WASHINGTON (5/24/13)--While a new Federal Reserve survey claims the interchange fee cap exemption is working for small issuers, details about credit unions' experience in this area are not fully reflected and the Credit Union National Association is talking with the agency to find out more about the survey results, CUNA President/CEO Bill Cheney said Thursday.
 
CUNA continues to closely monitor the impact of the interchange cap and whether market forces appear to drive down the fees that the exemption for smaller institutions is intended to protect.
 
"These results are welcome in the short term for credit unions across the country, but we continue to have grave concerns about debit interchange income for credit unions over the longer term, and question whether these results will stand over time," Cheney said.
 
The information was gathered from survey responses from the payment card networks and 102 small depository institutions. CUNA has reached out to the Fed to clarify how many of these respondents were credit unions, since the number is not apparent from the information released.  The Fed had asked 1,000 small financial institutions to take part in the survey.
 
The Fed's final rule implementing the interchange law capped large issuer debit interchange fees at 21 cents. An additional five basis points per transaction may be charged to cover fraud losses, and an extra penny may be charged by financial institutions that are in compliance with established fraud prevention standards. Most credit unions are exempt from the fee cap.
 
Information on network exclusivity provisions and compliance costs is also included in the Fed report.
 
For the full Fed release, use the resource link.

WASHINGTON (5/24/13)--Legislation that would tie student loan interest rates to 10-year U.S. Treasury notes, and allow those student loan rates to reset each year, was passed by the U.S. House on Thursday.

The Smarter Solutions for Students Act (H.R. 1911) passed the House by a 221 to 198 vote.

According to a U.S. House release, H.R. 1911 would:

• Calculate subsidized and unsubsidized Stafford loans using a formula based on the 10-year Treasury note plus 2.5%;

• Calculate graduate and parent PLUS loans using a formula based on the 10-year Treasury note plus 4.5%;

• Cap Stafford Loan interest rates at 8.5% and cap PLUS loans at 10.5%.

The bill will now move on to the Senate. The federal student loan rate is currently capped at 3.4%, and this limit will double to 6.8% on July 1 if Congress does not take action.

Other student loan fixes introduced in the House and Senate include:

• The Student Loan Affordability Act (S. 953), which would cap federal student loan rates at 3.4% for another two years;

• The Bank on Students Loan Fairness Act (S. 897), which would offer federal student loans at the same rates that are charged to banks through the Federal Reserve discount window. That rate is currently 0.75%; and

• The Student Loan Fairness Act (H.R. 1330), which would cap federal student loan interest rates at 3.4% and also allow some borrowers to refinance their student loan debt to improve their rate.

Sen. Kirsten Gillibrand (D-N.Y.) this week also announced the Federal Student Loan Refinancing Act, which would enable federal student loan holders with interest rates above 4% to refinance those loans at a fixed rate of 4%.

The Credit Union National Association's first annual High School Student Borrowing Survey, released last month, found that nearly half of high school seniors don't know how much they will need for college costs. That lack of knowledge translates to a greater student-debt burden after college.

In a recent meeting with Consumer Financial Protection Bureau officials, CUNA said credit unions could do more to help debt-saddled grads if the maximum credit union student loan maturity of 15 years was increased. (Use the resource link for an April 23 News Now story: CFPB Seeks CU Help For Student Loan Issues.)

MADISON, Wis. (5/24/13)--Key performance indicators (KPIs) such as return on assets, net promoter score and loan to assets, are used by credit unions because they are the easiest to measure, aggregate and compare, according to a new paper from the Filene Research Institute. However, they do not address credit unions' identity crisis--the need to form and describe a business model that is different from noncooperative financial institutions.
 
The report, "An Examination of Key Performance Indicators Reported by Credit Unions In North America," surveys the key performance indicator practices of 23 medium to large U.S. and Canadian credit unions.
 
Most credit union managers are so devoted to their established KPIs that they don't stop to imagine what metrics are right for measuring a credit union's values and its value to members, said the report's author Daphne Rixon, associate professor and executive director, Centre of Excellence in Accounting and Reporting for Cooperatives, Saint Mary's University, Novia Scotia, Canada.
 
"Even though credit unions measure these and other common financial indicators, something is missing from a cooperative that obsesses about financial metrics while ignoring other important points," Rixon wrote. "Credit unions have to consider strategy, regulation, their own users, and industry benchmarks. But what about community engagement and social responsibility? What about engaging stakeholders, not just shareholders? What about meaningful reporting to shareholders and stakeholders?"
 
She offered several suggestions:

• Address the identity crisis. Credit unions live many of the seven cooperative principles, but sophisticated and unsophisticated credit unions alike struggle to measure and, equally important, report on activities that are fundamental to cooperative credit unions.

• Develop appropriate benchmark data. With confusion about how best to make comparisons, credit unions are left with measuring and comparing only financial results. Rixon recommended creating national committees (in Canada and the U.S.) to investigate and sponsor no more than 10 KPIs and calculate methodologies for each. She also recommended a two-year pilot with anonymous reporting from a cross section of credit unions to gauge the effectiveness of the KPI system.

• Encourage stakeholder engagement. Rixon encouraged credit unions to get beyond "tokenism" at annual general meetings and in board elections. Incentivizing member and employee groups (beyond the board) to actively participate in setting strategic priorities would lead to more authentic involvement.

• Monitor the International Integrated Reporting Council (IIRC). IIRC is an international group that is already working on KPIs that would apply well to the varied priorities of credit unions, Rixon said. The IIRC's pilot project concludes in 2013; credit unions should note the results and consider adopting or modifying the suggested KPIs for their own use, she said.

To download the report, use the link.

MADISON, Wis. (5/24/13)--While a vault in the now-destroyed Moore, Okla., branch of Tinker FCU is getting credit for saving the lives of 22 people during Monday's tornado, the stories they brought out with them indicate heroic measures taken by credit union staff to keep the vault door closed and people inside safe.
 
National media, knowing a good miracle story when they hear one, began reporting on the survival of the 14 employees and eight members Wednesday. Reports of the group making it safely through the tornado appeared on CNN,NBCNightly News With Brian Williams, ABC News, the Huffington Post,NPR and more. The story went around the world, with United Kingdom's Daily Mail picking it up with photos of the vault's occupants being helped out of the vault after the tornado.
 
Jan Davis, the branch manager, and employee Teresa Price described to CNN's Wolf Blitzer how they hid in the small vault as the building around them."  Blitzer asked if it were crowded. Davis didn't hesitate. "It was crowded," she said, "but if there had been more people we would have crowded them right in."
 
Price described the loud crashing sounds and feeling the walls taking the impact. "The vault was rocking, cracking," and "people were praying out loud."
 
Davis said staff tried to keep everyone calm with constant conversation and good feelings and positive statements.  When it was over, there was "devastation," said Price.  Davis added they knew there would be nothing left when they opened the door.
 
"I was one of the members in the vault yesterday," Dena Clarke wrote on the credit union's Facebook page. "You all should be so proud of your employees! Everyone, especially Jan the branch manager, acted so heroically to keep everyone safe. I am so thankful! Our family loves TFCU!"
 
ABC News reported that Clarke, 23, was in the middle of a transaction, when the tornado sirens went off and the teller told her they needed to go into the vault.
 
As the group crowded into the vault, Davis and a police officer monitored the situation by watching the TV and looking out the window. At least one passerby came into the credit union seeking shelter. The group included a 10 year-old-boy with an iPad and elderly members.
 
The power went off and they closed the door just before the tornado hit.
 
But there was a problem. They couldn't get the door closed all the way from the inside. Someone took off a belt and looped it through an opening meant to let in oxygen and they tugged the vault door closed as much as possible. The manager, the police officer, and another employee held the door shut "just in case."
 
As the tornado hit and they could hear what sounded like a freight train and felt immense pressure in their ears, things started hitting the vault, said Clarke, who said that Davis, hanging onto the door to prevent it from opening, yelled, "Don't let go. Don't let go."
 
Clarke said she doesn't know how they kept the vault door shut.  Debris began flying in the cracks of the door and glass cut the feet of people wearing sandals. It became difficult to breathe because of the dust and debris.
 
Then it was over. They tried to open the door, but debris was piled up against it.  Someone texted 911 to say they were trapped and could smell gas. Before authorities arrived, however, the group heard people passing by and shouted, and everyone was rescued.
 
Comments on the CNN site after the interview lauded the credit union's staff for "quick thinking," although Davis said they were following the disaster procedures. One commenter wrote, "Those credit union members really got their money's worth on their membership."
 
Comments on the ABC site included one from a tornado survivor in Missouri.  "I tried to seek shelter at a Bank of America in Missouri when tornado sirens were going off. The employees had locked the door and were carefully not looking outside" for security reasons.
 
For more information, check out the videos, photos, and news reports.

BOSTON (5/24/13)--The number of branches built by credit unions and banks are expected to decrease between 30% and 40% in the next decade, according to Celent, a Boston-based financial services research and consulting firm.
 
Branch growth the past 40 years has exceeded population growth, said Celent's report, "Branch Boom Gone Bust: Predicting a Steep Decline in U.S. Branch Activity. "The U.S. retail banking branch network has yet to respond to the obvious migration of customers to new digital alternatives," said the report's abstract.
 
In 1970, there were 107 branches for every million individuals. By 2011, that had grown to 270 branches per million.
 
"There is every reason to suggest branch densities would be substantially lower now than 30 years ago, but just the opposite has occurred," said Bob Meara, senior analyst with Celent's Banking Group and co-author of the report. "Given this trend, a slow, but inexorable reduction in U.S. branch density seems unavoidable."
 
"Beyond simply reducing the number of operating branches, what is needed is a fundamental redesign of retail operating models. Rather than resisting the trend, banks should welcome it and reinvest the savings," Meara added.
 
Jim Holt, president of Wichita, Kan.-based, $197 million asset Mid American CU, said branches will remain an important part of how the credit union delivers its services and are expected by members.  In the past 20 years, the credit union has learned that members want every conceivable option to access the credit union they can get, including Internet and mobile banking, ATMs and branches, he told the Wichita Eagle (May 23).
 
Branches likely will change by becoming physically smaller but still must meet consumers' expectations and needs, he told the newspaper.
 
Mid American CU opened a full-service branch earlier this year and the board likely will be discussing the credit union's branch strategy, he told the publication.  It has two full-service branches in Wichita, a branch it jointly owns and operates with Cessna Employees CU in south Wichita, and a branch it acquired in Arkansas City.
 
Still, Celent indicates that  financial institutions must adapt to consumers' increasing use of online and mobile banking services.
 
"If banks don't align their multichannel strategies with this seismic shift in consumer preference, they'll be at a significant competitive disadvantage," said Stephen Greer, analyst with Celent's Banking Group and co-author of the report. "Financial institutions have their work cut out for them because transforming the branch network is neither cheap nor easy."

MERIDEN, Conn. (5/24/13)--

Barbara Bass, vice president of education and human resource development at the Credit Union League of Connecticut, accepts a proclamation by Connecticut Gov. Dannel P. Malloy praising Connecticut credit unions' Financial Reality Fair program from Fred Brown, director of marketing and member development of Northeast Family FCU. (Photo provided by the Credit Union League of Connecticut)

Connecticut Gov. Dannel P. Malloy has sent an official proclamation to the Credit Union League of Connecticut praising the value of its Financial Reality Fair program. The program is sponsored by Connecticut credit unions.
 
In his proclamation, Malloy encouraged all citizens of the state to engage in education about financial management for personal well-being.
 
"I congratulate the Credit Union League of Connecticut for organizing and hosting this event and applaud all students in attendance for making the decision to take charge of their financial futures," said the proclamation.  He encouraged  "all citizens of Connecticut to engage in education about personal finances through events such as the Financial Reality Fair."
 
Fred Brown, Hartford Chapter president and director of Marketing and Member Development, Northeast Family FCU in Manchester, presented the proclamation to Barbara Bass, the league  vice president of education and human resource development, at a recent chapter  quarterly meeting.
 
During the 2012-2013 school year, Connecticut credit unions provided seven fairs hosting more than 2,800 high students from 72 schools. In the past five years since its inception, the Connecticut program has engaged more than 12,000 high school students in learning to budget basic living expenses and lifestyle choices according to their chosen field of future employment.
 
More than 100 credit unions and businesses have participated and/or donated their time, effort, and monetary contributions to make this program not only successful, but also essential to the future of participants in the local as well as national economy.
 
"What makes this program so worthwhile," said Bass, "is the fact that when money management skills are learned early on, good financial habits are instilled and carried forward for a lifetime of security and success."
 
Since Connecticut began conducting Reality Fairs, the idea has caught on in a number of states. The National Credit Union Foundation's REAL Solutions program champions programs such as reality fairs and has encouraged them. In February, NCUF hosted its Financial Reality Fair during the Credit Union National Association's Governmental Affairs Conference  in Washington, D.C. (News Now Feb. 12).

Leagues and credit unions throughout the nation have been active in the interactive financial literacy tool for high school students.

WASHINGTON and MADISON, Wis. (5/24/13)--The Washington, D.C, and Madison, Wis., offices of the Credit Union National Association will be closed Monday in observance of the Memorial Day holiday.

News Now will not post a Monday issue but will resume regular publication on Tuesday.

WASHINGTON (5/24/13)--Fixed-mortgage rates in the U.S. are trending higher for a third consecutive week, putting pressure on refinance momentum, according to Freddie Mac's Primary Mortgage Market Survey released Thursday.

That could help credit unions, which get a good amount of loans from mortgage refinancings. "Higher rates may initially boost originations by drawing purchasers into the market and convincing those who haven't refinanced to do so before rates increase further--in both cases a 'get while the gettin's good' response," Mike Schenk, vice president of economics & statistics for the Credit Union National Association, told News Now.
 
"We think most who can refinance have already done so, but also know there is a tremendous amount of pent-up demand, improving labor markets--higher confidence, higher incomes--and high affordability despite the rate increases," he added.

Despite the upward trend, mortgage rates remain low, helping to keep home-buyer affordability high, which should further aid home sales and construction in coming weeks, Freddie said.

"Fixed rates moved up for the third consecutive week, with the average 30-year fixed-rate mortgage (FRM) about a quarter-percentage point higher than three weeks ago," said Frank Nothaft, Freddie Mac vice president and chief economist. "While this may slow some of the refinance momentum, rates are nonetheless low and home-buyer affordability high, which should further aid home sales and construction in coming weeks.

"For instance, in April, single-family housing permits rose to the strongest pace since May 2008 while existing home sales for the same month grew the most since November 2009," he added. "Moreover, the National Association of Realtors reported that the median number of days on the market for these sales fell from 62 to 46 days, the fewest since it began collecting the data in May 2011."

The survey revealed this new information:

• The 30-year FRM averaged 3.59%, with an average 0.7 point for the week ending May 23, up from last week's 3.51%. Last year at this time, the 30-year FRM averaged 3.78%.

• The 15-year FRM this week averaged 2.77%, with an average 0.7 point, up from last week when it averaged 2.69%. A year ago at this time, the 15-year FRM averaged 3.04%.

• The five-year Treasury-indexed adjustable-rate mortgage (ARM) averaged 2.63% this week with an average 0.5 point, up from last week when it averaged 2.62%. A year ago, the five-year ARM averaged 2.83%.

• The one-year Treasury-indexed ARM averaged 2.55% this week with an average 0.4 point, the same as last week. At this time last year, the one-year ARM averaged 2.75%.   

Borrowers may still pay closing costs which are not included in the survey, Freddie said.

In a related matter, U.S. house prices rose 1.9% in the first quarter, from the fourth quarter 2012, according to the Federal Housing Finance Agency (FHFA) House Price Index. This is the seventh consecutive quarterly price rise in the purchase-only, seasonally adjusted index. To read the FHFA release, use the link.

WASHINGTON (5/24/13)--On this week's Home & Family Finance Radio, discover what makes small-business owners tick, new innovations in travel and how to manage your health with your phone.
 
In this episode, which you can listen to on the Internet, host Paul Berry, Washington, D.C., journalist and broadcaster, discusses these topics with special guests:

• "The DNA of a Small-Business Owner." Terri Shapiro, communications director for Deluxe Corp., Shoreview, Minn., discusses a recent survey her company commissioned that explored what makes successful small-business owners unique. The survey found, for instance, that 86% respondents believe they can do anything they set their mind to.

• "The Sharing Economy Reshapes Travel." Farnoosh Torabi, personal-finance journalist, author, and TV personality, New York, explains how sites like Airbnb, which allows people to rent their apartments and homes to visitors, is changing travel by providing alternatives to traditional lodging.

• "Manage Your Health With a Smartphone." Jeffrey Rice, a lawyer and physician with Healthcare Blue Book, Brentwood, Tenn., helps you avoid the quacks and select credible health-care apps for your smartphone.

Home & Family Finance is a resource center for personal finance information at the Credit Union National Association. The radio show is sponsored by CO-OP Network, the national credit union ATM network; Cabot Creamery Cooperative, maker of award-winning cheddar; and the Defense Credit Union Council and member credit unions, serving those who serve the country worldwide.
 
Home & Family Finance airs Sundays at 3 p.m. ET on the Radio America Network. The show also is carried on American Forces Radio Network. The one-hour program devoted to consumer finance issues is brought to you by America's credit unions and their 95 million members, and is presented by CO-OP Network.
 
CUNA and Radio America are podcasting Home & Family Finance through iTunes, Podcast Alley, Odeo, and other popular podcast library sites, as well as on Radio America and CUNA's websites.
 
For related information, read "Avoid the Quacks: Choose the Best Health Apps" and "Do You Need a Travel Agent?" in the Home & Family Finance Resource Center.