CUNA Regulatory Advocacy Report

Debit Card Interchange Fees. TCF National Bank, which as you know is suing the Federal Reserve Board regarding the debit interchange amendment in the Dodd-Frank Act, filed an appeal this week in the U.S. Court of Appeals for the Eighth Circuit. TCF is appealing the denial issued by the U.S. District Court for the District of South Dakota on April 4th of the bank’s request for a ruling to prevent the interchange amendment from being implemented.

Along with outside counsel and our interchange coalition partners, CUNA has continued to review the April 4 court ruling. While the court declined to agree with the Federal Reserve Board to dismiss the case, it also did not agree with TCF Bank that an order to stop the Fed should be issued at that time. Here are some key points from the ruling that CUNA feels are important:

  1. The judge made clear that his ruling on the constitutional issues in the denial of a preliminary injunction was tentative and therefore, could change based on later events in the case (CUNA thinks this could include the issuance of the Fed’s final rule);
  2. The ruling only examined issues related to the Dodd-Frank statute and not the Fed’s rule on debit interchange regulation, which has yet to be made final;
  3. The judge said that TCF’s challenge to the statute was appropriate as to the timing but that any challenge to the Fed’s proposed rule, as opposed to a final regulation, was not yet timely;
  4. The judge said that TCF’s argument that the small issuer exemption gives small institutions an unlawful advantage over large institutions, which will be directly subject to the Fed’s rate cap, “gave the court pause.” However, the court also said that the statutory exemption did not appear to violate the equal protection clause of the Constitution as TCF alleged. He added that the change of the small issuer exemption from $1 billion in assets to $10 billion in assets during Dodd-Frank negotiations also “gave the court pause.”

The bottom line is that the major issues in the TCF case have yet to be resolved. TCF’s appeal regarding the preliminary order will not affect the district court’s continued review of TCF’s challenge to the interchange regulation. CUNA also filed another joint letter with the Fed this week, along with the other members of the coalition.

NCUA Board Meeting Next Week. The NCUA Board’s April meeting will be Thursday, April 21. Items on the agenda include the corporate credit union proposal issued for comments in November 2010. CUNA raised a number of concerns about the proposal, including:

  • The proposed prohibition on membership in more than one corporate credit union;
  • The proposed provisions to virtually require all members of corporate credit unions to contribute to the Corporate Stabilization Fund, which CUNA feels is not consistent with the Federal Credit Union Act;
  • Corporate credit union officials’ reporting of compensation from CUSOs;
  • Voting procedures for corporate credit union boards;
  • Corporate credit union audit requirements; and
  • Proposed detailed enterprise risk management requirements for corporate credit unions.

NCUA Board Chairman Debbie Matz has indicated that the agency is “working diligently” to address concerns. CUNA has strongly encouraged the Board to improve the proposal as recommended before it is adopted.

Repeal of Expanded IRS 1099 Information Reporting. On April 14, President Obama signed into law the “Comprehensive 1099 Taxpayer Protection and Repayment of Exchange Subsidy Overpayments Act of 2011” to repeal the expanded IRS reporting requirement established under last year’s healthcare reform law, a move CUNA supported. The expanded requirement would have mandated businesses to file IRS Form 1099 with regard to each vendor for which the business spent an aggregate of at least $600 over the course of the year for goods or services.

More details here

Interagency Proposal on Incentive-based Compensation Arrangements. A joint proposal of the federal financial regulators, including NCUA, was published April 14 in the Federal Register for public comment. The Dodd-Frank Act requires the agencies to jointly establish rules on particular incentive-based compensation practices at covered financial institutions, such as credit unions.

The proposed rule would prohibit incentive-based compensation arrangements at credit unions of $1 billion or more in total assets that encourage executive officers, employees, or the director to expose the credit union to inappropriate risks by providing such individuals excessive compensation. In addition, all covered credit unions would be required to report annually to NCUA the details of their incentive-based compensation arrangements—excluding individual compensation.

Under the proposal, credit unions with at least $10 billion in total assets would need to identify covered persons who have the ability to expose the credit union to possible substantial losses; the credit union’s board would need to approve the incentive-based compensation arrangement for such individuals. In addition, the proposal would require deferral of a portion of incentive-based compensation for executive officers of these larger credit unions. 

NCUA estimated 184 credit unions could be affected, based on asset size alone.

The comment period on this proposal is open until May 31.

Questions or comments? Contact Northwest Credit Union Association Director of Regulatory Affairs Jaycee Winn: 503.350.2209,

Posted in CUNA, Federal, NCUA.