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Theft larceny prompt new NCUA prohibition orders

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ALEXANDRIA, Va. (8/2/12)--The National Credit Union Administration (NCUA) on Wednesday prohibited five individuals from participating in the affairs of any federally insured financial institution.

They are:

  • Former Primeway FCU, Houston, Texas, employee Ashley Lynne Jackson, who was convicted of theft. Jackson was sentenced to nine months in prison and three years of probation;
  • Former United Northwest FCU, Norton, Kan., manager Mark A. Keilig. Keilig consented to the prohibition order to avoid administrative litigation;
  • Former Pacific Advantage FCU, Burlingame, Calif., employee Norielyn Galbadores Bautista. Bautista was convicted of grand theft, unauthorized use of personal identifying information of another person, and forgery and counterfeiting. She was sentenced to four years and three months in prison and ordered to pay $451,198.67 in restitution;
  • Former Morton R. Lane State University FCU, Buffalo, N.Y., employee Wanda Hasbrouck, who was convicted of grand larceny. Hasbrouck was sentenced to five years probation and ordered to pay $23,350 in restitution; and
  • Former of Catholic and Community Credit Union, Shiloh, Ill., employee Stacy A. Mergelkamp. Mergelkamp was convicted of theft, embezzlement, and misapplication by credit union officer or employees. She was sentenced to six months in prison and five years of supervised release, and ordered to pay $38,120 in restitution.
Violation of a prohibition order is a felony offense punishable by imprisonment and a fine of up to $1 million. For the full NCUA release, use the resource link.

House Financial Services fills comittee subcommittee spots

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WASHINGTON (8/2/12)--The House Financial Services Committee on Wednesday filled committee and subcommittee vacancies created by the July resignation of former Rep. Thaddeus McCotter (R-Ohio).

Rep. Frank Guinta (R-N.H.) will take McCotter's committee slot and his seats in the House Financial Services financial institutions and consumer credit subcommittee and the House Financial Services subcommittee on international monetary policy and trade.

Rep. Francisco "Quico" Canseco (R-Texas) was also added to the House Financial Services capital markets and government sponsored enterprises subcommittee.

Canseco is also a member of the financial institutions and consumer credit and oversight and investigations subcommittees.

Free NCUA webinar to address liquidity CLF changes

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ALEXANDRIA, Va. (8/2/12)--Pending Central Liquidity Facility (CLF) changes and the National Credit Union Administration's (NCUA) new proposed rule on emergency liquidity access will be discussed at a free Aug. 14 NCUA webinar announced by the agency Wednesday.

The webinar is scheduled to begin at 2 p.m. (ET) and will be hosted by NCUA Division of Capital Markets Director and CLF President Owen Cole.

The NCUA suggested that webinar participants review background information on the CLF before the webinar. Information on the CLF will be released to credit unions in an upcoming letter, the NCUA said.

Webinar participants may submit their questions for NCUA staff to The subject line should read "CLF and Your Credit Union's Contingent Liquidity," the agency said.

To register for the webinar, use the resource link.

More than 6,000 natural person credit unions will lose access to the CLF, which serves as a liquidity lender to credit unions in need of emergency funding, when U.S. Central Bridge Corporate CU closes in late October. In anticipation of this closing, the NCUA last month proposed a new emergency liquidity access rule.

The new proposal, which will remain open to public comment until Sept. 28, would require credit unions with less than $10 million in assets to maintain basic written emergency liquidity policies.

Federally insured credit unions (FICUs) with assets of $10 million or more would be required to develop contingency funding plans describing how their credit union would address liquidity shortfalls in emergency situations.

FICUs with assets of $100 million or more would be required to have access to a backup federal liquidity source for emergency situations.

The NCUA said these credit unions can ensure access to backup liquidity by:
  • Becoming a member of the CLF;
  • Becoming a CLF member through a CLF agent; or
  • Establishing direct borrowing access to the Federal Reserve's Discount Window.
The Credit Union National Association has urged the agency to use the guidance the federal financial agencies have already produced on liquidity issues, rather than release new rules. (See related July 25 News Now story: Troubled CU, liquidity rules 'unnecessary': CUNA)

Amendment would assign data security duties to retailers

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WASHINGTON (8/2/12)--Retailers, data brokers and government agencies would be required to protect sensitive information, investigate security breaches and notify consumers when identity theft or account fraud risks arise, under a bill introduced by Sens. Roy Blunt (R-Mo.) and Tom Carper (D-Del.) this week.

The senators offered the bill, known as the Data Security Act of 2012, as a potential amendment to Senate cybersecurity legislation. The larger bill, known as the Cybersecurity Act of 2012 (S. 3414), would establish voluntary cybersecurity standards in a bid to improve critical information protections.

In a release, Blunt and Carper noted that their amendment would increase consumer protections by replacing varied and sometimes conflicting state data protection regulations with a new national standard.

The amendment "builds on existing law to better ensure federal and state regulators comply with the law and to make sure that data security procedures are uniformly applied," the release added. "Although some state laws are similar, many have inconsistent and conflicting standards, forcing businesses to comply with multiple regulations, and leaving many consumers without proper recourse and protections," the senators said.

Financial establishments, retailers, federal agencies or other entities that find that their information may have been compromised would be required to investigate the scope of any data breach and determine the type of information that was compromised.

Regulators, law enforcement and consumer reporting agencies would need to be notified if more than 5,000 consumers would be harmed by the breach. All consumers that are affected by the breach would also need to be notified.

Blunt said the amendment is critically important to ensuring that businesses and government agencies have the tools they need to strengthen the nation's data security.

"The idea behind the Carper-Blunt amendment makes a lot of sense. Retailers and others would no longer be able to duck responsibility when they are involved in data security breaches.  It is an idea that has CUNA's full support," said Ryan Donovan, Credit Union National Association (CUNA) senior vice president of legislative affairs.

However, Donovan noted that the future of the underlying bill is in question. "Unless agreement is reached soon on which amendments to consider, it is unlikely that the Senate will be able to finalize consideration of this bill or any of the amendments before recessing at the end of this week," he said.

CUNA remains committed to ensuring that any data security measure passed by the U.S. Congress does not negatively impact credit unions.

Rep. Graves tells CFPB to consider reg burdens costs

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WASHINGTON (8/2/12)--Noting that "small businesses are often victims of unintended consequences of regulations," House Small Business Committee Chairman Sam Graves (R-Mo.) called on the Consumer Financial Protection Bureau (CFPB) to consider the costs and burdens that may be imposed on small businesses as it develops new rules.

Graves, who spoke during a Wednesday committee hearing entitled "Know Before You Regulate: The Impact of CFPB Regulations on Small Business," said he hopes to see the CFPB "emphasize the preservation of small businesses" going forward.

CFPB Director Richard Cordray, who was the lone witness at the Wednesday hearing, in a prepared statement said the agency understands the importance of integrating "direct input and advice from small businesses into the CFPB's decision-making process."

The CFPB has "actively and consciously designed a number of mechanisms to seek the input of small businesses to support its rulemaking, supervision, enforcement, consumer education, research, and reporting functions," he said.

The CFPB has held three Small Business Regulatory Enforcement Fairness Act (SBREFA) panel discussions this year to gather comments from small businesses and other entities. The first of these panels focused on the CFPB's project to combine separate Truth in Lending Act (TILA) and Real Estate Settlement Procedures Act (RESPA) disclosures into a single form. Later panels have focused on pending mortgage servicing and mortgage loan origination proposals.

"We responded to every panel recommendation and every major concern raised by the small business participants, whether by adopting the recommendation, changing the proposal, seeking comment on a particular issue, or other action," Cordray said.

The CFPB director said the agency incorporated SBREFA panelist recommendations into the TILA/RESPA proposal, including clearer guidance on how to complete the integrated forms. The agency may also remove certain troublesome disclosures from the final versions of its TILA/RESPA forms, Cordray added.

The feedback the agency has received during discussions of its mortgage servicing and mortgage loan origination proposals has also helped the CFPB "think significantly about the basic premises of proposals under consideration and about alternatives and accommodations for small businesses," Cordray said.

SBREFA panels are "not a 'check the box' kind of exercise but rather a vitally important source of information," he added.

Regulatory burden is also a key concern for credit unions coping with the onslaught of CFPB regulations, and Doug Fecher, president/CEO of Wright-Patt CU, Fairborn, Ohio, recently warned that every dollar a credit union must spend complying with regulatory changes is a dollar it cannot spend to benefit its members.

Testifying on behalf of the Credit Union National Association (CUNA) and his credit union last month, Fecher asked members of the House Oversight and Government Reform Committee financial services subcommittee to "aggressively urge" the CFPB to use its exemption authority so the weight of compounding rules "that are intended for abusers and the largest financial institutions" does not overburden credit unions. (See related July 25 News Now story: Compliance dollars better spent on members, CUNA testifies)

Minnesota CU assumes A M Communitys members assets

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ALEXANDRIA, Va. (8/2/12)--TruStone Financial FCU, Plymouth, Minn., has purchased and assumed the members, deposits, core facilities, and consumer loans of A M Community CU, Kenosha, Wis., the National Credit Union Administration (NCUA) announced on Wednesday.

The Wisconsin Office of Credit Unions and NCUA moved to liquidate the Kenosha credit union after it failed to resolve its financial issues. The credit union was placed into NCUA conservatorship in February.

A M Community, which held $121.8 million in assets and served 15,993 members, was chartered in 1933 and served Chrysler Corporation employees and residents of Kenosha and Racine counties. It is the seventh federally insured credit union to be liquidated this year, the NCUA said.

Members of A M Community CU will now be served by TruStone Financial, and will receive no interruption in service. TruStone Financial holds $739 million in assets and has more than 60,000 members. The credit union serves members that live, work, worship, or go to school in the cities of Minneapolis and St. Paul, Minn., and other members of select employer groups.

Inside Washington (08/01/2012)

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  • WASHINGTON (8/2/12)--David Cohen, the Treasury undersecretary for terrorism and financial intelligence, Tuesday asked the financial industry to comment on a regulatory plan that would require institutions to identify beneficial ownership of their account holders. Regulators are sensitive to financial institutions' regulatory burden and committed to improving the quality of the U.S. anti-money launder efforts, Cohen said during a Financial Crimes Enforcement Network (FinCEN) hearing (American Banker Aug. 1). However, public engagement is "a must" if regulators are to assist financial institutions in managing risk, Cohen said. In its advanced notice of proposed rulemaking issued in February, FinCEN said beneficial ownership of accounts can pose heightened risks because it can allow individuals to shield the identity of the true owner of assets derived from criminal activity …
  • WASHINGTON (8/2/12)--The Consumer Financial Protection Bureau has filed its first civil enforcement action in federal court. The complaint charges lawyer Chance Gordon and his law offices of failing to assist consumers in making loan modifications after accepting upfront fees.  (The Wall Street Journal Aug. 1). Also named in the complaint are Chance's business partner, Abraham Pessar, and two of Pessar's companies, Division One Investment and Loan Inc. and Processing Division LLC. Gordon and Pessar allegedly duped consumers into believing they were affiliated with U.S. government programs designed to provide troubled mortgage borrowers with relief, according to the complaint. Gordon and Pessar used money obtained from homeowners to fund an opulent lifestyle, the bureau said in court documents …