As first reported on this blog on 7/1/09, congress is determined to severely restrict NSF and Courtesy Pay fees. It appears that this issue will be addressed sooner rather than later.
Sen. Chris Dodd (D-Conn.) introduced his version of overdraft protection reform legislation last week. H.R. 1799 would:
• require consumers to opt-in to their bank or credit union's overdraft protection program, and prohibit discrimination against consumers who do not opt-in.
• limit the number of fees that could be assessed to a consumer to one per month and no more than six per year. (What happens if a member exceeds this limit? do we close their account?)
• require fees to be proportional to the cost of processing the overdraft and prohibits the manipulation of debits in order to generate additional overdraft.
• Prohibit institutions from manipulating the order in which they post transactions in order to assess extra fees.
• require the overdraft fee to be considered a finance charge under TILA, but would not include the fee in the calculation of interest for the purposes of the usury ceiling in the Federal Credit Union Act.
Thursday, October 29, 2009
Compliance Officer Issues Sigh
A deep, drawn-out, world-weary sigh emanated from an occupied bathroom stall at a local credit union on Monday, witnesses reported. The sigh, described by those who heard it as "somber," "resigned," and "a sad reminder of the crushing pain, anguish, and, ultimately, meaninglessness of life," escaped from the core of the man's being at approximately 12:32 p.m. and echoed quietly off the stall's dividers. After 30 seconds of complete silence—a brief respite from the workday which the compliance officer seated on the toilet bowl likely used to contemplate his place in the credit union world—he flushed the toilet, emerged from the stall, forced himself to smile, and returned to his job for yet another day of monotonous, unfulfilling compliance work.
Tuesday, October 27, 2009
A New Proposal: Immediately Freeze Credit Card Rates.
According to the Wall Street Journal, Sen. Christopher Dodd, who heads the Senate Banking Committee, introduced a measure that would freeze rates on existing card balances until February, when the new CARD Act rules are to go into effect. "No sooner had it been signed into law, but credit card companies were looking for ways to get around the protections," Mr. Dodd said in a written statement.
Dodd's move is part of an effort by leading Democrats to crack down on what they see as gaming of the new rules by card issuers. Reps. Barney Frank (D., Mass.) and Carolyn Maloney (D., N.Y.) have introduced House legislation that would move up the effective date of the new restrictions to December from February. As I wrote in a recent blog, the House Financial Services Committee has approved the accelerated date.
Dodd's move is part of an effort by leading Democrats to crack down on what they see as gaming of the new rules by card issuers. Reps. Barney Frank (D., Mass.) and Carolyn Maloney (D., N.Y.) have introduced House legislation that would move up the effective date of the new restrictions to December from February. As I wrote in a recent blog, the House Financial Services Committee has approved the accelerated date.
Federal Reserve Chicago President on Rates and the Economy
Federal Reserve Bank of Chicago President Charles Evans said the U.S. unemployment rate will probably rise above 10 percent and inflation may stay below his preferred level for years, making it difficult to know when to "remove policy accommodation", or raise rates and stop other intervention. “The biggest challenge for all of us is very high unemployment,” Evans, who votes on rates this year, said today during a speech in Ann Arbor, Michigan. Determining when to reverse the Fed’s accommodative stance “is probably not going to be quite so apparent.”
Central bankers saw many parts of the U.S. economy stabilize or make modest gains in areas such as housing and manufacturing, according to the Fed’s Beige Book business survey released yesterday. The survey suggests that the economy is gaining momentum and has not yet overcome weaknesses in banking and employment. “My own outlook is for the economy to grow at about 3 percent over the next 18 months,” Evans told an audience gathered at the University of Michigan, Ann Arbor. Inflation should remain around 1.5 percent for the next couple of years, below the 2 percent level that’s consistent with price stability, he said. Recent movements in the dollar haven’t been “large enough” to alter the outlook for inflation, Evans told reporters afterward. Even so, “it’s obviously something we’re going to monitor,” he said.
Central bankers saw many parts of the U.S. economy stabilize or make modest gains in areas such as housing and manufacturing, according to the Fed’s Beige Book business survey released yesterday. The survey suggests that the economy is gaining momentum and has not yet overcome weaknesses in banking and employment. “My own outlook is for the economy to grow at about 3 percent over the next 18 months,” Evans told an audience gathered at the University of Michigan, Ann Arbor. Inflation should remain around 1.5 percent for the next couple of years, below the 2 percent level that’s consistent with price stability, he said. Recent movements in the dollar haven’t been “large enough” to alter the outlook for inflation, Evans told reporters afterward. Even so, “it’s obviously something we’re going to monitor,” he said.
Monday, October 26, 2009
Effective Dates May Move Up. CARD Act Update.
I'm always hesitant to report proposed legislation because sometimes the text of one bill is often voted down, incorporated into another bill, changed, or regurgitated as something entirely different. However, this one seems to have a high likelihood of passing in some form, so you might want to "gear up". Side note: isn't "regurgitated a perfect word when describing new legislation?
On October 22nd, 2009, th House Financial Services Committee approved H.R. 3639 (read it here), which would move up the remaining effective dates of the Credit CARD Act from February 2010 to December 2009. However, two key amendments were added to the bill that will effectively exempt credit unions from these earlier compliance dates.
The first amendment limits the earlier effective dates for all of the provisions of the bill to issuers with more than 2 million cards in circulation. This effectively exempts all credit unions. Gift card provisions were not changed.
According to Dave Adams, Michigan Credit Union League CEO, the legislation pushing up the effective dates is a separate issue from the fix we’ve been seeking in the Credit CARD Act to narrow the scope of the 21-day periodic notice requirement from all open-end credit to only credit cards.
On October 22nd, 2009, th House Financial Services Committee approved H.R. 3639 (read it here), which would move up the remaining effective dates of the Credit CARD Act from February 2010 to December 2009. However, two key amendments were added to the bill that will effectively exempt credit unions from these earlier compliance dates.
The first amendment limits the earlier effective dates for all of the provisions of the bill to issuers with more than 2 million cards in circulation. This effectively exempts all credit unions. Gift card provisions were not changed.
According to Dave Adams, Michigan Credit Union League CEO, the legislation pushing up the effective dates is a separate issue from the fix we’ve been seeking in the Credit CARD Act to narrow the scope of the 21-day periodic notice requirement from all open-end credit to only credit cards.
Monday, October 12, 2009
The Servicemember's Civil Relief Act (SCRA)
Most credit union's have members who are in one of the military branches. Make sure that when you discover that a member is on active duty that you follow all the provisions of the SCRA.
The SCRA gives relief to individuals who are called to active duty in any of the military branches, including reservists or members of the National Guard. SCRA replaces and expands the Soldiers' and Sailors’ Civil Relief Act of 1940.
Major provisions of the SCRA that may affect credit unions include:
• Allowing borrowers to have their interest rates reduced to 6% on loans granted before going on active duty, if the call up to military service materially affected their ability to pay.
• Permitting active duty servicemembers, who are unable to appear in a court or administrative proceeding due to their military duties, to postpone court proceedings for a mandatory minimum of ninety days upon the servicemember's request.
• Prohibiting foreclosures or repossessions without prior court approval, up until three months after leaving active service.
• Prohibiting future adverse credit decisions based on the grant of SCRA relief. The 6% interest limitation only affects loans granted before the member entered active duty. Any loan granted after the member entered onto active duty would continue to have the terms at the time the loan was granted.
The provisions related to foreclosures and repossessions apply to dependents also. The provision related to the maximum interest rates only apply to a dependent when the member of the military also signed the note, prior to entering active duty.
In the news: "Well, if you saw '60 Minutes,' you probably saw this. President Obama coming under fire, because he has only spoken to the U.S. commander in Afghanistan once in the last six months. Well, whose fault is that? Hey, if the general wants to talk to President Obama, get a talk show. That's how you do it." "Well, actually, to be fair, I thought this was nice, President Obama said he's been very busy lately, but he would be willing to add the general as a Facebook friend." --Jay Leno
The SCRA gives relief to individuals who are called to active duty in any of the military branches, including reservists or members of the National Guard. SCRA replaces and expands the Soldiers' and Sailors’ Civil Relief Act of 1940.
Major provisions of the SCRA that may affect credit unions include:
• Allowing borrowers to have their interest rates reduced to 6% on loans granted before going on active duty, if the call up to military service materially affected their ability to pay.
• Permitting active duty servicemembers, who are unable to appear in a court or administrative proceeding due to their military duties, to postpone court proceedings for a mandatory minimum of ninety days upon the servicemember's request.
• Prohibiting foreclosures or repossessions without prior court approval, up until three months after leaving active service.
• Prohibiting future adverse credit decisions based on the grant of SCRA relief. The 6% interest limitation only affects loans granted before the member entered active duty. Any loan granted after the member entered onto active duty would continue to have the terms at the time the loan was granted.
The provisions related to foreclosures and repossessions apply to dependents also. The provision related to the maximum interest rates only apply to a dependent when the member of the military also signed the note, prior to entering active duty.
In the news: "Well, if you saw '60 Minutes,' you probably saw this. President Obama coming under fire, because he has only spoken to the U.S. commander in Afghanistan once in the last six months. Well, whose fault is that? Hey, if the general wants to talk to President Obama, get a talk show. That's how you do it." "Well, actually, to be fair, I thought this was nice, President Obama said he's been very busy lately, but he would be willing to add the general as a Facebook friend." --Jay Leno
Thursday, October 8, 2009
Figure on Higher Mortgage Rates by Spring
According to the Kiplinger Letter, 30 year fixed mortgage rates will be in the neighborhood of 6% this Spring, even higher if the recovery is stronger than expected and businesses start selling corporate bonds to fund capital investment projects.
The upward push will come just as the Federal Reserve quits buying mortgage debt. Right now, the Fed is buying 80% (!) of home mortgages being written, filling in for a largely absent private secondary market. But the Feds efforts to keep rates low and prop up the housing market is slated to wind down between now and March 31st.
Incidentally, the reasons investors are staying away from purchasing mortgages in the secondary market are many: Oh, but my broker says not to worry! This is a subject for another day, but excercise caution if you decide to go this route. You might be buying great risk if you are reaching for yield.
The upward push will come just as the Federal Reserve quits buying mortgage debt. Right now, the Fed is buying 80% (!) of home mortgages being written, filling in for a largely absent private secondary market. But the Feds efforts to keep rates low and prop up the housing market is slated to wind down between now and March 31st.
Incidentally, the reasons investors are staying away from purchasing mortgages in the secondary market are many: Oh, but my broker says not to worry! This is a subject for another day, but excercise caution if you decide to go this route. You might be buying great risk if you are reaching for yield.
Wednesday, October 7, 2009
Interest Rate Chonicles. The Weak Dollar.
The U.S. dollar is weak. That doesn't sound good does it? But Wall Street loves it . . . a weak dollar improves corporate profits by making U.S. goods cheaper to overseas buyers. Companies can also improve profits when they convert sales made in foreign currencies to dollars. Conversely, imports become more expensive.
How does this affect interest rates? Yesterday, Australia's central bank became the first G20 country to raise interest rates. Others may soon follow. This could prompt investors (read China) to sell dollars as they look to put their money into markets where interest rates are rising. The US then would have to raise rates to attract investors to finance our RECORD deficit borrowing.
Wouldn't you love to have the President's job? It would be a hoot to just spend an unlimited amount of money. Whoops, just ran out . . . that's OK, just print some more! (Don't get any ideas, you and I go to jail if we print money). By the way, this is a sure recipe for inflation (yep, inflation also means higher rates).
Ok, so you produce your ALM reports every quarter. Nice work. Keeps the examiners happy, right? But is anyone actually using the reports to form a strategy to reduce interest rate risk? Your ALM results are probably looking pretty good right now, but keep in mind that with interest rates HISTORICALLY low, those rosy numbers are skewed favorably and can change in a hurry. Do a couple of "what if" analysis and you'll see what I mean.
Let's face it, interest rates have no where to go but up, the question is when.With all the other problems plauging the industry, it's easy to take your eye off of Asset Liability Management. But your current problems could look like a walk in the park if you get caught on the wrong side of the rate risk equation.
How does this affect interest rates? Yesterday, Australia's central bank became the first G20 country to raise interest rates. Others may soon follow. This could prompt investors (read China) to sell dollars as they look to put their money into markets where interest rates are rising. The US then would have to raise rates to attract investors to finance our RECORD deficit borrowing.
Wouldn't you love to have the President's job? It would be a hoot to just spend an unlimited amount of money. Whoops, just ran out . . . that's OK, just print some more! (Don't get any ideas, you and I go to jail if we print money). By the way, this is a sure recipe for inflation (yep, inflation also means higher rates).
Ok, so you produce your ALM reports every quarter. Nice work. Keeps the examiners happy, right? But is anyone actually using the reports to form a strategy to reduce interest rate risk? Your ALM results are probably looking pretty good right now, but keep in mind that with interest rates HISTORICALLY low, those rosy numbers are skewed favorably and can change in a hurry. Do a couple of "what if" analysis and you'll see what I mean.
Let's face it, interest rates have no where to go but up, the question is when.With all the other problems plauging the industry, it's easy to take your eye off of Asset Liability Management. But your current problems could look like a walk in the park if you get caught on the wrong side of the rate risk equation.
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