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Inside Washington (09/21/2012)

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  • WASHINGTON (9/24/12)--The Federal Housing Financial Agency (FHFA) has proposed to adjust the guarantee fees that Fannie Mae and Freddie Mac charge for mortgages that finance properties with one to four units in certain states. The plan is intended to help the government-sponsored housing enterprises (GSEs), which are in conservatorship, to recover a portion of the "exceptionally high costs" they incur in cases of mortgage default in those states. The states affected are Illinois, Florida, Connecticut, New Jersey and New York. Also, the FHFA identified the principal drivers of differences across states in the average total carrying costs to the GSEs of a defaulted single-family mortgage, in order of importance, as:  the length of time needed to secure marketable title to the property; property taxes that must be paid until marketable title is secured; and legal and operational expenses during that period …
  • WASHINGTON (9/24/12)--Responding to recent criticism regarding the Office of the Comptroller of the Currency's (OCC) practice of embedding examiners at large banks, the head of that agency, Tom Curry, said in a speech last week to the Financial Services Roundtable that it was an important part of the agency's supervision program (American Banker Sept. 21). Curry said on-site examiners knew where weaknesses were and began putting capital and liquidity agreements in place at some institutions during the financial crisis--well before stress testing started. Curry told his audience that stress testing is an important supervisory tool but that it cannot replace supervisory "boots on the ground." He added that the OCC is improving its bank supervision by raising expectations for large banks; a step which he said includes raising standards for boards of directors, compensation and risk tolerance …
  • WASHINGTON (9/24/12)--Oklahoma, South Carolina and Michigan state attorneys general have joined a lawsuit challenging the constitutionality of the Dodd-Frank Wall Street Reform Act. (American Banker, Sept. 21) The lawsuit, which was filed in June by the State National Bank of Big Spring in Texas and two nonprofits, claims that Consumer Financial Protection Bureau (CFPB) Director Richard Cordray was illegally appointed to lead that agency, and states that the CFPB itself is unconstitutional. The lawsuit also named the U.S. Treasury and other agencies and directors as defendants, arguing that elements of Dodd-Frank that give federal authorities the ability to seize and wind-down financial institutions are unconstitutional. The attorneys general complaint focuses on the Federal Deposit Insurance Corp. and the Treasury Department ...

Interchange cap not helping consumers CUNA trades

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WASHINGTON (9/24/12)--With the one-year anniversary of debit interchange fee cap implementation approaching on Oct. 1, the Credit Union National Association (CUNA) and finance industry partners in a letter to Congress noted that "there is no evidence that consumers are seeing lower prices" on retail goods, a direct contrast from what they were promised by merchants.

"Despite promises by retailers, and despite a realized $8 billion windfall by these retailers over this past year, consumers have yet to see discounts for using their debit cards at the register," the letter said.

Credit unions and community banks are also being harmed by the regulation. The letter noted a U.S. Government Accountability Office (GAO) study released last week which found smaller community banks and credit unions, which were supposed to be "exempted" from the fallout of this legislation, have instead seen interchange revenue decreases of 5% in the first three months following interchange fee cap implementation. (See related News Now story: Dodd-Frank could mean mortgage costs for CUs: GAO)

Community banks and credit unions are struggling to maintain viable debit programs, and have had to raise their fees in some cases, the letter noted. "The GAO further concludes that even more harm to community banks and credit unions is likely as the marketplace evolves," the letter added.

The Federal Reserve Board's final rule implementing the interchange law capped large issuer debit interchange fees at 21 cents. An additional five basis points per transaction may be charged to cover fraud losses, and an extra penny may be charged by financial institutions that are in compliance with established fraud prevention standards. Most credit unions are exempt from the fee cap.

The GAO report does not address any fee changes that occurred after network exclusivity and routing provisions took effect in April 2012. These provisions require financial institutions to enable their debit cards with two unaffiliated payment card networks, and this change "will likely cause even more substantial reductions in interchange fees to exempt issuers," the letter said.

Any further interchange regulations are "not only unnecessary, but an insult to consumers throughout the country," the letter said in closing.

The letter, which was sent to Senate Majority Leader Harry Reid (D-Nev.), Senate Minority Leader Mitch McConnell (R-Ky.), Speaker of the House John Boehner (R-Ohio) and House Minority Leader Nancy Pelosi (D-Calif.), was co-signed by the American Bankers Association, Independent Community Bankers of America and the National Association of Federal Credit Unions.

For the full letter, use the resource link.

According to a May Fed survey, the average interchange fee received by credit unions and other debit card issuers that are exempt from the Federal Reserve's debit interchange fee cap was 43 cents per transaction in 2011. (See May 2 News Now story: Despite Fed survey, jury out on interchange impact: CUNA)

CUNA seeks comment on new P2P definitions

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WASHINGTON (9/24/12)--The Credit Union National Association (CUNA) is interested in how NACHA--the Electronic Payments Association's proposal to address mobile person-to-person (P2P) payments on the Automated Clearing House (ACH) network could impact credit unions, and has asked for credit union comment on the matter.

Mobile payments may currently use the WEB standard entry class (SEC) code, and many P2P payments are initiated by mobile devices. However, NACHA operating rules currently do not address P2P payments.

The NACHA proposal, which is scheduled to become effective on March 21, 2014, would:

  • Define a P2P entry as a credit entry initiated by or on behalf of a holder of a consumer account to a consumer account of a receiver;
  • Allow a credit version of the WEB SEC code to be used for a P2P credit transaction sent from a consumer's account; and
  • Establish standardized formatting requirements for the P2P WEB credit code.
The proposal would also add a requirement to permit Receiving Depository Financial Institutions (RDFIs) to initiate Notifications of Change (NOCs) related to P2P WEB credits, as well as NOCs for bill payment on the Customer Initiated Entries (CIEs).

In a comment call, CUNA asks credit unions to detail any cost, implementation or compliance concerns they may have regarding this proposal. Credit unions may also propose alternatives, and can recommend other implementation timeframes.

For the full comment call, use the resource link.