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Inside Washington (08/18/2011)

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* WASHINGTON (8/19/11)--U.S. Rep. Barney Frank (D-Mass.) requested in a letter to Fed Chairman Ben Bernanke that the Federal Reserve extend its review of Capital One Financial Corp.’s purchase of ING Direct USA (The New York Times Aug 18). In the letter, Frank said the ING acquisition would create the fifth-largest bank in the U.S. and its impact should be examined to ensure compliance with the Community Reinvestment Act. Frank, the senior Democrat on the House Financial Services Committee, asked the Fed to extend the public comment period on the acquisition for at least 60 days and hold public hearings on its economic impact. Consumer rights advocates have raised objections to the deal. The National Community Reinvestment Coalition (NCRC) said Capital One’s acquisition of ING Direct may create another large bank whose failure could disrupt the financial system. In a statement issued Aug. 12, the NCRC also called for the public comment period to be extended for at least 60 days … * WASHINGTON (8/19/11)--A federal appeals court decision in July blocking a Securities and Exchange Commission (SEC) rule that would have made it easier for shareholders to nominate company directors has created hope for industry groups seeking legal challenges to the Dodd-Frank Act (The New York Times Aug 18). While the SEC is considering an appeal of the ruling, industry groups have met in Washington to discuss other possible cases that could challenge Dodd-Frank. Among the cases under consideration are the SEC’s new corporate whistle-blower program and a provision related to the extraction of oil and natural gas from foreign countries. The Commodity Futures Trading Commission’s plan to curb speculative trading also has been discussed. A single lawsuit contesting the constitutionality of Dodd-Frank would be cost prohibitive, take years to adjudicate and have little chance of succeeding, according to legal experts …

Loans for musical instruments may qualify as MBLs NCUA

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ALEXANDRIA, Va. (8/19/11)--Loans in excess of $50,000 that are used by members to purchase musical instruments may be considered member business loans (MBL), the National Credit Union Administration said in a legal opinion. Responding to a letter from Houston Musicians FCU manager Bob McGrew, NCUA Associate General Counsel Hattie Ulan said that these types of loans provide “a means for your professional musician members to purchase a musical instrument for use in their trade as paid musicians.” She added that the musical instruments that are purchased with the loan are “tool(s) of the musician’s trade” and are “acquired for use in a business capacity. “Therefore, where a loan to a member for this purpose totals $50,000 or more when aggregated with other such loans to the member, the loan is an MBL,” Ulan wrote. While McGrew noted that the U.S. Internal Revenue Service (IRS) has previously said these loans should be considered personal loans and would not consider any interest on these loans to be a business deduction for the member, Ulan said that the NCUA “(does) not consider IRS treatment of an expense to be determinative of whether a loan qualifies for MBL treatment.” Ulan also encouraged the credit union to discuss extending its aggregate MBL limit with regional credit union authorities. For the full letter, use the resource link.

CUSO as landlord NCUA says yes

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ALEXANDRIA, Va. (8/19/11)--Federal credit unions that own a building where their home office, branch, or other offices are located may form their own credit union service organization (CUSO), sell the building to that CUSO, and proceed to rent part of the building out to their credit union, under certain circumstances. The National Credit Union Administration (NCUA) in a legal opinion told Guy Messick, of Media, Pa.-based Messick & Weber, P.C., that this practice is permissible under NCUA regulations as long as the majority of the building is leased out to a credit union and credit union-affiliated members. The NCUA has previously said that CUSOs that lease their fixed assets must primarily lease those properties to credit unions and members of affiliated credit unions.” “Primarily,” in some cases, meant leasing more than 50% of the property to a credit union or related entities. However, NCUA Associate General Counsel Hattie Ulan warned in the most recent letter that “a majority is not the only definition of ‘primarily’ and will not be sufficient to meet the ‘primarily’ serves requirement in all circumstances.” Ulan also noted that CUSO leasing arrangements “should not be used as a means for (a credit union) to circumvent the fixed-assets rule.” The NCUA’s fixed-assets rule states that federal credit unions with $1 million or more in assets cannot invest in fixed assets if the investment would cause the aggregate of all that credit union’s fixed assets to exceed 5% of it’s shares and retained earnings. For the full NCUA legal opinion letter, use the resource link.

NCUA addresses garnishment of accounts with federal benefits

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ALEXANDRIA, Va. (8/19/11)—In a recent Regulatory Alert (11-RA-04), the National Credit Union Administration offers guidance intended to help credit unions comply with an joint interim final rule that addresses garnishment of accounts that include federal benefits payments. The joint rule was issued by the U.S. Treasury, the Social Security Administration, the Department of Veterans Affairs, the Railroad Retirement Board, and the Office of Personnel Management and pertains to the following benefit payments:
* Social Security and Supplemental Security Income benefits; * Veterans benefits; * Federal Railroad retirement, unemployment and sickness benefits; * Civil Service Retirement System benefits; and * Federal Employees Retirement System benefits.
The rule covers all financial institutions that receive certain directly deposited federal benefit payments, including federal and state-chartered credit unions, and requires financial institutions that receive a garnishment order for an account to determine whether any federal benefit payments were deposited to the account within 60 days prior to receipt of the order. The rule aims to "ensure that benefit recipients have access to exempt funds" while garnishment orders are being resolved. The NCUA guidance advises that a credit union, within two days of receiving a garnishment order, must first determine whether the order was obtained by the United States or a state child support enforcement agency. To make this determination, the credit union may rely on the “Notice of Right to Garnish Federal Benefits” it receives. For these kinds of orders, all money in the account is subject to garnishment. The NCUA letter also discusses matters of account review, notice requirements, and other provisions, such as the correct way to handle a statutory lien. Use the resource link below to read the complete guidance.