March 23, 2011
Senate, House bills would delay Fed interchange plan
Senate bill (S. 575), introduced by Senator Jon Tester (R-MT), would establish a two-year delay for the Federal Reserve's (Fed) proposal to implement the Dodd-Frank interchange provisions, which limit debit card interchange fees. It would require the Fed, the National Credit Union Administration, the Federal Deposit Insurance Corp., and the Office of the Comptroller of the Currency to submit a study on the impact of any proposed interchange rule changes to the Senate Banking Committee and the House Financial Services Committee. The study would address the impact of the rules on credit unions and other debit card issuers, merchants, and consumers.
The House bill (H.R. 1081), introduced by Representative Shelly Moore Capito (R-WV), would delay the interchange rule effective date for one year and would also direct federal agencies to study the impact that interchange changes would have on credit unions and other card issuers, consumers, and merchants. This bill would require the Fed to write new interchange regulations within four months if the study were to find that the proposed exemption for financial institutions with under $10 billion in assets would not be effective. The regulations would also need to be rewritten if the study found that the Fed's proposal did not encompass all debit card-related costs or would harm consumers.
Opposition to the law mandating interchange limits has been building. One of the most public and strongly worded was an editorial which ran in the Wall Street Journal. It holds that interchange law ordered the Fed to "fix prices" on what card issuers may charge merchants "each time they swipe a transaction" with a customer's debit card.
"Under the new Fed rule, which will take effect in April unless Congress acts to stop it, that fee will be capped at 12 cents per transaction, reducing the charges by some $12 billion to $14 billion and in effect transferring the cost of debit cards from the merchants who pay the fees to the consumers who use them," the editorial said.
It also took aim at merchants' claims that they would pass savings from the lower debit charge interchange fees on to consumers as lower prices on merchandise. "While that is doubtful, the loss of that revenue will force debit card issuers to raise fees elsewhere to compensate," the editorial charged. Just look at the 2009 credit card reforms, which are driving free checking to extinctions, and you can extrapolate what will happen with debit cards, it said.
Although the Durbin amendment included an exemption for small issuers with $10 billion of less in assets, the Wall Street Journal said it was meaningless: "[F]ew small [issuers] will be able to compete in a marketplace blanketed with the artificially lowered fees of larger institutions.”
New NCUA property valuation rules take effect Friday, April 1
April 1 is the effective date for the Interagency Appraisal and Evaluation Guidelines. Whether your credit union uses full appraisals, drive-by appraisals, automated valuation models (AVMs), tax assessments, or any other means of determining property value for the purpose of making a loan to a member, it will be effected by the new guidelines.
Credit unions now relying on either Tax Assessments or AVMs will need to also obtain information relating to the condition on the subject property. Many credit unions are considering using a third party Appraisal Management Company (AMC) as a means of ordering its full appraisals. Doing so will provide benefits including a random, non-biased method for placing appraisal orders, an additional layer of appraiser credentialing and an additional layer of errors & omissions (E&O) insurance.
A turnkey solution is available through the MemberClose Resource Center. The flexible suite of products allows a credit union to tailor a point & click solution that fits its particular needs. These solutions include:
- AVM combined with a Property Condition Report
- Property Condition Report only
- Back-testing Solution
- Hybrid Valuation/Property Condition Reports
- Appraisal Management Company access
To discuss any aspect of the new guidelines, please contact Lisa Costello (email@example.com) at 1-888-746-2476, extension 6.
CUNA calls for credit score comments
Credit unions are encouraged to comment on a joint agency proposal to require creditors that use a consumer's credit score in risk-based pricing to disclose that score and other related information to that consumer.
Under the Federal Reserve-Federal Trade Commission (FTC) proposal, credit unions and others would be required to provide consumers with a statement that a credit score takes into account information in a consumer report and that a credit score can change over time. They must disclose the specific numerical credit score used in making the credit decision, as well as information on the full range of FICO scores that could be assessed for a given member or customer. The lender must also disclose any factors that adversely affected the credit score, the date on which that credit score was created, and the entity that provided the credit score.
The Credit Union National Association (CUNA) has issued a Comment Call asking credit unions for general comment on several areas of the proposal. CUNA has also included a Fed and FTC request for additional information. The regulators have asked for additional comment on whether the proposed additional content for general risk-based pricing notices and account review notices in the proposed rules are appropriate. They have also solicited extra input on their proposal's potential impact on smaller credit unions.
The proposal is scheduled to go into effect on June 21. Comments should be submitted to CUNA by April 8. The Fed and FTC are accepting comments until April 14.
Separate RegFlex analysis and any comments regarding the paperwork reduction act must be submitted by May 16.
Click here to respond to the CUNA Comment Call.