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WASHINGTON-The New Year will be a year of finalization for many regulatory matters affecting credit unions. “I think we’ll see some things finalized that we’ve been waiting on,” NAFCU Director of Regulatory Affairs Gwen Baker said, ” for example, the SEC broker-dealer issue.” Of course, the credit union service organization registration issue goes hand-in-hand with that. Since NCUA’s incidental powers rule now permits credit unions to earn income directly from activities, it has eliminated the need for the CUSO to be involved. As such, CUSOs would have to register as broker-dealers with the Securities and Exchange Commission. Credit unions may opt to bring the activities, and income, under the credit union’s services umbrella but many used CUSOs “ for liability reasons,” Baker explained. On the other hand, some credit unions might consider it somewhat a competitive advantage to go ahead and register their CUSOs. Additionally, the Financial Accounting Standards Board is expected to hand down an exposure draft, similar to a proposed regulation, in February with a 90-day comment period, Baker said. There is “no way” FASB is backing down, she added, “pooling versus purchase has been decided.” Credit union lobbyists are seeking a legislative fix. At the end of 2004, the Internal Revenue Service raised a number of issues concerning deferred compensation, 403(b)s (relating to tax-sheltered annuity arrangements for public school employees and 501(c)(3) tax-exempt organizations), and 457s (specifically for non-profits). A private letter ruling, which only applies to the credit union in question, stated that the credit union could not offer 403(b)s, which has raised concerns with others because a number of credit unions offer the programs to their employees. Baker said the IRS is expected to issue guidance, which will set the precedent, around June or July. Credit unions will also have to keep plugging along with requirements stemming from the Fair and Accurate Credit Transactions Act. “FACT Act will continue from mainly a compliance perspective through 2005,” Baker explained. A proposal on the risk-based pricing notices could be coming out as late as this fall though, she added. The Federal Reserve also published an advance notice of proposed rulemaking on open-end lending under Regulation Z (Truth-in-Lending) near the end of 2004. The ANPR does not contain specifics but basically asks for comments on any aspects of the rule that could be modified. Comments are due at the end of March. “Another area we might see proposals on is privacy,” the attorney noted. The Federal Trade commission has proposed privacy notices sent by financial service providers be shortened and simplified for clarity. Baker said NAFCU has supported the proposal so long as the short notices are voluntary because credit unions notices are sufficiently simple and they have been an enormous burden from the start. “Most of the things I’ve talked about are not from NCUA,” Baker observed. “It seemed the same in 2004,” she said, pointing out that credit unions are coming under the jurisdiction of many more regulations from other regulators. However, Baker said credit unions are definitely interested to see what comes out of NCUA Chairman JoAnn Johnson’s initiative to develop a risk-based capital structure for corporates. She explained that it could be a good jumping off point for a system aimed at natural person credit unions. Baker said she also expects NCUA to issue final regulations on disclosures in private deposit insurance conversions and credit union conversions to mutual savings banks. NCUA has issued proposals on both issues to help provide more information to members before they vote on either conversion. The proposed regulations kicked up some dust as some industry officials charged that NCUA was overstepping its bounds. -

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