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CSS provider: It's time for CUs to re-evaluate overdraft programs

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FARMERS BRANCH, Texas (1/10/14)--Recent regulatory changes have created the need for most credit unions to re-evaluate their overdraft programs, John M. Floyd, chairman and CEO of John M. Floyd & Associates (JMFA), recently told the Cornerstone Credit Union League.
 
John M. Floyd & Associates is a CUNA Strategic Services provider.
 
As regulators and consumer groups continue to focus on the expectations of transparency and full disclosure of consumer products, an overdraft program that is not up-to-date can negatively impact a credit union's compliance and revenue, Floyd said (Leaguer Jan. 9)
 
"Now is the time to re-evaluate the overall effectiveness of your overdraft program--from a compliance standpoint--as well as how it affects member service and performance," Floyd said.
 
In the past several years, nearly all of the criticisms on overdraft programs--as well as reported fines and legal action--have focused on institutions that offer programs with dynamic overdraft limits or those that manipulate transaction processing order to increase overdraft fee income.
 
"Because dynamic overdraft limits are set using a complicated, ever-changing criteria-based matrix, it is impossible for a member to know his or her limit from day to day," Floyd said. "Or, for that matter whether or not an overdraft will be paid. Posting checks, ATM and debit card transactions in non-neutral order can cause financial hardship for members who may already be facing a difficult economic situation."
 
From a regulatory standpoint, these undisclosed procedures are discriminatory and will most likely result in increased scrutiny during a compliance exam or, in a worst-case scenario, in fines and legal action.
 
Transparent financial products and services are expected in today's financial services regulatory environment. To eliminate the risk of non-compliance, credit unions should make sure their overdraft program follows consumer-focused regulations, industry standards and best practices. Those standards and practices include:
  • Complete transparency regarding fees and program procedures;
  • Reasonable, communicated overdraft fees;
  • Clearly established overdraft limits;
  • Transaction clearing policies that avoid maximizing overdrafts and related fees created by the clearing order;
  • The ability to easily monitor excessive usage; and
  • Communications materials that outline alternative financial products that more appropriately fit the needs of excessive overdraft users.
 For credit unions, the Credit Union National Association points out, overdraft protection and courtesy pay are designed to be a service to their consumer members, who have asked that they have continued access to such programs.
 
National studies--one as recent as November 2013--show credit unions offer higher checking account interest rates and lower overdraft fees on average than banks. That study, by GoBankingRates.com, showed credit unions continue to demonstrate their ability to offer depositors higher average checking account returns, with rates at 0.32% APY compared with a 0.26% APY for banks.
 
And according to Moebs Services, median bank overdraft fees are also $30, while credit unions charge $28 for an overdraft.

NEW: W. Va. CUs still open despite federal disaster declaration

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CHARLESTON, W. Va. (1/10/14, UPDATED 3:20 p.m. CST)--Credit unions in and around Charleston, W. Va., are mostly open for business, despite the declaration of a federal emergency caused by a chemical spill into the drinking water system, the West Virginia Credit Union League told News Now.
 
"We've been in contact with all of the credit unions in the affected areas this morning as well as the NCUA regional office," said league President Ken Watts. Of the 22 credit unions that are affected, all but two are open for business.
 
The two that are closed are housed in facilities that did not open today--the federal courthouse in Charleston and the county vocational center in Eleanor. "Members at the other 20 credit unions have full access to their accounts and business is being conducted as usual," Watts said.
 
Up to 300,000 residents of nine counties surrounding the state's capital city are without tap water. This includes restaurants, hospitals, state and local government, and financial institutions..
 
President Barack Obama issued the federal disaster declaration for nine West Virginia counties: Kanawha, Boone, Logan, Lincoln, Putnam, Jackson, Roane, Clay and Cabell.
 
A 48,000-gallon storage tank filled with a compound to wash coal breached a containment wall at Freedom Industries before it flowed into the Elk River Thursday (The New York Times Jan. 10). 
 
As of Friday afternoon, Freedom Industries, the company responsible for the spill could not determine the amount of chemical leaked into the river.
 
The West Virginia League will be monitoring the situation throughout the weekend and will determine if any assistance is needed should the water ban extend into next week. "We are hopeful that this gets resolved in a quick and safe manner," Watts added.
 
Jeff McIntyre, president of West Virginia American Water, told CNN today that the company has no timeline for declaring when the water will be safe to do more than flush toilets.
 
Residents were told that the water should not be used for drinking, boiling, washing, cleaning, bathing or given to pets.
 
Water distribution centers have been set up in the Charleston area.

CU System Briefs (01/10/2014)

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  • BANGOR, Maine (1/10/14)--A fire in the boiler room area of Katahdin FCU Wednesday sent two people to the hospital and closed the Millinocket, Maine, credit union. One employee and a second-floor tenant suffered from smoke inhalation, according to Bangor Daily News (Jan. 8). The fire, which was discovered when employees arrived for work Wednesday, was restricted to the room and spaces between the first and second floors. Don Casko, president of the $68 million-asset credit union, told the paper that members can use a temporary office at Eastmill FCU, East Millinocket; one of more than 150 credit unions statewide through the  Maine Credit Union Shared Branch Network; or the national Credit Union Shared Branch Network.  It is unknown how long the credit union will be closed ...
  • COLUMBIA, S.C. (1/10/14)--Dispelling the myth that it can be inconvenient to use credit unions, Carolina Collegiate FCU launched its new campaign, Banking in Your Boxers. The Columbia, S.C., credit union highlights its many services that can be used at home or "anywhere else that pants are optional." The microsite lists options such as mobile banking and remote check deposit as well as online payments, electronic statements and text banking. "This is an opportunity for us to educate consumers that Carolina Collegiate offers many of the same conveniences the big banks offer, with the personal approach that most credit unions are known for," said Anne Shivers, CEO of the $84 million-asset credit union ...
  • AUSTIN, Texas (1/10/14)--In recognition of surpassing 100,000 members and $1 billion in assets in 2013, Austin, Texas-based A+ FCU awarded $10,000 to one of its members. Winner Carmen Hinojosa said, "The A+ service has been wonderful, and I've always felt welcomed at the branches." The grand prize capped an eight-month member appreciation celebration during which more than 530 members won items ranging from $100 to free groceries for a year ...
 

ExpressJet lands in Alliance CU financial wellness program

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CHICAGO (1/10/14)--Alliant CU announced that ExpressJet, the world's largest regional airline, has signed on to offer its 9,000 employees access to the Alliant Financial Wellness Program.
 
The Chicago-based credit union's financial wellness program helps members gain greater skill and confidence in handling their finances by providing them with a toolkit of personal finance resources.
 
ExpressJet operates as American Eagle, Delta Connection, and United Express.
 
The program includes:
  • Online financial wellness videos from personal finance expert and best-selling author Jean Chatzky;
  • Free quarterly credit scores;
  • Financial news and tips;
  • A personal financial management tool, which helps members create and manage their budgets, track their spending and identify ways to save and meet their financial goals;
  • Free on-demand financial courses, videos and games; and
  • A free online financial wellness assessment.
Chatzky will appear at the Credit Union Dollars and Sense Financial Fitness Pavilion at this weekend's NBC 4 Health and Fitness Expo in Washington, D.C. She is director of education at SavvyMoney and financial editor for the "Today" show. She was a keynote speaker at the 2013 Credit Union National Association Governmental Affairs Conference.
 
Alliant CU, with $8.1 billion in assets, has experience in serving airline professionals from its historical start serving the employees of United Airlines.

CU branch linked to community college fin-lit program

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MENTOR, Ohio (1/10/14)--Cardinal Community CU, with $172 million in assets, Mentor, Ohio, has taken the student-run branch to college. After opening a branch in a local high school in 2012, the credit union recently opened student-run branch at Lakeland Community College, Kirtland, Ohio.
 
The branch is part of a new financial-literacy education program at the college.
 
"We really saw a need for financial literacy," Christine Blake, Cardinal Community CU president/CEO, told News Now. "We partnered with the college because we both saw the benefit that this would bring to the community."
 
Blake has ties to Lakeland. Before taking over as CEO of Cardinal Community CU, she served as an adjunct professor at the college, where she taught accounting and auditing.
 
"The student branch didn't come as a result of my teaching, but by teaching there I had an appreciation of what was missing in terms of financial literacy," Blake said.
 
Lakeland Community College also previously hosted a credit union that merged into Cardinal Community CU.
 
"There were a lot of bits and pieces that made this a good fit for us," Blake said.
 
About 10 to 12 students are employed at the student-run branch under the supervision of a Cardinal Community CU branch manager. The branch is open 40 hours per week.
 
Each month the credit union, with participation and input from Lakeland faculty, will feature financial education sessions for students on a specific topic, Blake said. Cardinal will also offer four scholarships per year to qualified Lakeland students.

Morrow Memorial Scholarship one of many CU offerings

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MADISON, Wis. (1/10/14)--The Iowa Credit Union Foundation will award the first Warren A. Morrow Memorial Scholarship this year--only one of many that the credit union community will distribute to high school and college students.
 
Morrow, who was founder/CEO of Coopera Consulting and widely known for his Hispanic outreach efforts, died in 2012. The $5,750 in scholarships will go to high school seniors with a projected graduation date of 2014 and to students in accredited undergraduate, graduate or vocational programs.
 
The Morrow scholarships include an essay question, something that is common across credit union offerings. Its deadline is Feb. 7.
 
Many of the scholarships bear the names of community leaders. Applicants submit written or video essays about the benefits of being a credit union member or how the credit union helped them use money wisely.
 
Supporting higher education with scholarship funds is another example of how credit unions "Unite for Good" for their communities. A partial list of scholarships with spring deadlines are below.
 
  • The Ohio Credit Union Foundation opens its video scholarship contest Feb. 3 for an opportunity to receive $5,000 to pursue an undergraduate degree. Finalists will appear on the foundation's website, with the winner announced May 16 (eLumination Jan. 8).

    The 15 chapters of the Ohio Credit Union League offer scholarships to local students pursuing post-secondary education. Winners of the chapter scholarships are automatically entered to win an additional scholarship from the Ohio foundation, which awards five $3,000 state-level credit union scholarship grants.
  • In Kalamazoo, Mich., Educational Community CU will disburse 21 scholarships worth $24,000 to high school seniors, who must be a primary member of the $396 million-asset credit union to be eligible.
  • Members Advantage CU, Michigan City, Ind., has two scholarships--one that honors former board member Gail Walker and the other in memory of the first manager of the $87 million-asset credit union, Leona Bruno.
  • Students who are members of Justice FCU, Chantilly, Va., and interested in pursuing a degree in the field of justice can apply for scholarships from the $600 million-asset credit union.
  • First Community CU, Jamestown, N.D., committed $1 million to create a scholarship fund in December. First Community CU will award nine scholarships to schools in which the $459 million-asset credit union has branches: Bismarck State College, Concordia College, Minnesota State University Moorhead, Mayville State University, North Dakota State University, North Dakota State College of Science, University of Jamestown, University of Mary and Valley City State University.
  • Palisades FCU, $153 million in assets, offers the George Hatala scholarship that honors the community activist and long-time senior manager of the Pearl River, N.Y., credit union and community activist. Palisades FCU also participates in Credit Union Association of New York scholarship program.
  • In St. Louis, Anheuser-Busch Employees' CU and American Eagle CU are calling for applicants for the Vince Jacknewitz program that awards six $1,500 to members of its Young Adult Financial Group. Jacknewitz was a longtime board member and chair of the $1.4 billion-asset credit union.
  • This year, United Methodist Connectional FCU, Marietta, Ga., expanded the eligible age range for applicants to 17- to 35-years old, in order to include graduate students.
  • The B.A. Candler/ORNL FCU Scholarship, Oak Ridge, Tenn., is awarded to students at the University of Tennessee, Knoxville. Candler served as president of the now-$1.4 billion asset credit union for 31 years.  
  • Lacey, Wash.-based TwinStar CU, with $872 million in assets, distributes nearly $30,000 per year to graduating high school seniors and older students seeking higher education.
  • Sikorsky CU, Stratford, Conn., awards five Thomas J. Williams Scholarships, each worth $1,000. Williams was president/CEO of the $677 million-asset credit union for more than 30 years. Applicants have to write an essay about how the credit union helped them take charge of their money.
  • Clatskanie, Ore.-based Wauna CU, $163 million in assets, will give $6,000 to its scholarship winner, who must have graduated from high school within the past five years.
  • Hawaii State FCU, $1.3 billion in assets, will distribute 15 scholarships worth $2,000 each. Since 1996, the Honolulu credit union has disbursed nearly $450,000 to members seeking higher education.
  • Student hopefuls must answer the question "What does financial responsibility mean to you?" when applying for one of the $1,000 scholarships from $271 million-asset SIU CU, Carbondale, Ill.

Social media pay-it-forward pays off for Royal CU

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EAU CLAIRE, Wis. (1/10/14)--For Royal CU, it was simple--take 20 of its Facebook fans, add $10 to each and multiply by paying it forward. The equation was more than effective--it was overwhelming.
 
"We weren't exactly prepared for all the heartwarming, touching stories that came out of this," said Andrea Finn, digital marketing specialist at the Eau Claire, Wis.-based credit union.
 
 
They shared their stories and photos on Royal CU's Facebook page, where others "liked" photos and proffered their thanks that so many lives were positively affected by a small gesture.
 
"One member reminded us that it takes all of us to do something like this, and that is what she specifically likes about RCU being so community-minded," Finn said. Members from Centuria, Chippewa Falls, Colby, Eau Claire, Eleva, Frederic, Independence, New Richmond, Whitehall and Withee participated.
 
Several members doubled the $10 by adding their own money to the campaign, making donations to holiday toy drives and food pantries. Pay-it-forward winner Natalie Spies used the money for her and her family to make sandwiches for a local homeless shelter.
 
Mande Kuechenmeister told her story about paying it forward on Royal CU's Facebook page. She decided her contribution would be the next time she dined out. After paying her bill and leaving her usual tip, she left a note on the table with the credit union's $10 and added her own $10 so the server could pay it forward.
 
The $1.35 billion-asset credit union plans to do another positive campaign, Finn said.