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Advocacy Alert- 07/7/2003

Registered warrants and the budget impasse

The issue of registered warrants remains on the minds of many as the California State Legislature has missed the deadline to pass a budget. CBA continues to meet regularly with the State Controller's and State Treasurer's offices and has another meeting planned for the end of July. CBA is sending under separate cover the week of July 7 a detailed memo describing our activities on the issue of registered warrants that includes several helpful memos from regulators and state officials. If you have any questions, please contact Maurine Padden at 916/441-7377 ext. 212 or mpadden@calbankers.com.

Trust legislation amended

After an exhaustive effort by the Trust Legislative Subcommittee, CBA was able to get AB 1705 (Assembly Judiciary) amended to address our concerns. In its original form, the bill would have prevented trustees from obtaining releases in certain circumstances and would have created serious confusion for financial institutions administering of trusts. Prior to the adoption of recent amendments, CBA had an "Oppose Priority 1" position on this bill, but the recent amendments now allow us to take a "neutral" position on the bill. CBA also continues to work closely with the California Civil Justice Association of California to defeat AB 95 (Corbett) and SB 122 (Escutia), which seek to further extend 17200 claims. We will continue to keep you informed on these items as they develop.

FCRA dominates DC's legislative agenda; Administration jumps aboard legislation

The battle to extend the expiring FCRA pre-emption has now taken its rightful place at the center of the congressional agenda. H.R. 2622 was introduced to extend the expiring provisions late last week by House Financial Institutions Subcommittee Chairman Spencer Bachus and 22 original co-sponsors (and 10 additional sponsors) to make the pre-emptions permanent. The Bachus bill would also provide that consumers be furnished with a free copy of their credit reports at least once a year. The bill also contains provisions that deal with identity theft and suspected identity theft, forbids printing of whole credit or debit card numbers, and it would add requirements strengthening dispute resolution requirements and impose new duties on reporting agencies and information furnishers to correct mistakes and to keep the information correct. All of these were issues that were raised repeatedly in lengthy hearings held by the subcommittee.

While the sponsorship list is bipartisan, many Democrats (and some Republicans) will want to go further to provide additional consumer protections. Ranking Democrat Barney Frank has already signaled that he considers the so-called Ackerman amendment (which would require a creditor to notify a customer any time it furnishes information adverse to that customer to a reporting agency) a prerequisite for his support. Efforts are also likely to be made to prohibit a lender from increasing an interest rate when the customer's account is current solely on the basis of information received in a credit report that was furnished by another party.

Early this week, the Bush Administration weighed in on the legislation. Treasury Secretary Snow, at a packed press conference on Monday called the national standards contained in FCRA "a pillar of our economy." Snow continued, "national uniform standards…make your reputation as a borrower portable so that you don't have to establish your good name from scratch in every city you visit or every store where you shop." But the Secretary also upped the ante slightly, calling for provisions which would require creditors when their credit scores result in just a higher rate of interest rather than an outright denial, as is the case presently, and even stronger consumer provisions that would require that consumers be informed as to how their credit scores are derived and what can be done to improve them. The Secretary emphatically resisted suggestions that legislation go further than extending the FCRA provisions - that is, to pre-empt states from enacting laws governing third party data sharing. Snow said that it would take much longer to resolve the many issues raised under the privacy provisions of the GLB Act and that presently, there is not enough experience with GLB to make an informed judgment about what should be changed.

The House subcommittee will hold hearings on the Bachus bill probably right after the July 4th recess, and hopes to report the legislation to the House floor before August. The Senate calendar is, as usual, more indefinite. The Senate Banking Committee held another hearing on the subject last week, this one focusing on the sharing of information between affiliates. Chairman Shelby has not revealed his hand yet, though he did describe the legislation introduced by his fellow Alabama Republican, Rep. Bachus, "as a helpful starting point." Shelby and ranking Democrat Senator Sarbanes have expressed strong interest in examining information sharing among affiliates and pre-screening.

Despite the growing price tag, the industry has made great progress since the beginning of the year when it was not at all clear that FCRA would receive the attention it has. Congress and the administration have been educated and have given very clear indication that the message has been received. FCRA is now not just a front burner issue, but rather the issue. And while the system has been highly praised, undeniable problems have been identified, problems the industry's friends in Congress must address if the legislation is to advance.

Freddie accounting woes may lead to enhanced regulator; FHLB hearings July 9

House hearings have already begun in the Capital Markets Subcommittee chaired by Louisiana Republican Richard Baker, who has introduced legislation to abolish the Office of Federal Housing Enterprise Oversight (the GSE regulator) and place the regulation of mortgage giants Fannie Mae and Freddie Mac directly under the Office of Thrift Supervision, albeit with a new name, the Office of Housing Supervision. Other committees have indicated intentions to hold hearings on one aspect or another of the accounting lapses at Freddie which still have senior management at the company indicating that they may have underreported income by anywhere from $ 1 billion to $4 billion, a large range of uncertainty, even by Washington standards. The agencies' present regulator, OFHEO, has few defenders. Not even the agencies themselves are trying to save OFHEO inasmuch as they now realize their interests are not well served by a regulator that appears to be weak and overmatched. Fannie Mae, in particular, which has not been implicated by any aspect of the revelations at Freddie, is lobbying for a new and stronger regulator, one that would be focused solely on GSE issues. If Fannie has its way, the regulation of the Federal Home Loan Bank System would also be moved to the new regulator. Thus far, Baker has not included the FHLB System in his legislation but he says he has an open mind on the subject. Meanwhile, in an unrelated development, the Senate Financial Institutions Subcommittee will hold an oversight hearing on the Home Loan Bank System on July 9. System witnesses will attempt to steer clear of the regulatory debate, arguing that its cooperative structure makes it separate and unique from Fannie and Freddie.

Senate-passed check truncation bill only slightly different from House version

The Senate passed by voice vote prior to its July 4th recess the check truncation bill, H.R. 1774, but the language is slightly different than the version passed by the House a few weeks earlier. It is not clear yet how the Senate and House will try to resolve the very minor differences between the bills. But it does appear almost certain that this legislation, that is expected to save the industry substantial back office costs in clearing checks, will be passed within the next few weeks. The House could simply pass the Senate version of the bill, or the respective staffs could negotiate a compromise which each body of Congress would then pass.

NACAB names Oehler president-elect

CBA would like to congratulate CBA board member Robert Oehler, president and CEO of Far East National Bank. Rob was recently installed as president-elect of the National Association of Chinese American Bankers (NACAB). Former CBA board member John J. Hou, chairman and CEO of Asian Pacific National Bank, was installed as chairman of the NACAB board of directors. CBA actively supports the interests and objectives of NACAB and congratulates all who serve on the NACAB board of directors.

Seacoast Commerce Bank opens

CBA is pleased to announce the opening of Seacoast Commerce Bank. Seacoast Commerce Bank, headed by Larry L. Benthien, opened its doors on June 16, 2003. Congratulations to Larry and Seacoast Commerce Bank.

CBA reaches nearly 2 million people in June media outreach

In the month of June, CBA received 14 calls from reporters on various banking issues. As a result, CBA appeared in nine articles ranging in subject from financial privacy to statewide banking issues as well as developments in CBA strategic partnerships. These articles had a combined circulation of nearly 1.9 million readers. So far this year, CBA has secured in excess of 20 million non-negative impressions on issues important to CBA and its membership. If you are interested in participating in CBA's media outreach efforts or would like to schedule free media training for you and your executive team in your bank, please contact Anissa Yates, vice president of Communications & Public Relations at 916/441-7377 ext. 208 or ayates@calbankers.com.

BancInsure offers expanded Mortgage Impairment

Under a traditional Mortgage E&O policy you require borrowers to maintain insurance and you have up to 90 days to force place coverage once you learn the insurance has lapsed. A great deal of time and money is spent in tracking insurance and force placing coverage when needed. Matterhorn Financial Services, which is a subsidiary of BancInsure, has a product to eliminate your administrative burden and fill potential gaps in the insurance which protects your assets. With Mortgage Impairment from Matterhorn you still require that insurance be carried and you verify its placement at time of loan closing but you no longer need to track or react to notices of cancellation, non-renewal or expiration. Coverage is written on a balance of perils (broader) basis and can include earthquake in California. If you want to protect your assets and eliminate administrative burden this is a product you should learn more about. Please contact Vince Saul, Regional Sales Manager at 714/693-1955 or 949/394-2654 (cell) or vsaul@bancinsure.com for more information. BancInsure is the exclusively endorsed insurance carrier of the CBA.