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Judge Fierce On Fed Interchange Rule

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WASHINGTON (8/15/13)--Judge Richard Leon on Wednesday set a tight schedule for the Federal Reserve Board to revise its debit interchange cap rule, asking Fed attorneys to return to his court room within one week with the board's thoughts on issuing an interim final rule.

The judge also asked for an interim final rule implementation timeline.

The Fed attorney said the agency has not yet decided whether it will appeal Leon's recent ruling, and noted there are a range of options for responding to the debit interchange issue. The judge seemed to scold the Fed's counsel for being unprepared to articulate the Fed's substantive positions on whether there should be an interim rule and how long such a rule would take to put in place.

Fed board members can come back from wherever they are on vacation or schedule a conference call, Leon suggested. The Fed needs to move expeditiously, he stressed.

Leon has extended the current stay on the interchange rule for an additional week. The next hearing is officially scheduled for Aug. 21 at 2 p.m. (ET). Briefs on a potential Fed interim interchange rule must be submitted by Aug. 28, and briefs on the issue of potential damages must be submitted by Sept. 16.

Leon on Wednesday also asked whether the court should order issuers to "disgorge revenue" obtained due to the Fed regulation.

Attorney Seth Waxman, speaking on behalf of a coalition of financial institution groups, including the Credit Union National Association, said such "damages" were not requested by the plaintiffs in the case, the financial institutions that would pay the damages are not party to the case and as such have not had the ability to defend themselves, and it is unclear the legal basis for the judge's theory of why damages could even be required. The coalition filed an amicus brief earlier in the case.
 
CUNA President/CEO Bill Cheney said, "CUNA is alarmed at the possibility any financial institution could be required to pay 'damages' for following the rules established by a federal agency." The CUNA CEO pledged to pursue every legal avenue available to prevent this from occurring. Leon has agreed to accept briefing on this topic before Sept. 16, and CUNA will ensure credit union interests are put before this judge, Cheney said.

Credit unions under $10 billion are exempt from the fee cap rule and would have a strong argument that any such order must not apply to them, CUNA General Counsel Eric Richard emphasized.

"CUNA will continue to follow the progress of debit interchange. It is a serious issue for credit unions and we are exploring a variety of options to ensure credit unions' interests are protected in any changes to the debit interchange regulation," Cheney added.

The U.S. District Court for the District of Columbia hearing follows Leon's July 31 decision to strike down the Fed's price caps on debit interchange fees. He ruled at that time that the Fed did not follow narrow congressional intent when it implemented the cap and other changes imposed by what is known as the Durbin amendment. He also said in that ruling that the Fed would have some time to redraft its rules--but did not specify how much time.

Small-entity Compliance Guide Available For CFPB QM/ATR Rule

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WASHINGTON (8/15/13)--The Consumer Financial Protection Bureau Wednesday updated its small entity compliance guide for the Ability-to-Repay and Qualified Mortgage (ATR/QM) rule to incorporate clarifications and amendments to the ATR/QM rule issued on May 29 and July 10.

Changes made in the May 29 amendments include:
  • The creation of a transitional period when small lenders can make balloon mortgage loans under certain conditions. These balloon mortgage loans would still qualify as QM loans; and
  • Extending QM status to held loans that are made by credit unions and community banks that have less than $2 billion in assets and make 500 or fewer first-lien mortgages annually, even if the borrower's debt-to-income ratio exceeds the rule's 43% QM threshold.
The July 10 amendments addressed servicing provisions, implementation dates for adjustable-rate mortgage servicing, exclusions from requirements on higher-priced mortgage loans, some small servicer exemptions, and other issues.

The QM rule is scheduled to go into effect January 2014.

Senate Committee Launches Virtual Currency Scrutiny

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WASHINGTON (8/15/13)--Sens. Tom Carper (D-Del.) and Tom Coburn (R-Okla.) have contacted the U.S. Department of Homeland Security seeking information on "any policies, procedures, guidance or advisories" the agency has issued related to virtual currencies. Carper is chairman of the Senate Committee on Homeland Security and Governmental Affairs and Coburn is its ranking Republican member.

The senators' letter notes virtual currencies--or, digitally based money--are receiving increased positive attention and use. However, the currency's "near-anonymous and decentralized nature has also attracted criminals who value few things more than being allowed to operate in the shadows."

"Given that virtual currencies appear to be an important emerging area...the (committee) has initiated an inquiry" into the currencies, such as Bitcoin, that are used in online transactions, the joint letter said.  The New York Times and other media outlets reported that the inquiry letter was sent to major federal financial regulatory and law enforcement agencies.

The letter also asks that its recipient share "any ongoing coordination of your agency with any other" federal, state or local government, as well as "any plan or strategies" regarding ongoing initiatives  regarding virtual currencies.

The letter is dated Aug. 12, the same day New York state's financial regulator announced it is launching a similar inquiry with a eye toward possible future regulation.

Cheney Conveys Interchange Message At DCUC Meeting

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WASHINGTON (8/15/13)--Credit Union National Association President/CEO Bill Cheney, in a 45-minute speech covering top credit unions issues, told attendees at the 50th annual conference of the Defense Credit Union Council that the only thing that equaled the shock of a recent court decision to vacate the Federal Reserve's debit interchange fee cap was the emphatic nature of the judge's decision that the rule--which has been in effect since October 2011--is, in essence, null and void.

Cheney was speaking in advance of the Wednesday U.S. District Court for the District of Columbia scheduling briefing for future proceedings in the interchange case. (See related story: Judge Fierce On Fed Interchange Rule.)

Cheney noted that the judge's decision to stay his own order to vacate the rule seems to reflect a realization by the court of the chaos that could ensure if no rule is in place.

But, Cheney underscored, the judge made it clear that the Fed has "months, not years" to determine new rules.

"The decision does not immediately impact interchange regulations," Cheney reminded, "but all debit card issuers, regardless of size, will be affected by the decision and the Durbin regulation with regard to routing and exclusivity provisions." Card issuers with less than $10 billion in assets remain exempt from a debit interchange cap.

As the situation continues to unfold, CUNA is working with a broad coalition of finance industry representatives to chart response strategy. CUNA also is in contact with Federal Reserve staff to detail the negative impact of the ruling on credit unions and other small card issuers as that agency considers its own course in response the court's July 31 decision.

Metsger Swearing In Set For Aug. 23

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ALEXANDRIA, Va. (8/15/13)--Richard Metsger will be sworn in as the third member of the National Credit Union Administration's three-person board on Aug. 23.

The swearing in will take place at a private ceremony on Capitol Hill. Metsger will fill the seat vacated late last by then-board member Gigi Hyland. His term is scheduled to run until Aug. 2, 2017.

Credit Union National Association President/CEO Bill Cheney said CUNA looks forward to working with Metsger as he starts his tenure on the board. "We know that Mr. Metsger will be able to rely on his experience as a credit union board member in dealing with the challenges that credit unions face today," Cheney added.

NCUA Deputy Director of the Office of National Examinations and Supervision David Shetler will serve as Metsger's interim senior policy adviser until a permanent candidate is selected, the agency said.

Metsger is a former Oregon state senator. He was named as a candidate for the open NCUA board position by President Barack Obama in June and was confirmed by the Senate for the post just before the U.S. Congress broke for its August recess.

Metsger will attend his first NCUA board meeting as a board member on Sept. 12.

Board Member Michael Fryzel's term officially expired earlier this month, and he continues to serve the NCUA.

NEW: Inside Exchange Video Lays Out Case For Corporate Charge Cancellation

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WASHINGTON (UPDATED: 8/15/13, 2:30 P.M. ET)--The clear case for swiftly ending corporate credit union stabilization fund assessments is one of many topics touched on in the Credit Union National Association's latest Inside Exchange video.
 
The overall status of the corporate stabilization fund, liquidity and the outlook for assessments are also discussed by CUNA Executive Vice President of Communications Paul Gentile and CUNA Chief Economist Bill Hampel.



The National Credit Union Administration, at its July open board meeting, declared a corporate credit union stabilization assessment of eight basis points of credit unions' insured shares as of June 30. That payment is due Oct. 16.
 
CUNA has noted that with the improvement of the performance of the NCUA's legacy assets, stabilization fund assessments should no longer be necessary after the 2013 payment. The range for any additional assessment for 2014, if any, will be set by the NCUA board in November.