Government Affairs Update / Regulatory Roundup: September 2008
Court Rejects Appeal; Speaker Dillon Recall Question on Ballot
With the U.S. Court of Appeals for the Sixth Circuit rejecting appeals, the recall of Michigan Speaker of the House Andy Dillon, D-Redford, will be on the Nov. 4 ballot. The issue argued by opponents of the recall had been that some of the circulators of the recall petition did not reside in Rep. Dillon's 17th District. While Dillon was successful in state court, federal courts held that circulators did not need to reside in the district to circulate petitions under the First Amendment of the U.S. Constitution.
Dillon could find himself in a scenario where he is recalled on the same ballot on which he is re-elected for his final term. If recalled and re-elected, Dillon would sit out the lame deck session of the House only to be sworn in when the new legislature is seated in January.
Originally, several House members were recall targets due to tax votes taken during last year's protracted budget negotiations. After many petitions failed in courts for various reasons, supporters of the recalls focused all efforts on Dillon.
RMGN Scuttled; Supporters Mull Appeal to Federal Court
The Michigan Supreme Court has upheld lower court rulings, and the Reform Michigan Government Now (RMGN) proposal will not appear on the ballot. The Court held that the proposal, which would have changed some 36 provisions of the state constitution, was simply too sweeping in scope. The most publicized aspects of the proposal would have reduced the size of the legislature, Court of Appeals, and the Supreme Court. Compensation for these entities also would have been reduced.
The Court also held that the proposal could not have adequately been communicated to voters in a statement of no more that 100 words, which is a constitutional requirement. While RMGN supporters are considering an appeal in federal court, that question may be moot, since the deadline for printing ballots and distributing them to voters residing overseas has passed.
Congress Returns to Capitol; Lame Duck Session Possible
Congress returned to work on Sept. 8 following the summer recess and still has Sept. 26 set as a target adjournment date. However, there is now talk of a lame duck session taking place in Nov. to finish work before year-end. There are a number of items CUNA is pushing for in these final days of session, including passage of the Credit Union, Bank, Thrift Regulatory Relief Act (CUBTRRA). The bill eases field of membership and member business lending (MBL) restrictions in underserved areas for credit unions. CUBTRRA passed the U.S. House in June and is awaiting action by the Senate.
Congressman Frank Sends Letter on Interchange to Leadership
U.S. Rep. Barney Frank has asked House leadership to ensure that the House Financial Services Committee, which he chairs, has a role in deciding credit and debit card interchange fee issues that were voted on this summer by the House Judiciary Committee.
In a Sept. 12 letter to U.S. House Speaker Nancy Pelosi (D-Calif.), Frank stated that Judiciary should not claim exclusive jurisdiction over a bill that makes decisions regarding the regulation of financial institutions, which fall under his committee's purview. In the letter, Chairman Frank asked that the Credit Card Fair Fee Act (H.R. 5546) be sequentially referred to his committee; given the fact the bill addresses complex issues surrounding financial institutions. The House Judiciary Committee, chaired by U.S. Rep. John Conyers (D-MI), had reported the bill back in July. Chairman Frank's request is a positive step for credit unions in this continuing debate. CUNA and credit union leagues oppose all legislative or regulatory proposals to regulate interchange fees, as the legislation would interfere in what they argue should be a free-market process and could affect the ability of credit unions to provide credit and debit card services for their members.
2008 Election Central & Candidate Endorsements
The MCUL Governmental Affairs Department sent out a request early in August to CEOs of member credit unions asking for their input on candidates for the House of Representatives from their area. With their input, as well as candidate surveys in hand, the MCULAF/MCULLAF Board of Trustees met on Aug. 25 and approved 12 additional endorsements, bringing the total to 76 endorsements out of the 110 seats. The Trustees' meeting on Sept. 29 will be the final chance to endorse a candidate before the November General Election. For the complete list see of endorsements see the 2008 Election Central section on the MCUL home page http://www.mcul.org/. A listing of endorsed candidates for Congress is also located under the election central section.
PAC Fundraising & Grand Raffle Gather Steam
MCULAF (State PAC) is currently at 85 percent of the 2008 goal with $126,917 raised as of Sept. 9. The current fundraising pace has MCULAF at just over $4,000 behind the total amount raised for all of 2007.
MCULLAF (Federal PAC) is currently at 53 percent of the 2008 goal with $144,876 raised. This is an increase of over $12,000 compared to this time in 2007. The Grand Raffle ticket sales are still going strong, with all 30,000 tickets distributed. 10,716 tickets have been sold, raising $53,580.
MCULAF Online Auction Begins Soon
The MCULAF Online Auction will once again be conducted during International Credit Union Week in October. The Auction begins Monday, Oct. 13 and ends at noon on Friday, Oct. 17. Some items that will be available for bidding include trips to Chicago, Traverse City, and Mackinac Island; tickets to sporting events such as a U-M/MSU basketball game, Pistons games, and the Final Four at Ford Field; a 50" plasma television; and various wine baskets. Each winning bidder's contribution will be credited to their credit union's 2008 MCULAF goal. More details will be provided in the coming weeks on the MCUL website and in Michigan Monitor. Click here for further details regarding the 2008 Online Auction.
GOTV Statement Stuffers
Credit unions can still obtain, free of charge, their choice of a generic or candidate-specific statement stuffer to go out with their September statements. The "Get Out the Vote" (GOTV) statement stuffers are a great political grassroots advocacy tool for credit unions to urge their members to vote in the November election. Thus far, the MCUL has received orders for 449,000, which is a 30 percent increase from the number requested for the 2006 election. A sample of the candidate specific statement stuffer can be seen here and a sample of the generic one can be seen here. Credit Unions may also include a PDF of either statement stuffer in their monthly newsletters to members. Those interested in utilizing this option, please contact dgm@mcul.org.
Fryzel Appoints Chief of Staff and Senior Policy Advisor
The new NCUA chairman, Mike Fryzel, has filled the position of chief of staff and senior policy advisor. Sara Vega began as chief of staff on Sept. 10th. She will oversee the day-to-day management of Fryzel's office, as well as advise the chairman on the full range of issues before the NCUA. Vega, an attorney, served four years as director of the Illinois Department of Financial Institutions and ten years as administrator of the department's credit union division. With her background and that of the chairman's, the NCUA board now enjoys additional credit union experience, adding to that of Member Gigi Hyland, former general counsel to Empire Corporate FCU in Albany, New York.
MCUL Publishes FAQ on Share Insurance
Credit unions have been necessarily concerned about responding to questions from their members concerning the safety of their deposits. In response to these concerns and to assist in handling them, MCUL recently published guidance in the popular FAQ format entitled, "Share Insurance - Part I." Prepared by Helpline Compliance Consultant, Stephon Johnson, the FAQ outlines the topic with a series of questions describing how share insurance coverage works and provides a typical situation using a family of four with different kinds of accounts. A second FAQ is forthcoming, which will discuss advertising requirements under the Federal Credit Union Act and related regulations, which apply to all credit unions. The FAQs can be found on the password protected, MCUL Compliance Web page under Compliance Communications. See: http://www.mcul.org/FAQs_546.html
September InfoSight Newsletter to Feature New ACH Rule Podcast
Credit unions should begin preparing for a new rule that will take effect in the fall of 2009 concerning the proper handling of International ACH Transactions (IAT) and in particular incoming international wires. Notices from NACHA and the Payments Authority prompted MCUL to conduct an audio podcast interview with Cindy Thompson at Payments Authority regarding the new rule and its related OFAC customer due diligence implications. The original effective date was March 20, 2009, but due to industry requests for additional time, the date was moved back to Sept. 18, 2009. Changes will require additional process documentation, testing with ACH Operators, and customer/member education, training and testing. For more information on the IAT rule, visit the Payments Authority website at: http://www.thepaymentsauthority.org/i4a/pages/Index.cfm?pageID=3429
The audio podcast is available in the four weekly issues of the Newsletter in the month of September. The Newsletter is a members-only resource, is password protected and is available on the InfoSight Web site at: http://mi.leagueinfosight.com/InfoSight_eNewsletter_Current_5498.html
SCUs Warned of Possible Quarterly Estimates for UBIT Returns
CUNA says to consult with an accountant and tax advisors on this UBIT related issue, which highlights the possibility of needing to file quarterly tax estimates for state-chartered credit unions filing IRS Form 990-T, the "Exempt Organization Business Income Tax Return," and paying unrelated business income taxes. In a CUNA News Now article, CUNA mentioned that the IRS told "a handful" of credit unions that they may be subject to interest and penalties if they fail to submit quarterly estimated tax reporting in years they file, or expect to file, a 990-T form. The full article can be found at: http://www.cuna.org/newsnow/08/wash082908-2.html?ref=hed
NCUA Regulatory Alerts
- None issued in this time period
NCUA Proposed Regulations
- None issued in this time period
NCUA Letters to Credit Unions
(All NCUA Letters are available at http://www.ncua.gov/letters/letters.html)
Letter No. 08-CU-19 (Third Party Relationships: Mortgage Brokers and Correspondents)
This Letter issued in August to all federally insured credit unions outlines appropriate steps when conducting due diligence with third party mortgage brokers and correspondents. Mortgage brokers typically do not fund loans, but simply bring borrowers and lenders together. Correspondents, as used in this Letter, will fund the loan and sell it to an investor, typically a credit union or bank. This Letter is based on a prior NCUA Letter (No. 07-CU-13) that broadly outlined the steps examiners will take when evaluating how credit unions deal with third party providers. This Letter is available at: http://www.ncua.gov/letters/2008/CU/08-CU-19docx%20(2).pdf
Letter No. 08-CU-20 (Evaluating Current Risks to Credit Unions)
This Letter to all federally-insured credit unions contains a Supervisory Letter, which addresses several of the current risks facing the credit union industry, provides NCUA field staff with guidance for assessing mortgage portfolio risk management, and recommends best practices for conducting risk focused supervision and monitoring. By providing this supervisory Letter to credit unions, one goal is to support open and clear communications between field staff and credit union management, a core element of the Risk Focused Examination program. While the Letter primarily addresses the risks in real estate lending, many of the principles discussed can and should be applied to other loan products and services. The Letter can be found at:
http://www.ncua.gov/letters/2008/CU/08-CU-20%20LCU.PDF
The Supervisory Letter: http://www.ncua.gov/letters/2008/CU/08-01%20Sup%20Letter.pdf
Letter No. 08-CU-21 (CU Financial Trends for First Half of 2008)
This Letter to all federally-insured credit unions highlights credit union financial trends for the first six months of 2008 based on quarterly call reports submitted by al federally-insured credit unions. Overall the financial condition remains sound as indicated by high net worth levels and continued net worth growth, but there are some trends worth noting. The majority of loan growth came from the real estate sector. Delinquency and net charge-offs continue to increase indicating elevated concerns in the credit quality of loan portfolios, and lastly, the level of industry earnings continues to fall. The Letter and its enclosure can be found as follows: http://www.ncua.gov/letters/2008/CU/08-CU-21.pdf
Enclosure: http://www.ncua.gov/letters/2008/CU/08-CU-21encl.pdf
NCUA Legal Opinions of Interest
(All Legal Opinions available at: http://www.ncua.gov/RegulationsOpinionsLaws/opinion_letters/2008Letters.htm)
08-0730 Issued August 11, 2008 - Permissibility of a FCU Providing Locked Box Accounting Services to Members. The opinion to a FCU stated in the affirmative that a FCU may offer the services under the Incidental Powers, "operational programs" provision. Operational programs are defined as programs that an FCU establishes to deliver products and services to members that enhance member service and promote safe and sound operation. Opinion available at: http://www.ncua.gov/RegulationsOpinionsLaws/opinion_letters/2008/08-0730.pdf
08-0431 Issued August 12, 2008 - Suspension of Services Policy. This opinion to a FCU states that a FCU may have a policy suspending or limiting services to members in various circumstances if there is a rational basis for the policy and members receive notice of the policy, but a credit union cannot terminate a member's right to vote in annual elections or maintain a share account without complying with the FCU Act's requirements for expulsion. In this case the FCU was asking about members who threaten or behave inappropriately towards staff or other members, have presented counterfeit items, kite checks or engage in suspicious transactions. Opinion available at: http://www.ncua.gov/RegulationsOpinionsLaws/opinion_letters/2008/08-0431.pdf
08-0718 Issued August 13, 2008 - Share Insurance Coverage - Section 529 College Savings Plans. This opinion was sent to the Treasurer and Chairwoman of Wisconsin's College Savings Program Board. The question was whether deposits from this program would be fully insured if no more than $100,000 is placed at a federally insured credit union. The answer is yes, since based on the facts outlined in the opinion, the Board qualifies as a public entity, insured up to $100,000. Opinion available at: http://www.ncua.gov/RegulationsOpinionsLaws/opinion_letters/2008/08-0718.pdf
OFAC Updates SDN List
Credit unions are reminded that the OFAC SDN lists have been updated through Sept. 10, 2008 with changes and new entries primarily from Iran and Columbia. The full 2008 listing can be found at: http://www.ustreas.gov/offices/enforcement/ofac/sdn/t11sdnew.pdf
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