuss combining the roles of deputy executive director and chief operating officer into a single position. Supervisory issues will be covered at a later closed meeting. For the full agenda, use the resource link.

CU-backed candidate wins California special election

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WASHINGTON (7/14/11)--Los Angeles City Councilwoman Janice Hahn (D), with the backing of the Credit Union National Association's (CUNA) Credit Union Legislative Action Council (CULAC) and the California Credit Union League, on Tuesday won a special election to take former Rep. Jane Harman’s (D) vacant congressional seat. Harman left congress in February to join the private sector. Hahn defeated Republican opponent Craig Huey, with 55% of the total vote. Hahn garnered a total of 41,585 votes, besting Huey’s 34,636. Hahn will represent California’s 36th district, which includes Venice, Torrance, Redondo Beach, and other towns in the coastal portion of the greater Los Angeles area. The district is mainly democratic. California and Nevada Credit Union Leagues Director of Political Affairs Andrea Svoboda told News Now that Hahn, who is a member of Wilmington, Calif.’s ILWU CU, “truly understands the important role credit unions play in California’s communities” and “shares credit unions’ goal of supporting small businesses to bring jobs back into our community. "Hahn has committed to having an open door when it comes to future issues and we look forward to working with her,” Svoboda added. CUNA Vice President of Political Affairs Trey Hawkins said that CULAC “will continue to aggressively support credit union friends in next fall's election.” The presidency, congressional seats, and state and local positions are all at stake in 2012.

Bernanke Low credit access stifling economy

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WASHINGTON (7/14/11)--Limited credit access is one of several “headwinds” that the U.S. economy continues to face as the nation works to recover from the recent economic crisis, Federal Reserve Chairman Ben Bernanke said in Wednesday’s Semiannual Monetary Policy Report to Congress. Slowed consumer spending, low home values, and reduced government spending also continue to hinder recovery, he added. Bernanke spoke before the House Financial Services Committee. He is scheduled to deliver remarks before the Senate Banking Committee today. Bernanke said that recent weak economic performance, which was demonstrated by an uptick in the unemployment rate and lower than expected job growth, could be blamed on “several factors that are likely to be temporary.” These factors include the impact of high energy and food prices on consumer spending and the effects of Japan’s recent earthquake on auto manufacturing. Officials continue to predict that the nation’s gross domestic product could increase by 2.9% in 2011 and 3.7% in 2012. Both of these increases would be better than what has occurred so far in 2012, Bernanke said. The Fed chairman said that his agency may again move to stimulate the economy if economic conditions do not improve. “The possibility remains that the recent weakness may prove more persistent than expected and that deflationary risks might reemerge, implying additional policy support,” he said. The Credit Union National Association advocates an increase in credit union member business lending authority as a way America's credit unions can increase access to capital for small businesses and help them create jobs—with no cost to taxpayers. Lifting the credit union member business lending cap to 27.5% of total assets, as proposed in separate Senate and House bills, could inject an estimated $13 billion in funds into the economy and create more than 140,000 new jobs, CUNA has estimated. For Bernanke’s full report, use the resource link.

CUs banks will cease Savings Bond sales Dec. 31

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WASHINGTON (7/14/11)--After 75 years of regular sales, savings bonds will no longer be sold at credit unions and other financial institutions as of January 1, 2012, the U.S. Treasury has reported. Series EE and I savings bonds will still be made available for purchase via the Treasury’s online purchase platform, TreasuryDirect. Consumers can also use the Treasury’s online platform to convert existing paper bonds into electronic bonds and to purchase savings bonds via a payroll savings plan. The Treasury estimates that the move from paper to electronic bonds will save $70 million in taxpayer funds over five years. Treasury Public Debt Commissioner Van Zeck said that "savings bonds are very much a part of this country's history and culture, and will remain a part of America's future – but in electronic form. "It's time for us to take a 1935 model and make it a 21st century investment tool," Zeck added. Paper savings bonds may still be redeemed at financial institutions. Bonds that have been misplaced or damaged, but have not matured, can be reissued in paper or electronic form, the Treasury added. For the full release, use the resource link.

Management oversight flaws cited in Beehive failure

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ALEXANDRIA, Va. (7/14/11)--Weak management and inaccurate financial reporting on behalf of the credit union helped cause the collapse of Salt Lake City, Utah’s Beehive CU, the National Credit Union Administration’s (NCUA) Office of the Inspector General (OIG) has reported. The $145 million in assets, 18,000 member credit union was acquired by Security Service FCU in December of 2010. The OIG report said that the credit union failed “because management did not effectively manage the risks, policies, operations, and financial position of the credit union, nor did they demonstrate an understanding of the risks inherent in their strategic decisions. In addition, both the Board and management lacked sufficient and responsive action to address repeat findings raised by external auditors and examiners related to concentrations, Allowance for Loan and Lease Losses (ALLL) methodology, and asset quality.” The report also pinned the failure on questionable business decisions, including the decision to go forward with a planned$3 million branch expansion and risky lending programs. The credit union also spent on new computer and telecommunications systems as the financial status of the credit union, and the nation as a whole, grew weaker. The credit union’s board did not address its poor financial condition, and management did nothing to address declining loan originations and increasing loan delinquencies, the OIG added. Lax supervision by the NCUA and state regulators also contributed to the collapse. The OIG found that the regulators did not make a single supervisory contact between March of 2006 and November of 2008. This lapse “prevented examiners from detecting the deficiencies and curtailing the risky lending practices that eventually led to Beehive’s insolvency,” the OIG report said. The OIG said that recent NCUA actions to schedule inspections of credit unions with over $250 million in assets on a yearly basis "should help prevent the type of supervision gap that occurred with Beehive from occurring in the future." Beehive pursued a thrift charter conversion during that time period, but in 2009 said it abandoned its conversion plans, saying it "sensed" that the country's economic turmoil would make federal regulators reluctant to approve a new bank charter. For the full report, use the resource link.

Freeing Capital for Small Biz Fox interviews CUNA

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WASHINGTON (7/14/11)— In an appearance on Fox Business Channel Tuesday, Credit Union National Association (CUNA) President/CEO Bill Cheney noted for a national audience that credit unions “are ready to do more” to help the economy; they just need Congress to act by increasing the member business lending cap to make more capital available to the nation's small businesses. Fox Business anchor Charles Payne noted that opposing an MBL cap

lift while small businesses are “drowning” is “beyond the pale” and asked who would oppose such a plan. Cheney said that bankers are the only group against it. Cheney touted the benefits of an MBL cap lift during his interview, noting that lifting the current 12.25% of assets cap to 27.5% could inject over $13 billion in funds into the economy, creating over 140,000 new jobs. "We know we need jobs to stimulate the economy, and we have no cost stimulus that can go out and help small businesses," Cheney said. The nearly 300 credit unions that are near the 12.25% of assets cap account for 51% of the total small business lending done by credit unions, Cheney noted. The CUNA CEO added that credit unions have increased their small business lending by 38% since December of 2007, while bank small business lending has declined by 5% since then. Legislation that would lift the cap is active in both the House and Senate. Cheney also discussed the credit union difference, which gives consumers “a better deal” than for-profit banks. He noted CUNA's new website, aSmarterchoice.org, helps consumers find credit unions to join.

Inside Washington (07/13/2011)

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* WASHINGTON (7/14/11)--The Financial Stability Oversight Council (FSOC), created by the Dodd-Frank Act to limit risk to the financial system, has accomplished little in its first year of existence, according to some observers (American Banker July 13). The council’s primary responsibilities are determining which nonbank financial companies are large and interconnected enough to receive heightened supervision and overseeing the Office of Financial Research, which monitors financial markets for potential systemic threats. The FSOC also assists in implementing the Volcker Rule, a Dodd-Frank provision named for former Fed Chairman Paul Volcker that limits banks’ risky investments. The council has held five meetings--another meeting is scheduled for Monday--and made early progress to curb banks’ proprietary trading and classify certain firms as “systemically important.” But overall, the 10-member FSOC has done little to make it more relevant than informal policy groups that predate it, industry observers say. The council, which includes heads of other top regulators such as the Federal Reserve Board and Federal Deposit Insurance Corp., may be a lower priority for its members that run other agencies, observers said. Douglas Landy, a partner in Allen & Overy LLP, said that although the FSOC miscalculated in not taking formal action earlier, it is working without a blueprint and may need time to gel … * WASHINGTON (7/14/11)--The Consumer Financial Protection Bureau (CFPB) Wednesday outlined the agency’s approach to monitoring big banks for consumer abuses. Starting July 21, the CFPB will oversee the 111 depository institutions that have total assets more than $10 billion--80% of the banking industry’s assets. “The new consumer agency is here to make sure that markets work for American families, and our bank supervision program is a big part of that,” said Elizabeth Warren, special advisor to the Secretary of the Treasury on the CFPB. “Starting on July 21, we will be a cop on the beat--examining banks and protecting consumers.” The CFPB will conduct periodic examinations for most banks, the agency said. For the largest and most complex institutions, the agency said it will implement year-round supervision programs. The examination process will begin remotely in most instances. CFPB examiners will start on-site reviews at the supervised institutions to continue their work, the agency said. The CPFB will provide additional information via letter to the 111 institutions, and will conduct informational roundtables starting in early August. The agency will post the initial phase of its examination manual on its website. The manual is the field guide for examiners supervising banks and other consumer financial services companies …

House approves flood insurance extension

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WASHINGTON (7/13/11)--The U.S. House Tuesday voted overwhelmingly in favor of a continuation of the National Flood Insurance Program (NFIP) for an additional five years. The legislation (H.R. 1309) preserves the rights of credit unions and others to protect their collateral from flood hazards and would clarify that flood insurance purchases "would date back to the date the existing policy lapsed or became insufficient in coverage amount, including any premiums or fees incurred during the 45-day notification period." The Credit Union National Association has backed these changes. The NFIP was set to expire on Sept. 30. Legislators from both bodies of Congress and both sides of the aisle have called for reforms to the NFIP, which provides more than $1.2 trillion in coverage to Americans in flood-prone areas. Sens. Tim Johnson (D-S.D.) and Richard Shelby (R-Ala.) have both cited the need for reforms in recent weeks, with Shelby saying that every part of the NFIP "must undergo significant revision for it to survive and continue on a sustainable path." The U.S. Government Accountability Office (GAO) late last month said that Congress should act to increase the financial stability of NFIP and limit taxpayer exposure.

Vensure FCU closed by NCUA

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ALEXANDRIA, Va. (7/13/11)--The National Credit Union Administration (NCUA) this week closed Mesa, Ariz.'s Vensure FCU, the 12th credit union to be liquidated this year. The NCUA in a release said the 140 member, $8.1 million in assets credit union “was insolvent and has no prospects for restoring viable operations.” Vensure FCU was taken into conservatorship by the NCUA on April 15, with the agency claiming that it failed to properly diversify its business. The agency had recommended that the credit union build a loan program, but the NCUA in its examinations found that the credit union relied solely on income from processing online gambling transactions to survive. The credit union was one of 16 financial institutions that allegedly held funds tied to online gambling sites under investigation by the Federal Bureau of Investigation. The credit union challenged the NCUA’s conservatorship in court, stating that the agency action "was arbitrary and capricious” and threatened “to significantly damage or destroy" the credit union. The credit union also alleged that the NCUA’s conservatorship order "contained only cursory and incomplete facts to support the grounds for conservancy,” and noted that the NCUA during its conservatorship action took possession of financial records that the credit union needed to show that the NCUA conservatorship was improper. A federal court in late June rejected Vensure’s conservatorship challenge. For the full NCUA release, use the resource link.

House subcommittee votes to cut Freddie and Fannie roles

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WASHINGTON (7/13/11)—H.R. 2440, which would require government-sponsored mortgage enterprises Fannie Mae and Freddie Mac to “dispose of all non-mission critical assets,” was approved via voice vote by the House Financial Services subcommittee on capital markets and government-sponsored enterprises on Tuesday. The legislation, which is also known as the Market Transparency and Taxpayer Protection Act, was introduced by Rep. Robert Hurt (R-Va.). Under the proposal, the director of the Federal Housing Finance Agency would require Fannie Mae and Freddie Mac to identify all valuable assets and describe the functions, characteristics, and estimated values of the assets. The FHFA director would then determine which are and which are not critical to the GSEs’ mission and will create a plan to sell or dispose of non-critical assets. Financial Services Committee Chairman Rep. Spencer Bachus (R-Ala.) said that “selling assets that have nothing to do with the mission of these two companies is critical to protecting taxpayers from wasteful spending, and ensuring that Fannie and Freddie engage only in activities related to their mission.” The subcommittee during the Tuesday hearing also voted to approve the Fannie Mae and Freddie Mac Transparency Act (H.R. 463); The Fannie Mae and Freddie Mac Taxpayer Payback Act (H.R. 2436); The Housing Trust Fund Elimination Act (H.R. 2441); Cap the GSE Bailout Act (H.R. 2462); Eliminate the GSE Charter During Receivership (H.R. 2439); and The GSE Legal Fee Reduction Act (H.R. 2428). Use the resource link for more information on the bills.

CUNA seeks comment on CDRLF rule reorganization

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WASHINGTON (7/13/11)--The Credit Union National Association (CUNA) is seeking comments from credit unions regarding the National Credit Union Administration's (NCUA) proposed Community Development Revolving Loan Fund (CDRLF) application changes. The NCUA’s CDRLF changes, which were offered during the agency’s May open board meeting, aim to improve transparency and ease credit union use of the fund. The changes also improve the process through which credit unions may apply for loans and technical assistance grants from the CDRLF, clarify the application process, and add reporting and monitoring requirements. CUNA in the comment call asks credit unions if they generally support the CDRLF amendments. Credit unions can also comment on whether the NCUA should be given greater flexibility to make changes and on each specific loan application outside of the regulations, and can suggest any other terms that they believe should be given greater flexibility. CUNA is accepting comments until July 18. For more information, use the resource link.

Inside Washington (07/12/2011)

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* WASHINGTON (7/13/11)--Although his overall assessment of the law bearing his name was positive a year after its implementation, U.S. Rep. Barney Frank (D-Mass.) assailed critics of the Dodd-Frank Act during a National Press Club luncheon Monday. Frank targeted those seeking to ease risk retention rules, saying he favored a broad exemption from risk-retention proposed by regulators in March, but was against making the exception a rule. Dodd-Frank requires financial institutions to retain 5% of the credit risk of securitized mortgages, but allows regulators to exempt qualified residential mortgages (QRM) (American Banker July 12). Regulators have been criticized for their definition of a QRM, which would be limited to loans with a 20% down payment and low debt-to-income ratio. Critics say that standard would be out of reach for lower-income borrowers. CUNA and others, including a bipartisan group of lawmakers, have criticized a proposal to require a 20% down payment for a loan to be defined as a QRM, saying that this change would shut out responsible homebuyers and further cripple the housing market. Frank indicated he was frustrated with the failure of Senate Republicans to confirm qualified nominees for key regulatory posts. On a positive note, the U.S. has led the world in regulating financial markets, including the new system mandated by Dodd-Frank to put large financial firms that fail into receivership, he said … * WASHINGTON (7/13/11)--Longtime credit union backer Rep. Ron Paul (R-Texas) on Tuesday announced that he will not contest his House seat in 2012, instead electing to focus on his campaign for the 2012 Republican presidential nomination. Paul currently chairs the House Financial Services domestic monetary policy subcommittee and was a cosponsor of legislation that would have delayed implementation of the Federal Reserve’s rule to implement a statutory cap on debit interchange fees. He has also supported the Credit Union Regulatory Improvements Act and maintaining the credit union tax exemption… * WASHINGTON (7/13/11)--While the Consumer Financial Protection Bureau (CFPB) will be limited without a director when it officially opens for business July 21, the agency will be free to examine and take action against banks with more than $10 billion of assets, while their nonbank competitors will not be subject to oversight (American Banker July 12). The Obama administration appointed Elizabeth Warren as a special advisor to the Treasury secretary to help organize the new bureau. But the White House has not nominated a permanent director. The Dodd-Frank Act allows the bureau to perform certain functions without a director after July 21, according to a report from the inspectors general of the Treasury Department and Federal Reserve. The bureau has the authority to prescribe rules, issue orders and produce guidance on consumer financial laws previously enforced by other bank regulators. It also can carry out functions and enforce laws previously enforced by the Federal Trade Commission and the Department of Housing and Urban Development. While those powers grant the CFPB scrutiny over banks, the inspectors general said the CFPB could not take on newly established bureau authorities until a director is appointed …

Fed issues interchange exemptnot exempt lists

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WASHINGTON (7/13/11)—In its first step to facilitate a two-tiered debit card interchange fee structure since adoption of its final rule, the Federal Reserve Tuesday issued two lists—one with the names of each institution considered to be covered by the new cap on debit interchange fees and another with the names of those that are exempt. The Dodd-Frank Wall Street Reform Act, which required the Fed to set standards to determine whether debit interchange fees for larger issuers are reasonable and proportionate to their costs, also specifically exempts card issuers with less than $10 billion in assets from the direct reach of the cap. The exemption would apply to all but three credit union issuers. However, many parties—the Credit Union National Association among them—have voiced concerns that the interchange law lacks an enforcement mechanism for the small issuers' exemption, and have said that there is no guarantee the payment card networks will operate a two-tiered system the exemption necessitates for small issuers. A resolution adopted by the Fed as part of its interchange rule requires agency staff to report by April 2012 on whether there is a two-tiered system and the impact of the rule on small issuers' interchange fee income. Staff will also bring a more comprehensive report to the board by April 2013, which will include such information as whether there is a change in debit interchange fee income for smaller issuers, whether merchants are discriminating against small issuers, and the impact of exclusivity provisions. The Fed release notes that, based on information as of Dec. 31, 2010, institutions have been grouped into two categories: “Exempt” and “Not Exempt.” However, a small number of debit card issuers may not appear on either of these lists, such as:
* Institutions for which the Fed has incomplete affiliate data; * De novo institutions for which the Fed did not have financial data as of the December date; and * Issuers without federal deposit insurance.
The Fed added that if an issuer does not appear on either list and is exempt from the interchange fee standards, it should “so certify to its participating payment card networks.” If an institution believes its placement on a list is not accurate, the Fed said it may submit a request for a correction of the information using this email address: IssuerExemptionListsRegII@frb.gov. It was just two weeks ago that the Fed adopted its final rule, which, in part:
* Caps large issuer debit interchange fees at 21 cents, to cover network connectivity, hardware, software, and labor costs, as well as costs related to network processing and transaction monitoring; and * Allows an additional five basis points per transaction to be charged to cover fraud losses
A separate interim final rule would allow an additional penny to be charged if financial institutions are in compliance with Fed established fraud prevention standards. Comments on this interim final rule, which is effective Oct. 1, will be accepted until Sept. 30. The debit interchange cap is also effective Oct. 1. The Fed plans to update its exempt/not exempt lists annually.

Inside Washington (07/11/2011)

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* WASHINGTON (7/12/11)--Sheila C. Bair, who officially stepped down as chairman of the Federal Deposit Insurance Corp. on Friday, will join the Pew Charitable Trusts as a senior advisor Sept. 7. Pew Charitable Trusts studies and promotes nonpartisan policy solutions for problems affecting the American public and the global community. The Pew Research Center, a Washington-based subsidiary of the trusts, uses impartial, fact-based public-opinion polling and other research tools to track issues and trends … * WASHINGTON (7/12/11)--Stephen A. Quick has been named the Federal Deposit Insurance Corp.’s first chief risk officer. Since 2000, Quick has been director of the office of evaluation and oversight at the Inter-American Development Bank, a $100 billion multilateral finance institution. In that role, he was responsible for oversight of policies, systems, processes and institutional arrangements that affect the bank’s ability to accomplish its mission. His principal focus was on the management and mitigation of operational, reputational, fiduciary and mission risks. From 1993 to 2000, Quick served as manager of strategic planning and budget at the Inter-American Development Bank … * WASHINGTON (7/12/11)--David W. Wilcox has been named the Federal Reserve Board’s director of the Division of Research and Statistics, effective Oct. 1. Wilcox, currently the deputy director of the division, will succeed David J. Stockton, who will retire on Sept. 30 after 30 years of service with the board, including 11 as division director. In his new position, Wilcox will oversee the work of 325 employees and will be responsible for briefing the Federal Open Market Committee on the outlook for the U.S. economy. The board's Division of Research and Statistics does economic analysis, forecasting, and research related to the domestic economy and financial markets …

iCompBlogi blasts compliance myths and more

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WASHINGTON (7/12/11)—The Credit Union National Association’s (CUNA) compliance bloggers, swayed by popular demand, posted Compliance Myths Part II on CUNA’s new CompBlog when readers clamored for more after the first “myths” posting. “We received great reader feedback on the first ‘episode’ and we wanted to share more compliance un-truths that travel through the compliance grapevine,” said Valerie Moss, CUNA’s director of compliance information. And to make access to the CompBlog even easier for first-time users in CUNA-affiliated credit unions, CUNA has added the CompBlog icon—or “button”--on CUNA’s homepage alongside the access buttons already provided to CUNAverse, Facebook, and more. “Three myths that kept popping up in the many comments we received on our first myths’ post (6/24/11) are featured in this edition. They include the mistaken beliefs that: Reg B prohibits lenders from maintaining photocopies of drivers’ licenses in the loan file; federal credit unions can’t be closed more than three consecutive days at a time (a holiday favorite myth); and that most credit union regulations contain annual training requirements. “We explode each of these compliance myths in detail in the July 8 post,” said Moss. “And further editions of ‘Compliance Myths’ will be based on the feedback we receive from our readers. So let us hear from you,” she added. Moss added that readers are providing positive feedback to a number of recent posts including CUNA staff insights on the compliance implications of the new interchange rules and the controversy surrounding the proposed definition of a “qualified residential mortgage” (QRM). “Credit unions will also want to check out what we posted just last night about federal agency focus on member complaints,” noted Moss. “And remember that the CompBlog continues to post items previously found in CUNA’s “What’s New” daily compiliation.” Access the new CompBlog by clicking on CUNA’s CompBlog icon at the bottom of CUNA’s home page at www.cuna.org.

Prepay plan deadline hard and fast reminds Matz in webinar

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ALEXANDRIA, Va. (7/12/11)--National Credit Union Association (NCUA)Chairman Debbie Matz and some of her senior staff fielded questions from credit unions regarding the agency’s plan to allow credit unions to prepay some of their Temporary Corporate Credit Union Stabilization Fund (TCCUSF)assessments in a webinar Monday. CUNA President/CEO Bill Cheney has encouraged credit unions to consider the extent to which the program will benefit them and the credit union system. Among the questions credit union participants in the webinar raised was why is the program limited to $500 million. Agency staff responded that if the program were substantially larger, the agency would not be able to provide a dollar-for-dollar reduction in the assessment for this year, as it has committed to do. Or, if there is a larger prepaid assessment this year, there would be much larger assessments in 2013 and 2014, compared to the estimated assessments for those years that already are expected to increase as a result of the $500 million ceiling on the size of the program. Another participant asked why the 2013 and 2014 assessments will be larger under the program than for subsequent years. NCUA staff responded that the $500 million in prepaid assessments that will be used to reduce the regular assessment this year is coming from the assessments in 2013 and 2014, $250 million in each year. The Larger assessments in 2013 and 2014 will be needed to offset the fund’s cash flow needs in those years, since the prepaid assessment draws funds from credit unions that would have otherwise gone to the 2013 and 2014 assessments. It also was asked whether the Central Liquidity Facility could be used to lend funds to the stabilization fund to minimize the need for assessments from credit unions. NCUA staff said such a loan to the TCCUSF is not an allowable use of the CLF’s funds. In response to another question about what to reflect on call reports regarding the assessments, NCUA staff said nothing should be reflected on the June 30 report. Any prepaid assessment and the regular assessment would be reflected on the September call report. July 29 is a “hard and fast” date, and credit unions should notify the NCUA by that time whether they intend to participate, the agency said on the webinar. The program, first proposed in May, has the potential to decrease the currently projected 2011 Stabilization Fund assessment by 6.4 basis points (BP), from 24.9 bp to 18.5 bp, based on the March 31 level of total insured shares, according to the NCUA. Credit unions that wish to take part may pledge a minimum of $1,000 or 5bp of insured shares, whichever is greater. The maximum that can be contributed is 48 bp of those shares. The agency will not move forward with the plan if less than $500 million is pledged by credit unions by the July 29 date. Matz, during the webinar, reiterated that the NCUA has committed to use all received funds to decrease the 2011 assessment. The agency will tally the total amount of credit union commitments on Aug. 9, and, if it moves forward with the plan, will debit the amounts that have been pledged from credit union accounts on Aug. 18. In addition to the agency chairman, the following NCUA staff participated in the webinar presentation: Deputy Executive Director Larry Fazio, Examination and Insurance Director Melinda Love, and Chief Economist John Worth. This webinar will be archived on the NCUA website approximately two weeks after the event for those who cannot participate in the live session. As reported Monday in News Now, the Credit Union National Association has released a comprehensive white paper that will help its member credit unions assess whether or not they should take part in the corporate assessment prepayment plan. The white paper notes that the prepayment plan's financial benefits may not be broadly felt, but could prove vital for some credit unions. Use the resource link below to access the CUNA white paper (members only).

Webinar to address QRM problems for CUs

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WASHINGTON (7/12/11)--Credit unions and other interested parties have until Aug. 1 to comment on Qualified Residential Mortgage (QRM) rules and CUNA Mutual Group will host a webinar on July 18 to outline issues that most affect credit unions. The Credit Union National Association (CUNA) has voiced concerns that part of the QRM rules could have serious negative impact on credit unions and their members. As required by the Dodd-Frank Wall Street Reform Act, federal regulators are working on rules to define what mortgages are exempt from new risk-retention requirements and therefore will be designated as Qualified Residential Mortgages. These proposed rules were released in draft form for public comment earlier this year. Currently very restrictive in their language, the rules as drafted could limit many consumers’ eligibility for home loans and reduce the ability of credit unions and other smaller lenders to compete against large financial institutions. The webinar, scheduled for 2 p.m. (ET), will feature a panel of industry professionals discussing the proposed rules and the related risk-retention requirements, as well as the potential impact on the credit union mortgage lending business and members’ opportunities for homeownership. Webinar presenters include:
* Mary Dunn, CUNA senior vice president, and deputy general counsel; * Joel Luebkeman, director, marketing and product development, CMG MI; * Steve Robertson, managing director, PricewaterhouseCoopers; and * John McKechnie, senior vice president, Total Spectrum, and former director of the National Credit Union Administration’s public and congressional affairs office.
The webinar will be moderated by Christopher Roe, CUNA Mutual senior vice president of corporate and legislative affairs. Use the resource links below to register for the webinar or to file a comment on the proposed QRM rules with the Office of the Comptroller of the Current.

In Congress NFIP action GSE mark ups

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WASHINGTON (7/12/11)--The U.S. House and Senate returned to session yesterday and while lawmaker attention will be dominated this week by budget negotiations, there are other matters of credit union interest on the agenda--such as discussion of a possible five-year extension of the National Flood Insurance Program (NFIP). Today the House will consider Rep. Judy Biggert’s (R-Ill.) bill (H.R. 1039) intended to reform and extend the national flood insurance program. Congress must approve an extension or NFIP will expire Sept. 30, under the terms of its latest temporary extension. On the committee level, the highlight of committee activity this week will be the semi-annual monetary policy report to Congress delivered by Chairman Ben Bernanke of the Federal Reserve Board of Governors, which will take place on Wednesday before the House Financial Services Committee and Thursday before the Senate Banking Committee. Also of interest:
* The House Financial Service subcommittee on capital markets and government-sponsored enterprises has scheduled a markup for today on several bills related to Fannie Mae and Freddie Mac. During this mark-up, the subcommittee is expected to consider the following bills: Fannie Mae and Freddie Mac Transparency Act (H.R. 463); The Fannie Mae and Freddie Mac Taxpayer Payback Act (H.R. 2436); The Housing Trust Fund Elimination Act (H.R. 2441); The Market Transparency and Taxpayer Protection Act (H.R. 2440); Cap the GSE Bailout Act (H.R. 2462); Eliminate the GSE Charter During Receivership (H.R. 2439); and The GSE Legal Fee Reduction Act (H.R. 2428); * On Wednesday, the House Financial Services subcommittee on insurance, housing and community opportunity is scheduled to conduct a hearing on “Mortgage Origination: The Impact of Recent Changes on Homeowners and Businesses”; * For Thursday, the House Oversight and Government Reform Committee has scheduled a hearing entitled, “Consumer Financial Protection Efforts: Answers Needed.” Elizabeth Warren, assistant to the president and special adviserr to the Secretary of the Treasury, is the sole witness; * Also for Thursday, the House Financial Services subcommittee on oversight and investigations has scheduled a hearing on “Oversight of the Office of Financial Research and the Financial Stability Oversight Council.”

Third strike for Phillys Borinquen FCU

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ALEXANDRIA, Va. (7/11/11)--The National Credit Union Administration (NCUA) liquidated Borinquen FCU of Philadelphia Friday. In early June, Borinquen was the subject of a regulatory cease-and-desist order due to "serious and persistent record keeping problems" and failure to perform yearly audits, according to the NCUA. Later that month, the NCUA took control of the $7 million-asset credit union so its 8,600 members could continue to have access to their credit union’s services while it worked under NCUA management to resolve issues the agency said were affecting the safety and soundness of the institution. Borinquen was chartered in 1974 as a full-service financial institution to serve a low-income community in Philadelphia. It is the eleventh federally-insured credit union liquidation in 2011. Member deposits are federally insured by the National Credit Union Share Insurance Fund up to $250,000. NCUA’s Asset Management and Assistance Center will issue checks to individuals holding verified share accounts in the credit union within one week. Members with additional questions about their insurance coverage may contact the NCUA’s Consumer Assistance Center toll free at 800-755-1030. The center answers calls Monday – Friday between 8 a.m. and 6 p.m. (ET). Individuals may also visit the MyCreditUnion.gov website at any time for more information about their insurance coverage.

White paper provides decision guidance for prepay plan

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WASHINGTON (7/11/11)--The Credit Union National Association has released a comprehensive white paper that will help credit unions assess whether or not they should take part in the National Credit Union Administration’s (NCUA) corporate assessment prepayment plan. The white paper notes that the prepayment plan’s financial benefits may not be broadly felt, but could prove vital for some credit unions. The NCUA’s final prepayment plan was released at a late June board meeting, and the agency has asked credit unions that wish to take part in the plan to submit a completed program agreement by July 29. Credit unions that wish to take part may pledge a minimum of $1,000, or 5 basis points of March 31, 2011 insured shares, whichever is greater. The maximum that can be contributed is 48 bp of those same shares. The agency has set the target size of the program at $500 million, and will not move forward with the plan if less than $500 million is pledged by credit unions. The agency will tally the total amount of credit union commitments on Aug. 9, and, if it moves forward with the plan, will debit the amounts that have been pledged from credit union accounts on Aug. 18. The National Credit Union Administration (NCUA) has officially announced that it will host a free webinar on its voluntary Corporate Stabilization Fund assessment prepayment plan on July 11 at 2 p.m. ET. NCUA Chairman Debbie Matz, Deputy Executive Director Larry Fazio, Examination and Insurance Director Melinda Love, Chief Economist John Worth, and staff attorney Lisa Henderson will give their own insights on the program during a 2 p.m. ET webinar. For the CUNA white paper (CUNA members only), and to register for the NCUA webinar, use the resource links.

CUNA to Fed Changes welcome but concern remains on interchange

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WASHINGTON (7/11/11)--While the Federal Reserve addressed some credit union concerns when it released its final debit interchange cap rule last month, the Credit Union National Association (CUNA) has noted that the debit interchange cap plan remains “bad law and poor public policy.” CUNA, in a letter to Fed Chairman Ben Bernanke, each Fed governor, and other regulators, added that the Fed rule’s impact on credit unions will not truly be known “until the regulation has been implemented for a number of months.” CUNA has “encouraged Congress to continue a watchful eye on the implementation process,” and “would like to work with the Board in its ongoing efforts to monitor the impact of the interchange rule,” the letter added. “Credit unions that offer debit cards to their members are anxious about the potential loss of debit interchange income as well as the impact of the routing and exclusivity provisions on their debit card programs,” Cheney said. The Fed's final interchange rule would cap large issuer debit interchange fees at 21 cents. This cap is intended to cover costs related to network connectivity, hardware, software and labor, as well as costs related to network processing and transaction monitoring. An additional five basis points per transaction may be charged to cover fraud losses. Under a separate rule, debit card issuers would be permitted to charge an additional penny per transaction if they are in compliance with Fed established fraud prevention standards. Debit card issuers with less than $10 billion in assets, prepaid cards, and government-issued cards are exempt from the cap provisions. The final rule also prohibits issuers and payment card networks from limiting merchants' ability to choose the network on which a transaction is routed, limited to those networks on which the debit card is enabled to be used. The Fed will be required to report on the interchange cap's impact on small-issuer interchange fee income and whether merchants are discriminating against small issuers that are still able to charge more for debit card purchases. For the full CUNA letter, use the resource link.

Boost sluggish economy with MBL cap lift CUNA

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WASHINGTON (7/11/11)--The Senate should be permitted to consider legislation to raise the cap on credit union business lending -- which would help create needed jobs in a fragile economy -- Credit Union National Association (CUNA) President/CEO Bill Cheney stated in a letter to Senate leaders. The Obama administration on Friday reported that overall payroll employment increased by 18,000 in June. The nationwide unemployment rate increased to 9.2% during the month. In the wake of this lackluster jobs report, Cheney told Senate Majority Leader Harry Reid (D-Nev.) and Senate Minority Leader Mitch McConnell (R-Ky.), that America’s credit unions stand “very willing” to help businesses create jobs and hold significant capital that could be loaned to small businesses -- but for a statutory cap restricting credit union business lending. Lifting the credit union member business cap to 27.5% of total assets, as proposed in Sen. Mark Udall's (D-Colo.) S. 509, would inject an estimated $13 billion in funds into the economy, creating over 140,000 new jobs. Sen. Olympia Snowe (R-Maine) is the other original sponsor of the bill. Cheney added that the MBL cap lift legislation “has been endorsed by the Obama administration, has been subject to hearings in the Senate Banking Committee, and is the type of commonsense legislation that Senators on both sides of the aisle should be able to embrace: new jobs, new lending to small business, zero cost.” Bank opposition to the MBL cap lift, and their own lack of business lending activity in the wake of considerable government assistance, are unacceptable, Cheney added. Failing to enact S. 509 “literally leaves money on the table that could help small businesses hire those among the 9.2% of Americans actively seeking jobs,” Cheney said. “The time is now to set aside the banker objections, move the Udall-Snowe bill and let credit unions serve their members who own small businesses,” he added. For the full letter, use the resource link.

Inside Washington (07/08/2011)

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* WASHINGTON (7/11/11)--Friday was Sheila Bair’s last day as the head of the Federal Deposit Insurance Corp. (FDIC), but hers is not the only transition on the board (American Banker July 8). FDIC Vice Chairman Martin Gruenberg is the nominee to assume the chairmanship. Tom Curry will continue to serve on the board; however, as the nominee to succeed acting Comptroller of the Currency John Walsh, Curry would be elevated in his FDIC board position if or when he takes over the comptroller position. The changes don’t stop there. John Bowman, who is acting director of the Office of Thrift Supervision (OTS), will be off the FDIC board when the thrift agency ceases to exist later this month. OTS duties, under the Dodd-Frank Act, are to be assumed by the director of the Consumer Financial Protection Bureau … * WASHINGTON (7/11/11)--Bankers told a House panel Friday that examiners are going too far in declassifying loans, which in turn, they say, is forcing banks to retain higher capital levels than is really necessary (American Banker July 8). The bankers urged federal lawmakers to support a bill, drafted by Rep. Bill Posey (R-Fla.), that would allow banks to treat non-accrual loans as accrual for capital purposes if certain conditions are met. Among those conditions are the requirements that the loans are current, amortizing, not paid from an interest reserve account and have not been more than 30-days delinquent within the previous six months. Generally, modified loans are treated as non-accrual for six months, but the Posey bill also would allow the mortgages to be considered accrual if they continue to meet the legislation’s other standards. Also, the bill would require a study by the Financial Stability Oversight Council to determine how to avoid conflicting guidance from being issued regarding loan classifications and capital requirements. The legislation would expire after two years. As one banker put it, tough treatment by bank examiners is forcing banks to forgo good loan opportunities for fear of examiner write-downs and a resulting income and capital loss. However, a bank regulator also testifying at the House committee hearing warned that the legislation in question would dangerously undermine examiners’ ability to ensure the safety and soundness of banks. … * WASHINGTON (7/11/11)--The first round of capital has been released under the U.S. Treasury Department’s Small Business Lending Fund (SBLF), and six community banks have received a total of $123 million from the fund. The government-funded program is intended to encourage banks to increase their lending to small businesses, and federal lawmakers have been pushing Treasury recently to get the funds distributions going. However, Treasury resisted the pressure saying it would continue to carefully screen applicants to protect the taxpayer dollars funding the bank program. Additional funding announcements are expected to be rolled out over the summer, and, as of June 22, Treasury reportedly had received 869 applications for approximately $11.6 billion in SBLF funds. The deadline to distribute funds is Sept. 27 American Banker July 8). Meanwhile, credit unions continue to urge the U.S. Congress to increase their statutory member business lending limit to 27.5% of assets, up from the current 12.25%. Credit Union National Association research has indicated that the increase would add more than $13 billion in small business credit and more than 140,000 jobs to the U.S. economy--with no involvement of taxpayer dollars … * WASHINGTON (7/11/11)--IndyMac Bank was the first big Federal Deposit Insurance Corp. (FDIC) seizure in the country’s exploding mortgage crisis and now, three years later, the FDIC has filed suit against the bank’s former top executive, Michael Perry. The FDIC has charged in U.S. District Court in California that Perry did not halt IndyMac's operation of a $10 billion pool of risky mortgages meant for resale, even though, according to the FDIC, Perry recognized and acknowledged the instability in the secondary market. While the FDIC action against the former leader of IndyMac may be one of the highest-profile suits brought by the agency, eight such lawsuits have been filed so far under the FDIC’s authority to sue the managers of collapsed banks. The FDIC is pursuing, to some degree, legal actions seeking almost $7 billion from former directors and officers (American Banker July 8) …

CUNA at CFPB to discuss large issuers

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WASHINGTON (7/8/11)—The Credit Union National Association (CUNA) was one of several industry representatives that discussed on Thursday how the Consumer Financial Protection Bureau (CFPB) should approach its regulation of non-bank/non-credit union “larger participants” in consumer financial services. The CFPB meeting aimed to identify what types of large non-bank/non-credit union financial entities should be subject to CFPB supervision and examination. It is considering regulating non-financial institution auto lenders, debt collection agencies, credit reporting agencies, prepaid credit card firms, debt relief firms, and money transfer firms. The CFPB is accepting public comment on how to treat these types of entities. CUNA and the CFPB were joined in the discussion by the Independent Community Bankers of America (ICBA), the AFL-CIO, and several other industry and consumer groups. The CFPB is holding additional meetings with more than 100 organizations. Under the Dodd-Frank Wall Street Reform and Consumer Protection Act, the CFPB is authorized to supervise all sizes of nonbank payday lenders, private student lenders, and mortgage companies. Dodd-Frank requires that the CFPB issue an initial rule on large non-bank firm regulation no later than July 21, 2012, one year after the designated transfer date. While the supervision of privately insured credit unions was not discussed during the CFPB roundtable on large non-bank financial entities, CUNA following the meeting said it is committed to minimizing the regulatory burden of these credit unions. CUNA added that if the CFPB elects to take on regulation of privately insured credit unions, it should rely on state-regulators to examine these credit unions. For more on this CFPB project, use the resource link.

Survey Debit preferred over checks at POS

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WASHINGTON (7/8/11)--A consumer survey has revealed that debit cards are the most popular form of payment at retail points of sale (POS), and checks are “largely a thing of the past” to most consumers, according to payment services firm TSYS. The TSYS survey questioned more than 1,000 debit card users on their card usage, payment preference, and interest in debit card account perks. The survey found that cash was the main fallback for consumers who did not use their debit cards, and the study found that consumers would “reduce or completely stop using their debit cards if they were charged fees.” However, consumers would be more interested in debit card services if they were offered “instant-issue” cards and increased online personal identification number (PIN) security. Adding or increasing debit account fees may be unavoidable for some credit unions when the Federal Reserve’s debit interchange rule comes into effect later this year. The Fed’s final interchange rule, which was approved by a 4 to 1 vote late last month, would cap large issuer debit interchange fees at 21 cents, to cover network connectivity, hardware, software and labor costs, as well as costs related to network processing and transaction monitoring. An additional five basis points per transaction may be charged to cover fraud losses. A separate interim final rule proposed would allow an additional penny to be charged if financial institutions are in compliance with Fed established fraud prevention standards. Debit card issuers with less than $10 billion in assets, prepaid cards, and government-issued cards are exempt from the cap provisions. The Fed will be required to report on the interchange cap’s impact on small-issuer interchange fee income and whether merchants are discriminating against small issuers that are still able to charge more for debit card purchases.

Inside Washington (07/07/2011)

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* WASHINGTON (7/8/11)--The Federal Reserve Board Thursday released a report of the 2010 payment and account information from more than 1,000 agreements between institutions of higher education, or their affiliated organizations, and credit card issuers. The Credit Card Accountability Responsibility and Disclosure Act of 2009 (CARD Act) requires issuers to submit to the Fed every year their agreements with educational institutions or affiliated organizations, such as alumni associations. For each agreement, issuers are also required to submit information regarding payments made to the institution or organization and the number of accounts opened under the agreement. An online database provides the complete text of each agreement and the payment and accounts information submitted by issuers. Users may also search for agreements by card issuer, by educational institution or organization, or by the city or state in which the institution or organization is located ... * WASHINGTON (7/8/11)--The Consumer Financial Protection Bureau (CFPB) announced an agreement with the U.S. Army, Marine Corps, Navy, Air Force and Coast Guard to provide stronger protections for service members and their families in connection with consumer financial products and services. Military lawyers and the CFPB will work together to track consumer financial complaints from military families. “Service members and their families sacrifice a great deal for our country and they deserve advocates who will use every available resource to protect them from financial threats, said Hollister K. Petraeus, CFPB’s assistant director for the Office of Service Member Affairs. “Through this partnership and our other efforts, we will work to make sure that the days of military families being easy targets for predatory practices and unscrupulous lenders are a thing of the past” …

Larceny conviction brings NCUA prohibition order

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ALEXANDRIA, Va. (7/8/11)--The National Credit Union Administration (NCUA) issued an order prohibiting Stephen Shinnick from participating in the affairs of any federally insured financial institution. The NCUA said that Shinnick, a former employee of Norwood School Employees FCU, Norwood, Mass., pleaded guilty to three counts of larceny and was sentenced to five years probation. In April it was reported that Shinnick, a former vice principal at Coakley Middle School in Norwood, was sentenced to two and a half years in prison for stealing more than $250,000 over a period of years (NorwoddPatch.com April 5) According to the court documents, Shinnick had a gambling problem and used credit union funds to pay more than $164,516 in personal bills, to issue checks payable to himself totaling $130,402 and to pay his children a total of $13,000. The credit union ceased operating in June 2009 and was merged into Rockland (Mass.) CU. Violation of a prohibition order is a felony offense punishable by imprisonment and a fine of up to $1 million. Use the link below to access NCUA enforcement orders.

Fed FTC finalize credit disclosure changes

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WASHINGTON (7/7/11)--The Federal Reserve and the Federal Trade Commission have issued a final version of rules that require creditors to add new details to the risk-based pricing (RBP) notices that are distributed to their members. Creditors are required to disclose credit scores and related information to consumers in risk-based pricing (RBP) notices under the Fair Credit Reporting Act (FCRA) if a credit score was used in setting the credit terms. The new rule will also require creditors to disclose on adverse action notices a credit score that was used in taking any adverse action against a consumer and any information relating to that score. The credit score disclosures are required by the Dodd-Frank Act. Credit unions and other financial institutions will need to add the following to their RBP and adverse action notices:
• A statement that a credit score takes into account information in a consumer report and a credit score can change over time; • The specific numerical credit score used in making the credit decision; • The range of possible credit scores; • Key factors that adversely affected the credit score such as late payments and high credit utilization; • The date on which the credit score was created; and • The name of the consumer reporting agency that provided the credit score.
The Credit Union National Association (CUNA) has said that whether or not credit unions will need to replace their current RBP forms with new ones is not certain. The answer to that question depends on whether a credit union uses a consumer's credit score to set the material terms of credit, CUNA added. The new rules will become effective 30 days after they are published in the Federal Register. The Fed said that it expects the rules to be published soon.

Inside Washington (07/06/2011)

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* WASHINGTON (7/7/11)--The Federal Housing Administration (FHA) may tighten borrowers’ required debt-to-income ratios, a move that could keep many consumers out of the mortgage market (American Banker July 6). Although the agency has yet to issue definitive ratios, lenders fear such tightening could hurt the still-recovering housing market and cause a further decline in home prices. But a hard cap on debt-to-income ratios likely would lower delinquency rates and bolster the financial health of the FHA’s Mutual Mortgage Insurance fund, according to the agency. The FHA is assessing the variables that go into its Total Scorecard automated underwriting system. Robert Ryan, FHA’s acting commissioner, suggested the debt-to-income ratios could be tightened, and instead of automated approval, lenders would conduct manual reviews to ensure borrowers had adequate income or savings … * WASHINGTON (7/7/11)--The Federal Deposit Insurance Corp. (FDIC) board of directors approved the authority to dismantle “too-big-to-fail” financial firms as part of the government’s effort to end bailouts of large firms because the government lacked an effective way to wind them down (The Wall Street Journal July 6). Dodd-Frank gave the FDIC resolution powers for firms deemed too systemic to be wound down through bankruptcy. In Chairman Sheila Bair’s last meeting, the board also approved rules allowing the government to recover compensation from executives whose actions lead to the failure of a financial services firms. Bank executives could be subject to clawbacks on their pay if they do not conduct their responsibilities with “the degree of skill and care an ordinarily prudent person in a like position would exercise under similar circumstances,” the agency said … * WASHINGTON (7/7/11)--The Office of the Comptroller of the Currency (OCC) has published a community development investments electronic newsletter that provides a guide for national banks seeking to expand their small-business lending initiatives. The newsletter describes new federal initiatives created by the Small Business Jobs Act and additional enhancements to Small Business Administration (SBA) credit support programs designed to provide sources of capital so banks can provide financing to small businesses. The online newsletter describes the Small Business Jobs Act’s flagship programs, the Small Business Lending Fund and the State Small Business Credit Initiative. It also highlights federal programs designed to promote mission-focused and entrepreneurial small businesses and small business exports. Community Developments Investments can be accessed on the OCC’s website … * WASHINGTON (7/7/11)--The Federal Housing Administration (FHA) has published updated condominium policy guidelines and instructions that clarify the approval and recertification process and policies for condo projects. FHA’s mortgagee letter includes a condominium policy guide and implementation schedule identifying timelines for lenders to comply with the guidelines. The Housing and Economic Recovery Act of 2008 required the issuance of updated administrative guidance and regulations. “This guidance formalizes and expands the policies we put in place in 2009 and lays the groundwork for a more formal rulemaking process going forward,” said FHA's Acting Commissioner Robert Ryan. The Condominium Project Approval and Processing Guide is available online

SBA Red Cross offer lessons in preparedness

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WASHINGTON (7/7/11)--The U.S. Small Business Administration (SBA) has joined the American Red Cross to “intensify outreach efforts to educate the public about the importance of having a disaster recovery plan in place.” The outreach efforts will include SBA/Red Cross-sponsored disaster preparedness workshops. Credit unions will want to look out for these workshops, which will be organized by district SBA and Red Cross offices. The agencies will also promote the Red Cross Ready Rating program, a Web-based tool that helps businesses gauge their emergency preparedness and provides individualized feedback on how a business’s preparedness can be improved. American Red Cross CEO Gail McGovern noted that 15% to 40% of businesses fail following a natural or man-made disaster. “By partnering with the SBA to get more families and businesses prepared for emergencies, we hope to save both lives and livelihoods,” she added. SBA Administrator Karen Mills in a release said that the SBA/Red Cross collaboration will help the two agencies “draw on each other’s resources to make emergency preparedness a way of life for individuals and businesses.” The SBA and Red Cross also advised businesses and individuals to prepare by reviewing their insurance policies, copying and storing any sensitive documents, and stocking an emergency kit with cash, medical supplies, water, food, and other items. For the full SBA/Red Cross release, use the resource link.

Stabilization Fund fee expected to be on August NCUA agenda

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ALEXANDRIA. Va. (7/7/11)—As mentioned in the July 5 issue of News Now, the National Credit Union Administration (NCUA) announced last week it is setting aside its longstanding practice of omitting an August meeting from its monthly open board meeting schedule and will hold a special meeting on Aug. 29. The agency board members are expected to discuss the Temporary Corporate Credit Union Stabilization Fund (TCCUSF) assessment that will be applied to credit unions for the year. The meeting is scheduled for 1 p.m. (ET). The TCCUSF, established in 2009, covers corporate stabilization-related expenses. In 2010, telling credit unions that the agency is "very mindful of the effect" that assessments have on their balance sheets, the NCUA separated the assessment related to National Credit Union Share Insurance Fund costs associated with problem natural person credit unions and those associated with NCUA's Corporate Stabilization Fund. The action was intended to improve the transparency of NCUA's assessment process and to improve the accuracy of credit unions' budget estimates.

Inside Washington (07/05/2011)

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* WASHINGTON (7/6/11)--President Barack Obama has tapped Tom Curry, a board director at the Federal Deposit Insurance Corp. (FDIC) for the past seven years, to head up the Office of the Comptroller of the Currency (OCC), succeeding Acting Comptroller John Walsh. Senate Banking Committee Chairman Tim Johnson (D-S.D.) praised the announcement in a press release and said he would move Curry's nomination through the committee "as quickly as possible." OCC has been criticized after its recent controversial interpretation of preemption under the Dodd-Frank Act, and some said the nomination will be seen as a benefit. Curry also served as former commissioner of banks in Massachusetts. Obama also indicated he would nominate Mary J. Miller, the Treasury assistant secretary for financial markets, as undersecretary for domestic affairs. She would succeed Jeffrey Goldstein, who resigned this week (American Banker July 5) …

House hearings follow July 4 break

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WASHINGTON (7/6/11)--With the Senate deciding to cancel its scheduled Independence Day constituent work period and remain in Washington, both bodies of Congress will be in session this week. However, the majority of this week’s action will take place in the House, as the Senate has not added much to the schedule for the week. The biggest action for credit unions will not take place until later in the week, with the House Financial Services Committee’s financial institutions subcommittee and its oversight and investigations subcommittee coming together on Thursday to hold a joint hearing on mortgage servicing. This hearing will focus on federal regulators’ role in settlement negotiations. Mortgage servicing standards are also on the agenda for that meeting. That same financial institutions subcommittee will cover legislative approaches to bank examination practices on Friday. H.R. 1723, the “Common Sense Economic Recovery Act,” which would permit certain loans that would otherwise be treated as non-accrual loans to be designated as accrual loans; and H.R. 2056, a bill to instruct the Federal Deposit Insurance Corp. Inspector General to study the impact on insured depository institutions’ failures. The House earlier in the week will consider H.R. 1309, the Flood Insurance Reform Act, and other legislation.

Federal financial agencies release derivatives guidance

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WASHINGTON (7/6/11)--The Federal Reserve and other financial regulatory agencies have urged financial institutions to practice effective management by using “appropriate reporting metrics and exposure limits systems” and other counterparty credit risk (CCR) mitigation measures. The Federal Deposit Insurance Corp., the Office of the Comptroller of the Currency, and the Office of Thrift Supervision joined the Fed in issuing the CCR management guidance. The regulators also advised institutions to have “well-developed and comprehensive stress testing,” and maintain systems that facilitate the measurement and aggregation of CCR.” The agencies said that the guidance “is intended primarily for use by banking organizations with large derivatives portfolios, as well as for supervisors as they assess and examine such institutions' CCR management.” The release defines CCR as “the risk that the counterparty to a transaction defaults or deteriorates in creditworthiness before the final settlement of the transaction.” The guidance is meant to supplement existing supervisory guidance and suggests that financial institutions strengthen their risk control activities by “validating models and systems, ensuring independent risk management and internal audit processes, and managing legal and operational risks.” National Credit Union Administration Chairman Debbie Matz has recently noted that credit risk "continues to constrain many credit unions' performance" and will remain a focus of examinations this year. The agency is also accepting public comment on whether to allow certain credit unions to hedge interest rates by investing in some forms of derivatives, including interest-rate swaps. For the full guidance, and more on the NCUA’s derivatives deliberations, use the resource links.

Inside Washington (07/04/2011)

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ALEXANDRIA, Va. (7/5/11)--Noting that "overcoming the effects of the economic downturn remains a challenge for most credit unions," National Credit Union Administration (NCUA) Chairman Debbie Matz last week said that NCUA examiners "are working diligently with credit union management and boards to mitigate existing and potential risks to maintain stable balance sheets." Matz, in the agency's most recent report on the state of the credit union industry (11-CU-07) also previewed some of the agencies supervisory priorities going forward. The NCUA chairman noted that credit risk, which "continues to constrain many credit unions' performance," will remain a focus of examinations this year. Matz said that real estate, business, and participation loan delinquencies "remain elevated," and "real estate and business loan modifications have increased." Credit unions should closely monitor any loan modifications in their portfolio, she said. Interest rate risk and concentration risk should also be closely monitored by credit unions, and the NCUA will "continue to take proactive steps to protect the safety and soundness of the credit union industry," Matz said ... ALEXANDRIA, Va. (7/5/11)--The National Credit Union Administration (NCUA) for the second consecutive day expanded the scope of its disaster relief policy as flooding continued to threaten parts of Missouri. The agency on June 30 expanded its policy after severe weather and flooding impacted areas of Montana, Nebraska, Indiana, Kansas and Iowa. The NCUA in recent months has also reached out to aid credit unions and members in North Dakota, Tennessee and Minnesota, and the southeast. The agency's disaster relief policy is intended to assist credit unions and their members to deal with potential losses, and allows for altered loan terms for members and guaranteed lines of credit for some credit unions ... WASHINGTON (7/5/11)--National banks should conduct a self-assessment of foreclosure management practices by Sept. 30, the Office of Comptroller of Currency (OCC) said in guidance issued Thursday. The self-assessments should include testing and file reviews and be appropriate in scope, considering the level and nature of the bank's mortgage servicing and foreclosure activity, the OCC said. In the fourth quarter of 2010, the OCC, the Federal Reserve, the Federal Deposit Insurance Corp., and the Office of Thrift Supervision conducted reviews of foreclosure processing at 14 federally regulated mortgage servicers. The agencies found weaknesses in servicers' foreclosure governance processes, foreclosure documentation preparation processes, and oversight and monitoring of third-party vendors, including attorneys. As a result, the OCC is advising banks to review their foreclosure policies to ensure that they treat borrowers fairly and are in compliance with foreclosure laws. Banks can expect regulators to conduct a thorough review of these self-assessments the next time they are examined, the OCC said ... WASHINGTON (7/5/11)--Observers questioned the public nature of a letter sent by the Treasury Department to Office of the Comptroller of Currency (OCC) criticizing the OCC's pre-emption plan (American Banker July 1). Critics say the public critique violated the spirit if not letter of the law prohibiting the administration from delaying or derailing rulemaking. Bob Clarke, a former comptroller and a senior partner with Bracewell & Giuliani LLP, suggested it would have been more appropriate for Treasury to speak with the OCC rather than issuing a public comment letter. While the OCC is nominally under the Treasury Department, it is an independent agency with a leader appointed by the president and confirmed by the Senate. Donald Lamson, a former OCC official and a partner with Shearman & Sterling LLP, said it appears as if there was a lack of communication between the two agencies. Conversations, both formal and informal, are part of the rulemaking process, Lamson said ... WASHINGTON (7/5/11)--Capital rules written for large banks may also apply to small institutions, Federal Deposit Insurance Corp (FDIC) Chairman Sheila Bair said during a Senate Banking Committee hearing Thursday. Bair, who will leave the FDIC Friday, also defended prompt corrective action in the face of an oversight report criticizing it (American Banker July 1). While the quality of capital definitions of Basel III was created for global banks, Blair said they should apply to banks of all sizes. "The competitive position of small and mid-sized institutions has been steadily eroded over time by the government subsidy attached to the Too Big to Fail status of the nation's largest banks," Bair said. "In the first quarter of this year, the cost of funding earning assets was only about half as high for banks with more that $100 billion in assets as it was for community banks with assets under $1 billion" ...

CUNA releases interchange rule analysis (07/04/2011)

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WASHINGTON (7/5/11)--The Credit Union National Association has released a final rule analysis of the Federal Reserve's final debit interchange fee and routing regulations. The Fed's final rule, which was released last Wednesday, would cap large issuer debit interchange fees at 21 cents, to cover network connectivity, hardware, software, and labor costs, as well as costs related to network processing and transaction monitoring. An additional five basis points per transaction may be charged to cover fraud losses. A separate interim final rule proposed would allow an additional penny to be charged if financial institutions are in compliance with Fed established fraud prevention standards. Debit card issuers with less than $10 billion in assets are exempt from the direct impact of the cap provisions. Prepaid cards and government-issued cards are also exempted. The final rule will also require issuers to provide a debit card that can be processed on at least two unaffiliated card networks, such as one signature network and one unaffiliated PIN network. Alternatively, issuers may also provide a debit card that can be processed on two or more unaffiliated signature networks, but not on any PIN networks, or that can be processed on two or more unaffiliated PIN networks, but not on any signature networks. The final rule also prohibits issuers and payment card networks from limiting merchants' ability to choose the network on which a transaction is routed, limited to those networks on which the debit card is enabled to be used. For the final rule analysis, use the resource link.

CUNA to CFPB Consider CUs as rules are written (07/04/2011)

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WASHINGTON (7/5/11)--The Credit Union National Association (CUNA) has called on the Consumer Financial Protection Bureau (CFPB) to consider the differences between member-owned financial cooperatives such as credit unions and for-profit banks that put the interests of their shareholders first as it develops and amends rules. CUNA's Deputy General Counsel Mary Dunn reiterated to the CFPB that credit unions are quite concerned about the rising tide of regulations under which credit unions must operate. She urged the agency to look for ways to minimize those requirements. She added that credit unions support reasonable consumer protections but the regulatory burden on financial institutions that seek to meet consumers' financial needs must be reasonable as well. The CFPB will oversee regulations addressing lending, savings, and consumer privacy when a number of consumer protection laws such as Truth in Savings are moved from the Federal Reserve, the National Credit Union Administration, the Federal Deposit Insurance Corp., and other regulators later this month for implementation by the CFPB. The Truth in Lending Act (TILA), Equal Credit Opportunity Act, most provisions of the Electronic Fund Transfers Act and others are also on the CFPB's regulatory agenda. Nineteen laws are scheduled to come under the CFPB's oversight in late July. CUNA in a comment letter to the CFPB said that it does not take issue with the CFPB taking on oversight of these rules. CUNA did, however, urge the CFPB to refrain from imposing new rules on credit unions. The letter also commended the CFPB for its approach to streamlining TILA and Real Estate Settlement Procedures Act (RESPA) forms. The CFPB is working to integrate the various TILA and RESPA disclosures into a single document comprehensible by consumers. This integration will be achieved by a multi-stage revision process through which the CFPB will release five separate, consecutive versions of its merged mortgage disclosure form. New sample forms will be released about once per month between now and September. A single draft disclosure will then be developed. The CFPB is currently in the second stage of this process. CUNA, leagues and credit unions have been actively involved in working with theCFPB on this project and in May met with the CFPB to discuss the first stage of the streamlining process. Additional meetings are in the works. CUNA urged the agency to continue to reach out to stakeholders as it moves forward.

NCUA announces July 11 corporate prepayment plan webinar (07/04/2011)

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ALEXANDRIA, Va. (7/5/11)--The National Credit Union Administration (NCUA) has officially announced that it will host a free webinar on its voluntary Corporate Stabilization Fund assessment prepayment plan on July 11 at 2 p.m. ET. The webinar will be moderated by NCUA Chairman Debbie Matz, and will also feature input from NCUA Deputy Executive Director Larry Fazio, Examination and Insurance Director Melinda Love, Chief Economist John Worth, and staff attorney Lisa Henderson. The agency in a release said the webinar will give credit union industry insiders and public stakeholders the chance to improve their understanding of the prepayment program. The NCUA last week unanimously voted to move forward with a plan to allow credit unions, on a voluntary basis, to prepay their Corporate Stabilization Fund assessment. The agency has set the target size of the program at $500 million, which will result in a reduction of the 2011 regular assessment from 24.9 basis points (bp) to 18.5 bp. The NCUA will not move forward with the plan if less than $500 million is pledged by credit unions. Matz emphasized that participation in the prepayment plan is voluntary, and said that the agency is neither encouraging nor discouraging credit union participation in the program. The Credit Union National Association has encouraged credit unions to consider the extent to which the program will benefit them and whether they should participate. Credit unions that wish to take part in the prepayment plan must submit a completed program agreement to the NCUA by July 29. The agency will tally the total amount of credit union commitments on Aug. 9, and, if it moves forward with the plan, will debit the amounts that have been pledged from credit union accounts on Aug. 18. For more on the webinar, and prior coverage of the NCUA's recent corporate prepayment plan actions, use the resource links. The NCUA last week also announced that it will hold a special closed board meeting on Aug. 29. A full agenda for that meeting has not yet been released.

Cheney to NCUA Amend corporate prepayment plan (07/04/2011)

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WASHINGTON (7/5/11)--Credit Union National Association (CUNA) President/CEO Bill Cheney has suggested that the National Credit Union Administration (NCUA) amend its corporate credit union assessment prepayment program to allow total prepayments of as much as $1 billion and apply all prepayments to a reduction in 2011 fund assessments. In a Friday letter to the agency, Cheney noted that credit unions have said that they are disappointed by the NCUA's decision to limit the Temporary Corporate Credit Union Share Insurance Fund (TCCUSF) plan to only $500 million in prepayments. Doing so would reduce the 2011 TCCUSF assessment by 6.4 basis points (bp), and member credit unions have told CUNA that "at that level, it's just not worth it," Cheney said. Cheney suggested that 2011's assessment could be further reduced if the agency made better use of the TCCUSF's $6 billion line of credit from the U.S. Treasury. "If the agency would be willing to allow the balance at Treasury to remain as high as $5.5 billion through 2013, the prepayment plan could be allowed to rise to $1 billion, and this year's assessment could be reduced by as much as 13 bp," Cheney said. The CUNA CEO added that Treasury officials have been "supportive" of using the borrowing authority "to even out assessment expenses for credit unions." The NCUA's prepayment plan, which was approved at last Wednesday's special open board meeting, would allow credit unions to prepay some TCCUSF assessments. The agency has set the target size of the program at $500 million, and the program will not be implemented if less than $500 million is committed. Credit unions may commit a maximum of 48 bp of their total insured shares as of March 31, 2011 to the fund. The NCUA will cover additional details of the plan at a July 11 webinar. (See related story: NCUA announces July 11 corporate prepayment plan webinar) For the full letter, use the resource link.

NCUA announces July 11 corporate prepayment plan webinar

 Permanent link
ALEXANDRIA, Va. (7/5/11)--The National Credit Union Administration (NCUA) has officially announced that it will host a free webinar on its voluntary Corporate Stabilization Fund assessment prepayment plan on July 11 at 2 p.m. ET. The webinar will be moderated by NCUA Chairman Debbie Matz, and will also feature input from NCUA Deputy Executive Director Larry Fazio, Examination and Insurance Director Melinda Love, Chief Economist John Worth, and staff attorney Lisa Henderson. The agency in a release said the webinar will give credit union industry insiders and public stakeholders the chance to improve their understanding of the prepayment program. The NCUA last week unanimously voted to move forward with a plan to allow credit unions, on a voluntary basis, to prepay their Corporate Stabilization Fund assessment. The agency has set the target size of the program at $500 million, which will result in a reduction of the 2011 regular assessment from 24.9 basis points (bp) to 18.5 bp. The NCUA will not move forward with the plan if less than $500 million is pledged by credit unions. Matz emphasized that participation in the prepayment plan is voluntary, and said that the agency is neither encouraging nor discouraging credit union participation in the program. The Credit Union National Association has encouraged credit unions to consider the extent to which the program will benefit them and whether they should participate. Credit unions that wish to take part in the prepayment plan must submit a completed program agreement to the NCUA by July 29. The agency will tally the total amount of credit union commitments on Aug. 9, and, if it moves forward with the plan, will debit the amounts that have been pledged from credit union accounts on Aug. 18. For more on the webinar, and prior coverage of the NCUA’s recent corporate prepayment plan actions, use the resource links. The NCUA last week also announced that it will hold a special closed board meeting on Aug. 29. A full agenda for that meeting has not yet been released.

CUNA to CFPB Consider CUs as rules are written

 Permanent link
WASHINGTON (7/5/11)--The Credit Union National Association (CUNA) has called on the Consumer Financial Protection Bureau (CFPB) to consider the differences between member-owned financial cooperatives such as credit unions and for-profit banks that put the interests of their shareholders first as it develops and amends rules. CUNA's Deputy General Counsel Mary Dunn reiterated to the CFPB that credit unions are quite concerned about the rising tide of regulations under which credit unions must operate. She urged the agency to look for ways to minimize those requirements. She added that credit unions support reasonable consumer protections but the regulatory burden on financial institutions that seek to meet consumers' financial needs must be reasonable as well. The CFPB will oversee regulations addressing lending, savings, and consumer privacy when a number of consumer protection laws such as Truth in Savings are moved from the Federal Reserve, the National Credit Union Administration, the Federal Deposit Insurance Corp., and other regulators later this month for implementation by the CFPB. The Truth in Lending Act (TILA), Equal Credit Opportunity Act, most provisions of the Electronic Fund Transfers Act and others are also on the CFPB's regulatory agenda. Nineteen laws are scheduled to come under the CFPB's oversight in late July. CUNA in a comment letter to the CFPB said that it does not take issue with the CFPB taking on oversight of these rules. CUNA did, however, urge the CFPB to refrain from imposing new rules on credit unions. The letter also commended the CFPB for its approach to streamlining TILA and Real Estate Settlement Procedures Act (RESPA) forms. The CFPB is working to integrate the various TILA and RESPA disclosures into a single document comprehensible by consumers. This integration will be achieved by a multi-stage revision process through which the CFPB will release five separate, consecutive versions of its merged mortgage disclosure form. New sample forms will be released about once per month between now and September. A single draft disclosure will then be developed. The CFPB is currently in the second stage of this process. CUNA, leagues and credit unions have been actively involved in working with theCFPB on this project and in May met with the CFPB to discuss the first stage of the streamlining process. Additional meetings are in the works. CUNA urged the agency to continue to reach out to stakeholders as it moves forward. For the full letter, use the resource link.

CUNA releases interchange rule analysis

 Permanent link
WASHINGTON (7/5/11)--The Credit Union National Association has released a final rule analysis of the Federal Reserve’s final debit interchange fee and routing regulations. The Fed’s final rule, which was released last Wednesday, would cap large issuer debit interchange fees at 21 cents, to cover network connectivity, hardware, software, and labor costs, as well as costs related to network processing and transaction monitoring. An additional five basis points per transaction may be charged to cover fraud losses. A separate interim final rule proposed would allow an additional penny to be charged if financial institutions are in compliance with Fed established fraud prevention standards. Debit card issuers with less than $10 billion in assets are exempt from the direct impact of the cap provisions. Prepaid cards and government-issued cards are also exempted. The final rule will also require issuers to provide a debit card that can be processed on at least two unaffiliated card networks, such as one signature network and one unaffiliated PIN network. Alternatively, issuers may also provide a debit card that can be processed on two or more unaffiliated signature networks, but not on any PIN networks, or that can be processed on two or more unaffiliated PIN networks, but not on any signature networks. The final rule also prohibits issuers and payment card networks from limiting merchants' ability to choose the network on which a transaction is routed, limited to those networks on which the debit card is enabled to be used. For the final rule analysis, use the resource link.

Cheney to NCUA Amend corporate prepayment plan

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WASHINGTON (7/5/11)--Credit Union National Association (CUNA) President/CEO Bill Cheney has suggested that the National Credit Union Administration (NCUA) amend its corporate credit union assessment prepayment program to allow total prepayments of as much as $1 billion and apply all prepayments to a reduction in 2011 fund assessments. In a Friday letter to the agency, Cheney noted that credit unions have said that they are disappointed by the NCUA’s decision to limit the Temporary Corporate Credit Union Share Insurance Fund (TCCUSF) plan to only $500 million in prepayments. Doing so would reduce the 2011 TCCUSF assessment by 6.4 basis points (bp), and member credit unions have told CUNA that “at that level, it’s just not worth it,” Cheney said. Cheney suggested that 2011’s assessment could be further reduced if the agency made better use of the TCCUSF’s $6 billion line of credit from the U.S. Treasury. “If the agency would be willing to allow the balance at Treasury to remain as high as $5.5 billion through 2013, the prepayment plan could be allowed to rise to $1 billion, and this year’s assessment could be reduced by as much as 13 bp,” Cheney said. The CUNA CEO added that Treasury officials have been “supportive” of using the borrowing authority “to even out assessment expenses for credit unions.” The NCUA’s prepayment plan, which was approved at last Wednesday’s special open board meeting, would allow credit unions to prepay some TCCUSF assessments. The agency has set the target size of the program at $500 million, and the program will not be implemented if less than $500 million is committed. Credit unions may commit a maximum of 48 bp of their total insured shares as of March 31, 2011 to the fund. The NCUA will cover additional details of the plan at a July 11 webinar. (See related story: NCUA announces July 11 corporate prepayment plan webinar) For the full letter, use the resource link.

Inside Washington (07/01/2011)

 Permanent link
* ALEXANDRIA, Va. (7/5/11)--Noting that “overcoming the effects of the economic downturn remains a challenge for most credit unions,” National Credit Union Administration (NCUA) Chairman Debbie Matz last week said that NCUA examiners “are working diligently with credit union management and boards to mitigate existing and potential risks to maintain stable balance sheets.” Matz, in the agency’s most recent report on the state of the credit union industry (11-CU-07) also previewed some of the agencies supervisory priorities going forward. The NCUA chairman noted that credit risk, which “continues to constrain many credit unions’ performance,” will remain a focus of examinations this year. Matz said that real estate, business, and participation loan delinquencies “remain elevated,” and “real estate and business loan modifications have increased.” Credit unions should closely monitor any loan modifications in their portfolio, she said. Interest rate risk and concentration risk should also be closely monitored by credit unions, and the NCUA will “continue to take proactive steps to protect the safety and soundness of the credit union industry,” Matz said … * ALEXANDRIA, Va. (7/5/11)--The National Credit Union Administration (NCUA) for the second consecutive day expanded the scope of its disaster relief policy as flooding continued to threaten parts of Missouri. The agency on June 30 expanded its policy after severe weather and flooding impacted areas of Montana, Nebraska, Indiana, Kansas and Iowa. The NCUA in recent months has also reached out to aid credit unions and members in North Dakota, Tennessee and Minnesota, and the southeast. The agency's disaster relief policy is intended to assist credit unions and their members to deal with potential losses, and allows for altered loan terms for members and guaranteed lines of credit for some credit unions … * WASHINGTON (7/5/11)--National banks should conduct a self-assessment of foreclosure management practices by Sept. 30, the Office of Comptroller of Currency (OCC) said in guidance issued Thursday. The self-assessments should include testing and file reviews and be appropriate in scope, considering the level and nature of the bank’s mortgage servicing and foreclosure activity, the OCC said. In the fourth quarter of 2010, the OCC, the Federal Reserve, the Federal Deposit Insurance Corp., and the Office of Thrift Supervision conducted reviews of foreclosure processing at 14 federally regulated mortgage servicers. The agencies found weaknesses in servicers’ foreclosure governance processes, foreclosure documentation preparation processes, and oversight and monitoring of third-party vendors, including attorneys. As a result, the OCC is advising banks to review their foreclosure policies to ensure that they treat borrowers fairly and are in compliance with foreclosure laws. Banks can expect regulators to conduct a thorough review of these self-assessments the next time they are examined, the OCC said … * WASHINGTON (7/5/11)--Observers questioned the public nature of a letter sent by the Treasury Department to Office of the Comptroller of Currency (OCC) criticizing the OCC’s pre-emption plan (American Banker July 1). Critics say the public critique violated the spirit if not letter of the law prohibiting the administration from delaying or derailing rulemaking. Bob Clarke, a former comptroller and a senior partner with Bracewell & Giuliani LLP, suggested it would have been more appropriate for Treasury to speak with the OCC rather than issuing a public comment letter. While the OCC is nominally under the Treasury Department, it is an independent agency with a leader appointed by the president and confirmed by the Senate. Donald Lamson, a former OCC official and a partner with Shearman & Sterling LLP, said it appears as if there was a lack of communication between the two agencies. Conversations, both formal and informal, are part of the rulemaking process, Lamson said … * WASHINGTON (7/5/11)--Capital rules written for large banks may also apply to small institutions, Federal Deposit Insurance Corp (FDIC) Chairman Sheila Bair said during a Senate Banking Committee hearing Thursday. Bair, who will leave the FDIC Friday, also defended prompt corrective action in the face of an oversight report criticizing it (American Banker July 1). While the quality of capital definitions of Basel III was created for global banks, Blair said they should apply to banks of all sizes. “The competitive position of small and mid-sized institutions has been steadily eroded over time by the government subsidy attached to the Too Big to Fail status of the nation’s largest banks,” Bair said. “In the first quarter of this year, the cost of funding earning assets was only about half as high for banks with more that $100 billion in assets as it was for community banks with assets under $1 billion” …