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LISA MCCUEVICE PRESIDENT OF COMMUNICATIONS
EDITOR-IN-CHIEF
MICHELLE WILLITSManaging Editor
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ALEX MCVEIGHSTAFF NEWSWRITER
TOM SAKASHSTAFF NEWSWRITER

News Now

News Now: January 26, 2015

Act fast: Don't miss today's webinar on RBC2 impact, continuing concerns

Washington
WASHINGTON (1/26/15)--There is still time to register for today's free webinar from the Credit Union National Association on the National Credit Union Administration's revised risk-based capital proposal (RBC2). The 60-minute webinar is scheduled for 1 to 2 p.m. (ET).

CUNA President/CEO Jim Nussle, Chief Policy Officer Bill Hampel and Deputy General Counsel Mary Dunn will discuss how and to what extent the new proposal addressed the significant concerns CUNA members raised with the first proposal.

CUNA staff will go into details of the organization's estimator tool, which is scheduled to go online today. The estimator will allow credit unions to plug in their own numbers and estimate the full impact the proposal would have on their operations.

The webinar will also feature the CUNA economic team's analysis of the impact the proposal will have, as well as other areas of continuing concern.

CUNA staff will show credit unions what they need to assess their own outcome under the proposal, including the estimator tool, in addition to the proposal's broader implications for the credit union community.

In addition to CUNA staff, NCUA Director of Examination and Insurance Larry Fazio will break down the proposal, including reasons behind many of the changes from the original proposal.

Nussle, Hampel, Dunn and Fazio will also answer questions from participants, as time allows.

The RBC2 proposal was released at the NCUA's Jan. 15 board meeting, almost a year after the original proposal was introduced. While it contains improvements over the original, it is still a "solution in search of a problem," Nussle said.

The proposal will have a 90-day comment period, which will begin once it is published in the Federal Register , which is expected in the coming weeks.

CUNA, trades unite to urge Congress on data security action

Washington
WASHINGTON (1/26/15)--A group of financial trade organizations, including the Credit Union National Association, has written to Congress with a set of principles to serve as a guide for potential data security legislation.

President Barack Obama has spoken of the need for such legislation, and the House subcommittee on commerce, manufacturing and trade will host a hearing this week examining what sound data breach legislation should look like.
 
CUNA President/CEO Jim Nussle said the joint letter--with credit unions and banks uniting in a single message--serves to underscore the importance that legislative action be taken to plug the gaps in data security rules that apply to merchants.
 
The letter reads, "Some industries--including the financial industry--are required by law to develop and maintain robust internal protections to combat and address criminal attacks, and are required to protect consumer financial information and notify consumers when a breach occurs within their systems that will put their customers at risk.
 
"The same cannot be said for other industries, like retailers, that routinely handle this same information and increasingly store it for their own purposes."
 
The letter is signed by CUNA, the American Bankers Association, the Consumer Bankers Association, the Financial Services Roundtable, the Independent Community Bankers Association, the National Association of Federal Credit Unions and The Clearing House.

The list of principles the organizations believe should serve as a guide when drafting data breach legislation are:
  • Strong national data protection and consumer notification standards with effective enforcement provisions that are applicable to any party with access to important consumer financial information;

  • Banks and credit unions are already subject to robust data protection and notification standards. These Gramm-Leach-Bliley Act requirements must be recognized;
     
  • Pre-emption of inconsistent state laws and regulations for strong federal data protection and notification standards;

  • In the event of a breach, the public should be informed where it occurred as soon as reasonably possible to allow consumers to protect themselves from fraud. Credit unions and banks should be able to inform their customers and members about the information regarding the breach, including the entity at which the breach occurred; and

  • Requiring the costs of data breaches to be borne by the entity that incurs the breach.
Financial institutions are subject to significant federal requirements regarding protection of information and consumer notification, and they are also subject to federal oversight, examination and sanction authority.

"This extensive legal, regulatory examination and enforcement regime ensures that financial institutions robustly protect American's personal financial information," the letter reads. "In contrast, retailers that accept electronic payments face no similar requirements or oversight, and as a result millions of American consumers' personal financial information has been compromised in recent years."

According to surveys conducted by CUNA on the Home Depot and Target breaches, those events cost credit unions roughly $60 million and $30 million, respectively.

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Kenyan CUs intersect with Gates' vision to alleviate poverty

CU System
SEATTLE (1/26/15)--An annual letter from the Bill & Melinda Gates Foundation sets out a vision of "unprecedented opportunities" for the world's poorest people in the next 15 years. Part of that vision is access to financial services--a service that globally credit unions already are providing through mobile banking.
 
Click to view larger image (Bill & Melinda Gates Foundation Graphic)
"One interesting feature of digital financial innovation is that some of it is happening in poor countries first," the letter noted. "But because there is strong demand for banking among the poor, and because the poor can in fact be a profitable customer base, entrepreneurs in developing countries are doing exciting work--some of which will 'trickle up' to developed countries over time."
 
Some of that exciting work is already being advanced by the World Council of Credit Unions and the E-Kenya Savings and Credit Cooperative Society (SACCO).
 
E-Kenya SACCO delivers financial services to rural Kenya using mobile technology and the M-Pesa mobile money transfer network.
 
More and more members come online each day, said Matt Garcia, World Council cooperative development program projector director. Using mobile phones, Kenyans can transfer money from M-Pesa to their savings accounts at E-Kenya, where they can earn between 6%-8% interest, Garcia said.
 
"M-Pesa is like a checking account--it can be used to pay utility bills, send money to people or buy groceries," Garcia told News Now . "It makes it very easy to get to their funds."
 
However, if Kenyans "store" their money with M-Pesa, the key benefit is the access. By transferring it to an E-Kenya account, they can earn interest and build their assets, Garcia said. Funds can be transferred between accounts at any time.
 
In a country of 42 million people, 28 million--71%--have cell phones, and nearly half of mobile users have Android-based smart phones.
 
The Gates letter forecast that by 2030, 2 billion people who don't have a bank account today will be storing money, making payments and even procuring loans and insurance with their phones.
 
Bill Gates, co-founder of Microsoft Corp., formed the foundation in 2000 with his wife, Melinda. This year's letter envisions the poor will be living longer and in better health, have more opportunities for education and will have access to nutritious food.
 
"The rich world will keep getting exciting new advances too, but the improvements in the lives of the poor will be far more fundamental--the basics of a healthy, productive life. It's great that more people in rich countries will be able to watch movies on super hi-resolution screens. It's even better that more parents in poor countries will know their children aren't going to die," the couple wrote.

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CUNA, Defense CU Council meet with CFPB on CU exemption from lending changes

Washington
WASHINGTON (1/26/15)--Credit unions should be exempt from proposed changes to the Military Lending Act (MLA), Credit Union National Association and Defense Credit Union Council (DCUC) staff told federal regulators Friday.

The meeting was with staff from the Consumer Financial Protection Bureau (CFPB), which is working in close collaboration with the Department of Defense (DOD) to finalize the proposal.

The changes would amend the MLA to place a 36% cap on the annual percentage rate (APR) of interest charged by credit products covered by the regulation, which includes credit cards. It would also require creditors to provide additional disclosures and consumer protections.

CUNA is concerned that the regulation would hamper credit unions' ability to extend credit to servicemembers and expressed concerns in its December comment letter on the proposal. This was followed by a supplemental comment letter earlier this month.

CUNA and the DCUC noted during the meeting that credit unions are not part of the problem that the proposed changes are meant to address--predatory lenders that alter products to skirt MLA requirements, which is what the proposed changes intend to combat. Therefore credit unions should not fall under the proposed rule changes.

CUNA also urged the CFPB to work with the DOD to ensure the proposed changes will not adversely affect credit unions' ability to make Payday Alternative Loans (PALs), which is a program created by the National Credit Union Administration.

NCUA Chair Debbie Matz previously expressed concerns that the PAL program would be affected by the new regulation and sent her own letter to the DOD, asking for PALs to be exempt from the proposal.

During the meeting, CUNA also expressed reservations about the proposed changes to the process by which creditors determine whether a consumer is a "covered borrower" using the Defense Manpower Data Center database, should the DOD not exempt credit unions from the proposal.

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CU tax-help programs ready for new healthcare questions

CU System
HELENA, Mont. (1/26/15)--This year brings the first tax season that will require Americans to navigate the nuances of the Affordable Care Act when filing their taxes.

That only makes the U.S. Internal Revenue Service' Volunteer Income Tax Assistance (VITA) program all the more important for those who have a difficult time preparing taxes.

Fortunately, credit unions nationwide have once again stepped up this year to help bring the program to those citizens who need it most.

VITA is a free, tax-assistance program that was created to help taxpayers such as the economically disadvantaged, handicapped, non-English speaking and elderly, among others. To qualify, a citizen must earn an adjusted annual gross income of $53,000 or less.

Montana Credit Unions for Community Development (MCUCD) has initiated a number of activities that will help deliver VITA to those in need, including the coordination of an event at the end of the month with AARP where residents can walk in off the street and receive help preparing their taxes.

It's an event where "people can walk in and get their taxes done, as a way to kick off the season," Alana Listoe, public relations manager for the Montana Credit Union Network, told News Now .

This tax help is especially important this year because of the added layer of the Affordable Care Act.

"The biggest thing this year is, the Affordable Care Act says that everyone has to have health insurance," said Carin McClain, VITA program manager for MCUCD. "Filing a 1040 is how you report to the government how you're complying with that law."

In addition to traditional tax-assistance services, VITA volunteers helping people on the day of the MCUCD-AARP joint event--in addition to volunteers associated with any of the 27 Montana-based credit unions that will provide similar services--will help people determine whether they qualify for exemptions to the health care law.

VITA volunteers can decipher language and help participants understand the guidelines and determine requirements for individuals or families, Listoe said.

Those without health insurance in 2014 are required to pay the "shared responsibility payment," which will run about $95 for most citizens, a fee that will climb in subsequent years.

"Because we're the charitable arm of the trade association we have the ability to do this work through our credit unions and make more of an impact with our partnerships," McClain told News Now . "I think it's a very special setup."

In addition to those from Montana, credit unions nationwide are pitching in to ensure that citizens who need tax-assistance receive it, for example:
  • Royal CU, Eau Claire, Wis., with $1.4 billion in assets, will once again assist the VITA program by offering free office space for volunteers to set up and meet with citizens who need the assistance. The service will be available Feb. 2-April 8; and
     
  • Travis CU, Vacaville, Calif., with $2.2 billion in assets, will host free services through the VITA program at its headquarters on specified days in the coming months.

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More than 90% of 2014 data breaches were preventable, report says

Washington
SEATTLE (1/26/15)--More than 90% of data breaches that occurred in the first half of 2014 could have easily been prevented, according to the 2015 Data Protection Best Practices report from the Online Trust Alliance (OTA).

The nonprofit organization, which has a mission to "enhance online trust," analyzed more than 1,000 breaches involving the loss of personally identifiable information in 2014.

It found that 40% were the result of external intrusions, 29% were caused by employees due to a lack of internal controls, 18% were due to lost or stolen devices or documents and 11% were due to social engineering scams or fraud.

According to OTA, its recommendations for assessing third-party vendors would have prevented and contained the breaches at Target and Home Depot--breaches that have cost credit unions close to $100 million.

Some of the recommendations included in the report are:
  • Enforce effective password management policies by using multifactor authentication (e.g. passwords and one-time PINs), requiring the use of passwords for external vendor systems that are different from internal systems and deploying a log-in abuse detection system that monitors connections, login counts, cookies and other data;

  • Run accounts with as few privileged access levels as possible, which is known as least privilege user access (LUA). For example, allow a user to edit documents or emails but do not give access to download payroll data or member lists;

  • Use multilayered firewall protections that include up-to-date antivirus software and whole-disk encryption on all laptops, mobile devices and other equipment with sensitive data;

  • Implement a mobile device management program that requires authentication to unlock a device, locks a device after five failed login attempts and enables remote wiping of a device should it become lost or stolen; and

  • Permit only authorized wireless devices to connect to a network, including point-of-sale terminals and credit card devices. This includes encrypting communications with all wireless routers and printers. Keep "guest" network access on separate servers and access devices with strong encryption.
OTA has also included a risk assessment guide as part of its report. The policies in the guide echo the proposals outlined by President Barack Obama his recent remarks regarding data security.

The Credit Union National Association continues to urge the U.S. Congress to  increase data security standards for merchants so they are more aligned with the higher standards required of credit unions and other financial institutions. (See story: CUNA, trades unite to urge Congress on data security action.)

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LinkedIn group a home for new bank-to-CU employees

CU System
HARRISBURG, Pa. (1/26/15)--Communities are built on common ground and the sharing of ideas. With that in mind, the Pennsylvania Credit Union Association (PCUA) has formed a networking group on the social media site LinkedIn for former bankers who have found a new "home" in credit unions.
 
The purpose of the group is to provide a venue through which former bankers can connect with and learn from one another and make their transition into the credit union space easier and more successful, according to the league.
 
The group was created by PCUA staff who responded to a challenge from President/CEO Patrick Conway to think outside of the box.
 
Conway said many former bankers populate leadership roles in credit unions and leagues. "They've added a new dimension to our dialogue," Conway told News Now . "This is exciting, and it's something that will add value."
 
The invitation was issued to members last week in the PCUA's newsletter, and the group has already received an enthusiastic response, said Molly Snody, PCUA director of business advisory services. "People have been very willing to introduce themselves and share how much they love credit unions," said Snody, herself a former banker, told News Now .
 
The PCUA will include a pre-conference breakout session for the ex-bankers group at its annual conference in May. The event will include a question-and-answer session and networking opportunities.
 
Snody said she is confident that the former bankers will agree on one important point: Credit unions truly are different than banks.

"Coming from banks, we come with a lot of misconceptions," Snody said. "I know I was told, 'If it walks like a duck and talks like a duck, it's a duck.' I learned credit unions aren't at all like banks. I think a lot of us, having been on the other side, can attest to that, maybe even better than someone who has worked for credit unions their entire career."

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Goldenwest marshals members for political advocacy

CU System
OGDEN, Utah (1/26/15)--Goldenwest CU, Ogden, Utah, with $1 billion in assets, has initiated a member advocacy group that offers its members an opportunity to provide lawmakers with a consumer's-eye view of the difference credit unions make in the financial lives of their members.
 
The idea sprung from Goldenwest CU Vice President of Marketing Diana Windley's service on the Utah Credit Union Association's Legislative Affairs Committee. As part of that commitment, Windley met with the members of the state's Congressional delegation to advocate for credit unions.
 
"It's good when people within the industry advocate for credit unions, but it can be more powerful when the constituents who are really benefiting from the service they receive from a credit union contact their legislators," Windley told News Now . "Those everyday members are the ones who are benefiting from the difference between a bank and a credit union. Giving those members an opportunity to have a voice with their senators and representatives can really make a difference."
 
Windley said Goldenwest is currently preparing members for the future when a strong voice is particularly needed. "We are in close contact with our state association," Windley said. "[Utah Credit Union Association President/CEO] Scott Simpson is our leader, and he very much has his finger on the pulse on what is going on. He will let us know when this type of resource is necessary. We don't think it's 'if' we need to be ready, but 'when' we need to be ready. Scott is very realistic. He knows we need to prepared."
 
Windley said Goldenwest CU would also like to use the advocacy group at the local level. Utah's political process begins every two years in neighborhood caucuses throughout the state where members of each precinct vote for delegates to represent them at county and state party conventions. Delegates then attend the conventions to vote for candidates who will then face each other in the public general election.
 
"We encourage credit union members and employees to be active in their neighborhood, county and state caucuses because we want credit unions to have a voice," Windley said. "We also value our advocacy at a local level."

Other Resources

World Council shares 12 tactics to reach Gen Y globally

CU System
MADISON, Wis. (1/26/15)--The World Council of Credit Unions has released a guide that offers credit unions ideas for reaching the global young adult market.

Click to view larger image (World Council of Credit Unions Graphic)
"International Lessons for Young Adult Membership Growth" offers 12 growth strategies that have worked for credit unions in Australia, Brazil, Canada, Kenya, Mexico, Poland and the United States.

The strategies include:
  • Provide core services online and via mobile. Young adults expect to use online and mobile technology to manage their finances, just as they use these channels for information, entertainment, social and payment services;
  • Leverage payment services to respond to expectations for convenience. Many young people are unbanked but not unconnected. When credit unions offer online and mobile bill payment services, their relationship with members becomes stronger and allows credit unions to introduce other financial services;
  • Design products for life transitions. Young adults go through life transitions as they pursue their education, start careers, get married, buy a home or have children. These transitions pose opportunities to offer financial services;
  • Differentiate with social responsibility. Young adults prefer to belong to institutions with ethical reputations that pride themselves on "doing good;"
  • Shift to a culture that "wows" members. Young adults expect things fast and easy, and respond more to experience than product;
  • Turn young employees into ambassadors. According to the Filene Research Institute, young employees tend to embrace credit union ideals but are often uncertain about how to articulate them. When young employees clearly understand the credit union difference, they can become ambassadors for the organization. Help them communicate that message;
  • Represent youth in governance. If credit unions are serious about serving young adults, young adults must be represented in the boardroom;
  • Embrace diversity. According to the the U.S. Census Bureau, Gen Y is the most ethnically diverse in history. Accordingly, product design and delivery must be tailored to different communities;
  • Motivate peer recommendations. Use a marketing and service strategy that rewards young adult members by enlisting their natural tendency to connect and bring in new members through peer recommendations;
  • Initiate incentive programs. Because of their social connectedness, young adults tend to rely more on references from one another than on institutional reputations. By creating incentives that not only provide lower rates but also improve the entire borrowing experience, young adults are more likely to be long-term loyal members and spread the word about service;
  • Engage on social media; don't just post. Through social media, young adults have the ability to make connections that previous generations could only dream of. As a result, credit unions have a distinct opportunity to be a part of young adults' connections through social media; and
  • Offer financial management and literacy tools outside the classroom. According to the Filene Research Institute, young adults' financial literacy is typically low--even amongst those with high levels of education and income. Although they might not admit it, they could use assistance with debt management.

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