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Inside Washington (09/15/2008)

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* WASHINGTON (9/16/08)—Consumer advocacy group Consumers Union (CU) filed a petition last week seeking Federal Trade Commission (FTC) action to protect consumers from losing money on gift cards when a retailer files for bankruptcy. In a letter to the agency, CU urged the FTC to require retailers to segregate funds generated from gift card sales in a trust account and to honor a consumer’s gift card as long as the doors remain open unless a bankruptcy court orders otherwise. The CU letter called on the FTC to declare the sale of gift cards without segregating funds and holding the funds in trust to be an unfair and deceptive practice. Consumers Union was joined by the Consumers Federation of America, National Consumer Law Center, and U.S. PIRG in filing the petition. CU is the nonprofit publisher of Consumer Reports… * WASHINGTON (9/16/08)--Fannie Mae and Freddie Mac’s multi-family and single-family housing contracts will not be affected by the two government-sponsored enterprises’ conservatorships, the Federal Housing Finance Agency said last week (American Banker Sept. 15). The agency will only intervene if the contracts raise safety and soundness questions about Fannie and Freddie. The enterprises were placed into conservatorship by the federal government Sept. 7 ... * WASHINGTON (9/16/08)--Actions by national banks and thrifts to prevent home mortgage foreclosures increased faster than their new foreclosures during the second quarter of 2008, according to a joint report issued Friday by the Office of the Comptroller of the Currency and the Office of Thrift Supervision. From January to June, new loan modifications increased by more than 80%. New payment plans grew by 8% and two types of loss mitigation actions reached more than 90,000 in June alone. The report is the first issued by the two agencies to combine the mortgage data of national banks and federal thrifts ... * WASHINGTON (9/16/08)--The Office of Thrift Supervision (OTS) will be questioned during a Thursday hearing by the Senate Banking Committee on the IndyMac Bank takeover. The OTS’ largest institution, Washington Mutual, also could be acquired soon (American Banker Sept. 15). Washington Mutual has 20% of its assets under the OTS and if the bank is acquired the OTS could be forced to restructure. At the hearing will be: OTS Director John Reich, Federal Deposit Insurance Corp. Chairman Sheila Bair, and Comptroller of the Currency John Dugan ... * WASHINGTON (9/16/08)--House Financial Services Committee Chairman Barney Frank (D-Mass.) was named as the funniest and brainiest member of the House by Washingtonian Magazine. Frank also was second in the eloquence category and third in the workhouse category (Washingtonian Magazine Aug. 25). Sens. Barack Obama (D-Ill.) and Joe Biden (D-Del.), the Democratic presidential and vice-presidential candidates, came in second and third in the show horse category. Republican presidential candidate Sen. John McCain (R-Ariz.) was second on the best friend to lobbyists category, while placing third in the enemy to lobbyists category ... * WASHINGTON (9/16/08)--The Small Business Administration’s (SBA) small/rural lender advantage program has received a “soft response,” according to Charlie Thomas, SBA director of program development (American Banker Sept. 15). SBA officials said the soft response could be due to the fact that the program has been marketed primarily in rural areas. Eligible borrowers are in more developed markets, they said. Officials also cited a slow economy. The program aims to help lenders with fewer than 20 SBA loans from the last three years. Lenders can receive loans of $350,000 or less. Decisions on the applications are made within three to five business days ... * WASHINGTON (9/16/08)--U.S. Treasury Secretary Henry Paulson is scheduled to deliver remarks today on issues involving the economy and the housing market. He will make his remarks at The Brookings Institution’s conference on The Future of Consumer Payments being held here in Washington…

PSECU can move to jury trial

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WASHINGTON (9/16//08)—A court has denied the request of Fifth Third Bank of Cincinnati, which was seeking a rehearing of a July court decision regarding the quest of Pennsylvania State Employees CU (PSECU) and Sovereign Bank to sue over losses sustained in a data breach. The July court decision granted PSECU and Sovereign Bank standing to sue BJ's Wholesale Club for the cost of replacing member credit cards after customer data was stolen from the retailer. That U.S. court of appeals ruling reversed a district court ' s decision denying the parties standing in the case, and thereby cleared the way for the credit union’s plan to return to the District Court for a jury trial--which PSECU originally had requested. After the breach was discovered, the $3.13 billion Harrisburg, Penn.-based credit union had tried to recover $98,000 from both the retailer and its merchant bank, which is Fifth Third Bank, through negotiations. More than 235,000 credit and debit cards total were reissued, and nearly 1,000 accounts were affected by illegal purchases made by thieves.

House committee vote today on funds access

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WASHINGTON (9/16/08)—A bill scheduled for a House Financial Services Committee vote today would increase the dollar amount of funds subject to next day availability. The bill, developed by Rep. Carolyn Maloney (D-N.Y.), would allow accountholders next-day access to the first $175 deposited by check on any single business day, up from the current $100 cap. Maloney also proposes to raise to $700—up from $400—the amount of cash from a deposit that may be withdrawn by 5 p.m. on the day it is available. The New York congresswoman has said her bill, The Expedited Funds Availability Dollar Limits Adjustment Act of 2008 (H.R. 6871), is intended to account for inflation over the 21 years since the enactment of the original law. It also contains a provision to provide for future adjustments on a regular basis—at least every five years. Maloney is chairman of the House Financial Services subcommittee on financial institutions. H.R. 6871 is co-sponsored by Rep. Barney Frank (D-Mass.), who heads the parent financial services panel. The Credit Union National Association (CUNA) has worked closely with the bill’s designers, noted Ryan Donovan Monday. Donovan is CUNA vice president of legislative affairs. The funds availability legislation is among five bills scheduled for a vote today. The others on the calendar are:
* A new version of the Payment Systems Protection Act introduced Sept. 11 by Frank, which is intended to respond to concerns of the Credit Union National Association (CUNA) and many others in the financial services industry about aspects of a current plan to implement the 2006 Unlawful Internet Gambling Enforcement Act (see News Now; Sept. 15, “New Internet gambling definition bill up for vote.”); * H.R. 6694, FHA Seller-Financed Downpayment Reform and Risk-Based Pricing Authorization Act; * H.R. 3019, Expand and Preserve Home Ownership through Counseling Act; and * H.R. 6642, National Consumer Cooperative Bank Act Amendments.

New Reg Z trigger CUNA analysis

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WASHINGTON (9/16/08)—Starting Jan. 1, the dollar amount that triggers additional disclosures and prohibitions under the Truth in Lending Act (TILA) for certain mortgage loans will increase, reminds the Credit Union National Association (CUNA) in a final rule analysis. TILA requires creditors to disclose credit terms and the cost of consumer credit as an annual percentage rate. The act, implemented by the Fed’s Regulation Z, requires additional disclosures for loans secured by a consumer’s home, and permits consumers to cancel certain transactions that involve their principal dwelling. The recent adjustment to the trigger, which is tied to the Consumer Price Index, is required under the Home Ownership and Equity Protection Act of 1994. Under the Fed’s new trigger, the disclosures and prohibitions will now apply when total points and fees on a loan exceed $583 or 8% of the loan an amount, whichever is greater. The trigger for 2008 was $561. The adjustment does not affect the new mortgage lending rules adopted by the Fed in July 2008 for "higher-priced mortgage loans," the CUNA analysis notes. Coverage of mortgage loans under those rules is determined using a different rate-based threshold. Use the resource link below to read the Fed’s Regulation Z rule.

Treasury-SBA website helps with HSA info

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WASHINGTON (9/16/08)—A new government website has been established to provide information on health savings accounts (HSAs), the tax-advantaged accounts created in 2003 that individuals may use to pay for medical expenses that are not reimbursed. The U.S. Treasury Dept. and the U.S. Small Business Administration (SBA), announcing their website partnership last week, said that many employees who work for small businesses find their companies are unable to sponsor health insurance plans. “Many of these employees can benefit from the affordability and flexibility of HSAs and HSA-eligible health plans,” noted the agencies’ release. For instance, such expenses as co-pays, deductibles, and other products and services not covered by one’s insurance plan could be deducted from pre-tax income. The new website is designed to present the advantages of HSAs and to provide comparisons to other health coverage options. It offers other materials to help employers and individuals determine whether and how to enroll in HSA-eligible coverage and how to save for health care costs through an HAS. The Credit Union National Association (CUNA) supported creation of these accounts in the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, to give individuals more flexibility and control over the payment of their health care costs. CUNA has noted that credit union members benefit from these accounts and often urge their credit unions to offer them if they don’t already do so. Credit unions, in turn, benefit from offering HSAs because of the additional deposits that follow as a result. There are nearly seven million Americans currently covered by HSAs and CUNA supports the expansion of HSAs as a way of providing credit union members with a way to build wealth while also better managing personal medical costs. CUNA also supports an aggressive effort to encourage credit unions to offer HSAs, as only 600 credit unions currently offer these accounts. Use the resource links below to access more HSA information and to visit the Treasury-SBA website.

NCUA responds to Ike disaster

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ALEXANDRIA, Va. (9/16/08)--The National Credit Union Administration (NCUA) announced Monday it has activated its disaster relief policy to assist credit unions and their members affected by Hurricane Ike in Texas and Louisiana. Under its disaster assistance policy, NCUA will, where necessary:
* Encourage credit unions to make loans with special terms and reduced documentation to affected members; * Reschedule routine examinations of affected credit unions if necessary; * Guarantee lines of credit for credit unions through the National Credit Union Share Insurance Fund; and * Make loans to meet the liquidity needs of member credit unions through the Central Liquidity Facility.
In its announcement, the NCUA noted that it works with individual state league organizations and state regulators to ensure all federally insured credit unions are aware of NCUA’s available assistance. Region IV examiners are closely monitoring the situation and will provide assistance as requested or needed. The NCUA reiterated its three operating priorities during disaster conditions. NCUA personnel:
* Determine the safety of credit union staff and operational condition of credit unions; * Provide needed material and technical assistance to affected credit unions; and * Return credit unions to normal operations as quickly as possible.