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Washington Archive

Washington

Oct. 5 due diligence discussion set by FinCEN

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WASHINGTON (9/25/12)--Proposed regulations that would require financial institutions and others to establish and maintain member and customer account monitoring policies will be the subject of an Oct. 5 roundtable discussion, the Financial Crimes Enforcement Network (FinCEN) has announced.

The roundtable discussion on customer due diligence (CDD) will take place at the Financial Industry Regulatory Authority (FINRA) in New York, N.Y., and will be held between the hours of 10 a.m. and 3 p.m. ET. Advanced registration is required, and interested parties must register by Sept. 28. Any interested parties, including finance industry representatives, may attend, FinCEN said.

Discussion will focus on FinCEN's March Advanced Notice of Proposed Rulemaking that would codify, clarify, consolidate and strengthen CDD rules. The proposal, which would apply to financial institutions, securities brokers and dealers, mutual fund brokers and dealers, futures commission merchants, and some introducing commodities brokers, addresses standards for verifying the identity of each member/customer and understanding the "nature and purpose" of each account held at an institution to assess the likelihood of suspicious activity.

The FinCEN plan, if made final, would be one part of a broader U.S. Treasury strategy to enhance financial transparency in order to strengthen efforts to combat financial crime, including money laundering, terrorist financing, and tax evasion.

FinCEN said the meeting will focus, in part, on how and when financial institutions collect "beneficial ownership" information from their customers and members and how this information is verified. FinCEN is also interested in any costs associated with obtaining this information. Roundtable attendees will also have the chance to discuss how they conduct due diligence on trust accounts, and how financial institutions identify whether their customers are or are not "shell companies."

The Credit Union National Association (CUNA) has noted that while it supports the objectives of the FinCEN proposal, the burdens and costs credit unions could face as a result would far outweigh the purported benefits to FinCEN. CUNA has suggested that FinCEN abandon the due diligence proposal and, alternatively, work with the National Credit Union Administration and other federal financial regulators to further clarify current Bank Secrecy Act and anti-money laundering rules.

The information needed to review these accounts can also be difficult to obtain, and credit unions may need to increase their staff and make costly software changes to comply with the requirements, CUNA added.

For more on the FinCEN meeting, use the resource link.

Agencies detail practices that brought Discovers fines

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WASHINGTON (9/25/12)--The deceptive telemarketing tactics that Discover Bank employees used to sell payment protection plans and other credit card add-on products, and resulted in a joint Federal Deposit Insurance Corp. (FDIC)/Consumer Financial Protection Bureau (CFPB) action against that financial institution, were detailed in a Monday release.

Discover Financial Services late last week agreed to repay $200 million to cardholders who purchased card protection products by telephone from December 2007 to August 2011.

Discover also agreed to pay another combined $14 million in civil monetary penalties to the FDIC and the CFPB, and to enhance the company's marketing practices. Affected consumers will not need to take any action to receive their refunds. They will receive checks or will have the money they are owed credited to their Discover card account, the agencies said.

The FDIC and CFPB in a release said the fines follow a joint investigation which found that Discover mislead consumers into paying for various credit card "add-on products," including payment protection, credit score tracking, identity theft protection, and wallet protection. According to the agencies, telemarketers promoting these products may have deceived consumers about whether they were actually purchasing these products, and sped up their speech during portions of consumer marketing calls that disclosed the prices and terms of these products.

According to the FDIC and CFPB, the products in question were:

  • Payment Protection, which was marketed as a product that allows consumers to put their payments on hold for up to two years in the event of unemployment, hospitalization, or other qualifying life events;
  • A Credit Score Tracker, which is designed to allow a customer unlimited access to his or her credit reports and credit score;
  • Identity Theft Protection, which was marketed as providing daily credit monitoring; and
  • A Wallet Protection product was sold as a service to help a consumer cancel credit cards in the event that his or her wallet is stolen.
Many cardholders were led to believe some products were free, when, in fact, they were paying for them. The telemarketing scripts frequently suggested that consumers would not be charged for the products until after having a chance to review printed materials from Discover.  Discover, however, did not provide consumers with the information until after Discover had already initiated the consumer's purchase of a product.

Consumer were also at times enrolled in these protection programs, and charged for the products, without their consent. Elements of the payment protection benefits, such as exclusions for pre-existing medical conditions and certain limitations concerning employment, were also not disclosed to consumers, the agencies said.

The Discover agreement follows by just a couple months a separate agreement between Capital One Financial and regulators, which revolved around that company's call center allegedly leading customers to pay too much for credit card products. Capitol One also agreed to pay about $200 million in refunds.

For more on the Discover agreement, use the resource link.

CUNA meets with CFPB on remittance rule changes

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WASHINGTON (9/25/12)--Credit Union National Association (CUNA) President/CEO Bill Cheney urged Consumer Financial Protection Bureau (CFPB) Director Richard Cordray to distinguish in the agency's rulemaking between credit unions that champion consumers' interests and other service providers in the financial marketplace in a meeting with the director.

Cheney also urged the agency to continue considering ways to lessen the impact of the final international remittance transfer rule on credit unions, and addressed other credit union priorities during the meeting last week.

Under the CFPB remittance rule, remittance transfer providers would be required to disclose the exchange rate, all fees associated with a transfer, and the amount of money that will be received on the other end. Remittance transfer providers will also be required to investigate disputes and correct errors. The bureau's new remittance disclosure rule will take effect Feb. 7.

The CFPB has provided a safe harbor exemption from the rule for remittance providers that transact 100 or fewer remittances per year. The agency has claimed at least 80% of credit unions that offer remittance services would be exempt under this safe harbor, but CUNA during the meeting last week revealed recent research showing that a number of credit unions they surveyed make more than 100 remittance transfers per year.

CUNA staff and the CFPB during the meeting also discussed foreign tax disclosures and liability issues related to the remittance transfer regulations.

Mortgage regulation changes, including the CFPB's revisions of the qualified mortgage definition, were also discussed during the meeting. Under a still-developing CFPB rule, mortgage originators would be required to consider a homebuyer's ability to repay a loan before the loan is offered. The CFPB's ability-to-repay requirements would apply to consumer credit transactions that are secured by a dwelling and be further defined by the agency's definition of a qualified mortgage.

CUNA called on the CFPB to broadly define qualified mortgages and provide mortgage lenders with a legal safe harbor from ability-to-repay litigation.

Mortgage servicing, mortgage loan officer compensation and the definition of "finance charge" under the proposal accompanying the CFPB's still-under-development combined Truth in Lending Act (TILA)/Real Estate Settlement Procedures Act (RESPA) forms were also discussed during the meeting.

CUNA General Counsel Eric Richard and Deputy General Counsel Mary Dunn participated in the meeting.

In other CFPB news, Zixta Martinez, CFPB assistant director for community affairs, and Bart Shapiro, senior advisor for small business, also met recently with the CUNA Council Forum. CUNA's Council Forum also met with National Credit Union Administration senior staff Buddy Gill, Owen Cole, and Tim Segerson last week.

NCUAs Marquis to retire at yearend

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ALEXANDRIA, Va. (9/25/12)--Calling retiring National Credit Union Administration (NCUA) Executive Director David Marquis a fixture at the agency, Credit Union National Association (CUNA) President/CEO Bill Cheney said Marquis has helped define the culture there, having been involved in so many of the operational issues at NCUA during his 34 years of service.

Click to view larger imageWest Virginia Credit Union League President/CEO Ken Watts (left) and NCUA Executive Director David Marquis (right) chat before presenting differing views during a House subcommittee hearing in February on a bill intended to reform the federal financial institution examination process. (CUNA Photo)
Cheney further noted Marquis' significant role in NCUA's handling of corporate credit unions during a critical juncture, and said CUNA looks forward to working with new NCUA leadership.

The NCUA Monday announced that Marquis plans to retire at the end of the year, after filling many roles at the agency.

Since January 2009, Marquis' job at the agency has been to oversee its day-to-day as executive director. For the 14 years before that, he served as director of the Office of Examination and Insurance, where he was responsible for the safe and sound operation of the National Credit Union Share Insurance Fund (NCUSIF) and for monitoring the examination and supervision procedures at all federally insured credit unions.

Also during his 34 years at the agency, Marquis has served as a supervisory examiner, regional manager, associate regional director, regional director, and deputy director of the Office of Examination and Insurance. Marquis began his career with NCUA as an examiner in Baltimore.

"It is difficult to imagine this agency without Dave," NCUA Chairman Debbie Matz said, announcing Marquis' decision to leave in December. "Over the course of his career, Dave initiated many of the changes that enabled NCUA to protect the safety and soundness of the increasingly sophisticated credit union industry. Dave's foresight and diligence transformed NCUA's exam process to ensure that examiners have the requisite expertise, tools and training, and that exams are thorough and effective."

Since starting his career at NCUA in 1978, the credit union industry's total assets grew 1,860%, the NCUA release noted, from $51.4 billion to more than $1 trillion. Matz said Marquis' "calm and steady leadership" during the economic downturn brought him "the admiration, trust and respect of the entire agency."

NCUA board member Gigi Hyland said Marquis "cares profoundly about the health, safety and soundness of the institutions he has supervised," and noted that her policy debates with Marquis resulted in policy and regulations that appropriately protected credit unions and the NCUSIF during the recent recession.

Board member Michael Fryzel said Marquis "has done an outstanding job in every position held," and wished him "all the best in everything he goes on to do."

The NCUA said it will select the next executive director later this year.

Fake employees attempt ID theft FinCEN warns

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WASHINGTON (9/25/12)--The Financial Crimes Enforcement Network (FinCEN) has issued an alert warning of telephone and e-mail scams in which the fraudster claims to be an employee of FinCEN, and seeks personal information from the call or email recipient.

In one example, the false FinCEN employee calls and identifies an outstanding debt. The debt may be real, or made up, FinCEN said. The caller, who often knows the victim's social security number, account number or other personal information, then demands that the victim pay the debt immediately.

In another example, individuals claiming to represent the U.S. Treasury or FinCEN inform victims that they have received large grants from the Treasury, and must provide bank account information and make a payment or donation to receive the grant funds.

FinCEN said it does not make unsolicited public information requests. The agency recommended that recipients of these calls, letters or e-mails ignore any attempts at contact, and avoid sending money or providing personal or confidential information. Potential scam victims should contact local, state, or federal authorities, FinCEN added.

For the full FinCEN release, use the resource link.

Inside Washington (09/24/2012)

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  • WASHINGTON (9/25/12)--A task force formed by President Barack Obama to investigate illicit mortgage practices that contributed to the financial crisis will soon take legal action, New York Attorney General Eric Schneiderman said Thursday. Schneiderman, a co-chair of the Residential Mortgage-Backed Securities Working Group, said his office would take action and he expected his federal counterparts on the task force to do the same (American Banker Sept. 25). The task force was formed in January to probe the pooling and sale of risky mortgages in the runup to the 2008 financial crisis. It includes the Justice Department, the Securities and Exchange Commission, the Department of Housing and Urban Development and the Internal Revenue Service …
  • WASHINGTON (9/25/12)--The House Ethics Committee is expected Friday to clear Rep. Maxine Waters (D-Calif.) of ethics violations, paving the way for her to serve as the chief Democrat on the House Financial Services Committee next year. Waters faced accusations of improperly helping minority-owned OneUnited Bank secure Troubled Asset Relief Program funds, even though her husband had a financial interest in the bank (American Banker Sept. 25). Politico later published a story that questioned whether the panel's investigation had been compromised. The committee's former staff director alleged that two committee lawyers secretly communicated with Republican members of the panel. A final vote was expected as early as Monday. Waters would succeed retiring Rep. Barney Frank (D-Mass.) as the lead Democrat on the committee …
  • WASHINGTON (9/25/12)--Republican presidential candidate Mitt Romney and running mate Paul Ryan unveiled a seven-page white paper on Friday laying out their plans to improve the U.S. housing market. The Romney-Ryan plan said it will completely end "too-big-to-fail" by reforming Fannie Mae and Freddie Mac. However, the plan does not provide details on how the government-sponsored enterprises would be wound down. "A Romney-Ryan Administration will protect taxpayers from additional risk in the future by reforming Fannie Mae and Freddie Mac and provide a long-term, sustainable solution for the future of housing finance reform in our country," the paper said. The paper also discusses "responsibly" selling 200,000 government-owned homes, getting rid of Dodd-Frank, improving the job market, and making foreclosures easier …
  • WASHINGTON (9/25/12)--Federal banking regulatory agencies on Monday announced the availability of a regulatory capital estimation tool to help community banking organizations and other interested parties evaluate recently published regulatory capital proposals. The tool will assist the organizations in estimating the potential effects on their capital ratios of the agencies' Basel III Notice of Proposed Rulemaking (NPR) and Standardized Approach NPR. In June, the Federal Reserve Board, the Federal Deposit Insurance Corp. and the Office of the Comptroller of the Currency approved joint proposals for comment that would revise their current regulatory capital standards. The public comment period for these proposals ends Oct. 22. The Basel III NPR focuses primarily on strengthening the level of regulatory capital requirements and improving the quality of capital. The Standardized Approach NPR proposes a number of enhancements to the risk sensitivity of the agencies' capital standards. The tool is intended to help institutions estimate the potential effect the proposals could have on their capital ratios …

NEW NCUAs Marquis to retire end of year

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ALEXANDRIA, Va. (9/24/12, UPDATED 9:45 a.m. ET)--After almost three and a half decades with the National Credit Union Administration (NCUA), Executive Director David Marquis has announced he will retire at the end of this year.

Since January 2009, Marquis' role at the agency has been to oversee its day-to-day as executive director. For the 14 years before that, he served as director of the Office of Examination and Insurance, where he was responsible for the safe and sound operation of the National Credit Union Share Insurance Fund (NCUSIF) and for monitoring the examination and supervision procedures at all federally insured credit unions.

Also during his 34 years at the agency, Marquis has served as a supervisory examiner, regional manager, associate regional director, regional director, and deputy director of the Office of Examination and Insurance. Marquis began his career with NCUA as an examiner in Baltimore.

"It is difficult to imagine this agency without Dave," NCUA Chairman Debbie Matz said, announcing Marquis' decision to leave in December. "Over the course of his career, Dave initiated many of the changes that enabled NCUA to protect the safety and soundness of the increasingly sophisticated credit union industry. Dave's foresight and diligence transformed NCUA's exam process to ensure that examiners have the requisite expertise, tools and training, and that exams are thorough and effective."

Since starting his career at NCUA in 1978, the credit union industry's total assets grew 1,860%, the NCUA release noted, from $51.4 billion to more than $1 trillion.  Matz said Marquis' "calm and steady leadership" during the economic downturn brought him "the admiration, trust and respect of the entire agency."

For more, read Tuesday's News Now.