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Inside Washington (08/03/2010)

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* WASHINGTON (8/4/10)--The Securities and Exchange Commission (SEC) has raised concerns about “abbreviated disclosures” that don’t tell investors enough about why the mutual funds use derivatives. Regulators said they worry that more funds are using derivatives without shareholders knowing the risks or investment strategies (American Banker Aug. 3). The SEC criticized inadequate disclosures in a letter to the Investment Company Institute. Barry Miller, associate director in the SEC division of investment management, said all funds that use derivatives should “assess the accuracy and completeness” of disclosures ... * WASHINGTON (8/4/10)--The state of the U.S. banking system has improved significantly since the worst of the financial crisis, Federal Reserve Board Chairman Ben Bernanke said in a speech Monday. Loss rates on most types of loans are peaking and bank capital ratios have risen to new highs. However, many banks have large volumes of troubled loans and lending standards remain tight. With weak credit demand and banks writing down problem credits, bank loans outstanding have continued to decline, he added. Bernanke noted that the Fed has been working to improve the flow of funds to creditworthy small businesses. The Credit Union National Association (CUNA) and credit unions support an amendment to a stimulus bill that would raise credit unions’ member business lending caps to 27.5% from 12.25%. CUNA has said lifting the caps would generate $10 billion in credit for small businesses in the first year and create 108,000 jobs ... * WASHINGTON (8/4/10)--Rep. Maxine Waters (D-Calif.) said she does not agree with a House ethics report released Monday that calls for an investigation into her relationship with a bank that received money from the Troubled Asset Relief Program (TARP). The report focuses on Waters’ involvement in a 2008 meeting with the National Bankers Association and then-Treasury Secretary Henry Paulson (American Banker Aug. 2). The meeting was called to discuss OneUnited Bank, Boston. Waters’ husband, Sidney Williams, served on the bank’s board until 2008 and has investments in OneUnited. The bank received $12 million in TARP funds. Waters said in a press release that she has not violated any rules and will seek a trial ...

NCUA liquidates Tex.-based Kappa Alpha Psi FCU

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ALEXANDRIA, Va. (8/4/10)—Addison, Texas-based Kappa Alpha Psi FCU has been liquidated, effective Tuesday, the National Credit Union Administration (NCUA) reported. The $780,000-asset, 1,341-member credit union was closed due to minimal capitalization, NCUA said in a press release. “There are no reasonable prospects for the credit union to achieve adequate capitalization,” NCUA added. Members of the credit union will have their deposited funds returned to them via checks, which will be issued soon, NCUA said. The credit union, which was founded in 2004, drew its membership from members of the Kappa Alpha Psi Fraternity and their families. Employees of the fraternity and members of affiliated organizations were also eligible for membership, according to the credit union. For the NCUA release, use the resource link.

NCUA provides CUs with opt-in guidance

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ALEXANDRIA, Va. (8/4/10)--National Credit Union Administration (NCUA) Chairman Debbie Matz on Tuesday strongly encouraged credit unions “to notify members of their opportunity to ‘opt in’ to overdraft protection before the Aug. 15 deadline.” Matz’s comments were accompanied by a sample overdraft disclosure form that, according to the NCUA, provides “a succinct explanation of the options available to protect consumers in the event their account is overdrawn.” A similar notice was provided by the Federal Reserve Board earlier this year. NCUA said that while credit unions will not be forced to use this particular disclosure, the disclosure is “a convenient way to provide the required notice to members.” The Reg E changes prohibit the assessing of overdraft fees without the consumer's affirmative consent. This prohibition applies to all institutions that charge such fees for ATM and one-time debit card overdrafts. The Reg E changes also address sustained overdraft, negative balance, or similar fees associated with paying overdrafts, and clarify that institutions are not prohibited from assessing a fee when a negative balance is attributable in whole or in part to a transaction that is not subject to the fee prohibition. For the NCUA release, use the resource link.

Congress extends some gift-card provisions

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WASHINGTON (8/4/10)--Congress last week extended until Jan. 31, 2011, the effective date of pending gift-card requirements--allowing businesses to sell their existing stock of gift cards and gift certificates produced before April 1. However, according to Credit Union National Association (CUNA) staff, the portions of the new gift-card rules that address notices, fees and expiration dates will still come into effect on the original effective date of Aug. 22. During the transition period, gift-card issuers may notify consumers of their rights through signage, customer service numbers, websites, and general advertising, CUNA staff added. The final rules, which were implemented under the Credit Card Accountability, Responsibility and Disclosure Act of 2009 (CARD Act), specifically restrict the fees and expiration dates that may apply to gift cards, and require that gift-card terms and conditions be clearly stated. The gift-card rules also prohibit dormancy, inactivity, and service fees on gift cards unless the consumer has not used the certificate or card for at least one year, the card issuer charges no more than one service fee per month, and the consumer is given clear and conspicuous disclosures about the fees. An expiration date for funds underlying gift cards must be at least five years after the date the card was issued, or five years after the last date the card was reloaded. The rules cover network-branded gift cards, which are redeemable at any merchant that accepts the card brand, as well as retail gift cards that can be used to buy goods or services at a single merchant or affiliated group of merchants.