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FEDS OK ANTITRUST SETTLEMENT WITH VISA AND MASTERCARD

NEW YORK-The Department of Justice filed papers to implement the settlement of its antitrust suit against Visa and MasterCard, which will prevent the two card networks from barring merchants from steering transactions to lower-cost cards.

In documents filed with the U.S. District Court for the Eastern District of New York the DoJ said public comments it received support the terms and entry of a final judgment in the landmark antitrust case "will provide an effective and appropriate remedy for the antitrust violations alleged in the (suit)."

In its suit, DoJ and 18 states alleged that Visa's and MasterCard's non-negotiable rules-known as "merchant restraints"-insulated the card networks from competition.

The settlement prohibits Visa and MasterCard from enforcing rules prohibiting merchants from encouraging customers to pay with a competing credit card or with cash, checks or debit cards. The consent decree also restricts rules prohibiting merchants from promoting a type of payment through customer discounts, rebates, or free goods and services.

DoJ alleges the anti-steering rules in place at Visa and MasterCard reduces consumers' opportunities to use lower-cost cards, stifles innovation and denies information to consumers about lower-cost options. "Merchant Restraints also have heightened the already high barriers to entry and expansion in the network services market," claims the antitrust suit.

The antitrust suit also names American Express as a defendant but AmEx has refused to settle.

 

CU CHAMPION KANJORSKI GETS CONSUMER AWARD

WASHINGTON-Former U.S. Rep. Paul Kanjorski, the long-time congressional champion for credit unions, was awarded a lifetime achievement award from the Consumer Federation of America.

Kanjorski, who served 26 years in the House until his defeat last year, received the Philip Hart Public Service Award.

As a leader in the House Financial Services Committee, Kanjorski made exceptional contributions to financial services reforms. In the late 1990s, the Pennsylvania Democrat spearheaded successful efforts to pass legislation ensuring greater consumer access to credit unions, known as HR 1151, the CU Membership Access Act. He also introduced almost every major credit union bill over the past 15 years, including recent bills creating the corporate credit union bailout fund and efforts to raise the member business loan limit on CUs.

Credit unions were instrumental in creating the Consumer Federation and always hold three seats on its board, for a representative from CUNA, NAFCU and CUNA Mutual Group.

Following the Enron and Worldcom scandals, he led House investor protection efforts that culminated in passage of the Sarbanes-Oxley Act and, since then, he also fought to preserve these reforms. In 2003, he helped persuade Congress to expand fair credit reporting protections for consumers. Before and during the recent financial crisis, he advocated predatory lending reforms that were incorporated in the Dodd-Frank Act. And during the same period, he advanced proposals to reform credit rating agencies and strengthen the Securities and Exchange Commission that were also included in this legislation.

 

NCUA OFFERS $1.75M IN COMM. DEVELOPMENT GRANTS

ALEXANDRIA, Va.-NCUA has opened the application period for $1.75 million in small technical assistance grants it will be awarding through its Community Development Revolving Loan Fund. The grants will help fund operating expenses, financial education programs, volunteer income tax assistance, partnership and outreach and staff and director training. This year NCUA will also award grants for urgent needs to help credit unions in jeopardy. Credit unions wishing to participate in the programs must be designated as a "low-income" credit union by NCUA.

 

CUSO INVESTMENT RELIES ON 'PRIMARILY SERVES' TEST

ALEXANDRIA, Va.-A federal credit union may buy or invest in an existing insurance agency as a CUSO only if the insurance agency meets NCUA's "primarily serves" customer base test, that is, the insurance agency primarily serves CU members, NCUA said.

"Before making an investment, an FCU must determine whether a CUSO meets the customer base test," said NCUA. That means "the CUSO primarily serves credit unions, the FCU's members, or the members of other credit unions contracting with the CUSO."

NCUA denied any firm guidelines to meet the "primarily serves" threshold, but said a CU should consider a number of variables, including the number of affiliated members served, gross or net revenues derived from members; members' assets under management, the number of policies and services sold to members and the availability/accessibility of services to members.

The CUSO, said NCUA, must meet the customer base requirement at the time an FCU invests in it and the requirement is for the duration of the FCU's investment.

The credit union's board, "must vigilantly reassess the customer base requirement on a constant basis," said NCUA. "To do otherwise would permit a large loophole in the CUSO rule, allowing negligent or unscrupulous CUSOs to ignore the customer base requirements once fully funded from FCUs. This practice could easily lead to safety and soundness problems, and perhaps even threaten the (National CU Share Insurance Fund)."

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