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CU System briefs (01/12/2012)

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  • SEAL BEACH, Calif.(1/13/12)--Patelcorp CEO Scott Waite has been appointed to a new advisory board for SaveDaily Inc., a provider of mutual fund investing platforms used by financial institutions. The board will assist SaveDaily's management with marketing and financial industry best practice strategies. At Patelcorp, Waite is responsible for corporate finance and accounting, asset liability management and investments, plastic card services, and the investment brokerage and insurance subsidiary corporate for Patelcorp CU. He is also chief financial officer for its parent company, Patelco CU and in 2003 became the first credit union industry representative on the Advisory Council of the Financial Accounting Standards Board. He is serving his seventh year as chair of the Credit Unions of North America's accounting subcommittee …
  • DALLAS (1/13/12)--Deborah Matthews, director of payment strategies at ProfitStars, a division of Jack Henry & Associates, has been elected chairperson of The Internet Council of NACHA-The Electronic Payments Association. She took office Jan. 1. NACHA represents more than 10,000 financial institutions via 17 regional payments associates and direct membership. The council's mission is to advance electronic commerce over open networks by enabling digital business in a straight-through, secure, and cost-effective manner. Its initiatives include enhancing the integrity and security of the automated clearing house (ACH) network; developing best practices for data security, fraud management and authentication; facilitating industry adoption of NACHA Operating Rules for mobile ACH payments; and continuing education …
  • SILICON VALLEY, Calif.(1/13/12)--Seven of NerdWallet's Top 10 Community-oriented Credit Unions are community development credit unions (CDCUs), said the National Federation of Community Development Credit Unions. CDCUs have a focus on serving low- and moderate-income communities, minorities and other at-risk populations. Federation President/CEO Cliff Rosenthal noted that the credit unions "are among our high-performing CDCUS" and show "the world day-in and day-out that serving low-income communities can be done effectively and profitably." News Now reported the top 10 list in Wednesday's issue
  • COLUMBUS, Ohio (1/13/12)--John Herriott, Ohio Credit Union League director emeritus, died Dec. 28 at the age of 84, said the league (eLumination Newsletter Jan. 11).  Herriott served on the league board from 1989 to 1999 and was inducted as director emeritus in 2003. He was a retired employee of W.G. Herriott and Sons, Popright, Marion Power Shovel and Rhodes Heating and Air Conditioning …

EOC preparing to open CU in Fresno

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FRESNO, Calif. (1/13/12)--Fresno (Calif.) Economic Opportunities Commission  (EOC)  is planning to establish the only EOC-operated credit union on the West Coast, which would be a community development credit union serving low-income residents to counter high-interest-rate payday lending in the area.

The credit union, Community First CU, would serve low-income and loan customers in Fresno and eight other counties, reported The Business Journal (TBJNow Jan. 9). EOC currently makes loans through a certified loan fund handled through Fresno's Community Development Financial Institution, which works through banks.

Banks prefer larger loans, EOC said in the article. The  proposed credit union would offer loans in the $5,000 to $10,000 range, including personal, auto and consumer loans. Community First CU will contract some of its operations to larger credit unions.

EOC has received permission from the Small Business Administration to serve eight additional counties from Bakersfield to Sacramento, and it is applying for inclusion in San Luis Obispo and Sonora, the article said.

EOC, which is already looking for an office for the credit union, is seeking donations, grants and low-interest loans to help fund it.

CUNA Ohio league continue meetings with CFPB

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COLUMBUS, Ohio (1/13/12)--Credit Union National Association (CUNA) President/CEO Bill Cheney will meet later this month with the nation's newly appointed Consumer Financial Protection Bureau (CFPB) director, Richard Cordray. Director Cordray reached out to CUNA's Cheney following his appointment.

CFPB also has reached out to CUNA  to help arrange a meeting with credit unions in Alabama in conjunction with a field hearing on payday lending, Dunn told News Now. CFPB asked CUNA to have a credit union person at the hearing to discuss how credit unions are good alternatives to high fee pay day lenders.

The Ohio Credit Union League also will meet with Cordray, who hails from the state.

Cordray, who was appointed Jan. 5 by President Barack Obama in a recess appointment, is the former attorney general and treasurer of Ohio. He was serving at the time of his appointment as the agency's enforcement chief (News Now Jan. 5).

The appointment "is positive news for credit unions, as Cordray and CFPB staff have been strong supporters and highly accessible since the agency was created in 2010," said Paul Mercer, president of the Ohio league (eLumination Newsletter Jan. 11). "The action means CFPB will be able to assume regulatory authority over financial entities, like payday lenders and check cashers, not currently subject to federal regulation," Mercer added.

The league has a long-standing relationship with Cordray, dating back to his days in the state's administrative branch. Two days after his appointment, Cordray called league General Counsel John Kozlowski to thank credit unions for their support. He noted he looked forward to working with the movement.

CUNA and the league, which met earlier with the appointee "will meet with Cordray again shortly to reinforce that credit unions are consumer-owned cooperatives and need meaningful regulatory relief, not new regulations, in order to protect consumers," said CUNA and the league (News Now Jan. 5). They said they would "continue to consistently and aggressively press for regulatory relief to allow credit unions to continue their critically important role as consumer advocates and champions."

Now that the agency has a director, the agency can move forward with its Consumer Advisory Board, which will consult on key issues and some regulations, including remittances, that were stalled, the league said.

CUNA has emphasized to Cordray and other CFPB staff that the agency must consider ways in which the bureau can help minimize regulatory requirements for credit unions and other financial institutions. CUNA's Deputy General Counsel Mary Dunn will join the meeting with Director Cordray.

CUNA closed Monday for holiday no INews NowI (01/12/2012)

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WASHINGTON and MADISON, Wis. (1/13/12)--The Washington, D.C., and Madison, Wis., offices of the Credit Union National Association will be closed Monday in observance of Martin Luther King Jr. Day, a federal holiday.

News Now will not post an issue Monday but will resume its publication on Tuesday.

Redistricting in Ohio pits CU supporters against each other

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COLUMBUS, Ohio (1/13/12)--Ohio will lose two House seats in the mandatory congressional redistricting, which means that some long-serving, credit union-friendly legislators will compete against each other in this year's elections, said the Ohio Credit Union League.

U.S. Reps. Marcy Kaptur (D-Toledo) and Dennis Kucinich (D-Cleveland) will compete for the 9th Congressional District seat. Kucinich could have run in the new 11th District in Cleveland, but he chose the 9th District, said the league (eLumination Newsletter Jan. 11). The new district includes a large portion of Toledo that likely would favor home-town candidate Kaptur in the race, the league added. Both are credit union friends. Kaptur recently co-sponsored HR 1418, legislation to expand credit unions' member business lending to 27.5% of assets from 12.25%.

Two other credit union friends will vie for the new 16th District seat. U.S. Rep. Jim Renacci (R-Wadsworth), a member of the House Financial Services Committee, actively supported the financial services industry's position on interchange, while U.S. Rep. Betty Sutton (D-Copley) is a long-time sponsor of MBL legislation, including the current HB 1418, and a public supporter of credit unions' tax status, the league said.

In the new 10th District, U.S. Rep. Steve Austria (R-Beavercreek), facing a tough primary, said he would not seek re-election. He would have run against U.S. Rep. Mike Turner (R-Dayton) in the primary. While they are not sponsors of pro-credit union legislation, Turner took the financial services industry's side in the interchange battle and has worked to build close relationships with area credit unions, said the league.

The redistricting means Ohio will have 16 House districts.

"The redistricting that is taking place in the U.S. Congress right now is going to present some difficult challenges, like the one in Ohio, for supporters of credit union-friendly candidates this year. That's the bad news," Trey Hawkins, vice president of political affairs at the Credit Union National Association, told News Now.

"The good news is that in a race in which two credit union-friendly candidates are competing, credit unions--and their members--are the real winners, no matter what the outcome," Hawkins concluded.

Catalyst Three investment resolutions for CUs

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PLANO, Texas (1/13/12)--Catalyst Corporate FCU in Plano, Texas, has three investment resolutions that it says credit unions should follow in 2012.  They are: Don't wait for rates to rise--stay invested; don't get lazy with liquidity; and don't fall for the "bond of the day."

While everyone would like to see improvement over 2011, many factors that are beyond credit union control--such as Europe's continuing debt crisis, the November U.S. presidential election, and the nation's unsolved budget problems in Washington, D.C.--have the potential to sidetrack economic progress, the corporate said.

Most credit union leaders have some concern about what to do with the growing investment portfolio that has replaced what used to be a healthy loan portfolio. Even seasoned investors have found themselves in a quandary over the mismatch of basic lessons from Economics 101, according to Sarina Freedland, senior investment officer at Catalyst Strategic Solutions.

"We are beginning to see glimmers of progress in economic growth that would tempt us to believe we are at the beginning of a growth cycle that would lead to higher interest rates," Freedland said. "That means buying short-term investments, right? However, we have heard many times over the Federal Reserve's intentions to keep interest rates at extreme low levels until mid-2013, not to mention the European Central Bank's recent move to actively lower interest rates. So, that means locking up yields for longer periods."

Credit union managers struggling to make sense of these mixed messages have reason to be optimistic, Freedland said.

"A year ago, earning even the slightest margin over cost of funds seemed impossible," she explained. "However, most credit unions managed to eke out enough return to satisfy examiners and members. But, credit unions will continue to rely heavily on investment portfolio income to replicate revenue streams. Currently, every $1 in loan principal received requires $2.65 in investment principal."

Freedland offered credit unions three resolutions to maximize investment returns in 2012:

1. Don't wait for rates to rise--stay invested. Rates have been at their lows for a long period. Recent job reports show net job gains, and housing sales gaining traction rather than falling. Given this scenario, a prudent investor might think it best to hold onto cash rather than lock in low rates. Most individuals believed this a year ago, too, but rates continued to fall throughout 2011.

Staying in cash in hopes of higher rates will only rob credit unions of needed interest income. Investing in a two-year agency at 0.65% could earn an additional 40 basis points over what the credit union would earn by keeping liquid funds in cash, or $4,000 for every $1 million invested (in the first year). If the credit union stays true to its investment ladder with call and maturity dates evenly spread out, it is protected and will have funds to invest when rates do make the turn. Freedland said.

2. Don't get lazy with liquidity. Credit unions added close to $400 billion in new balances in 2011, an increase of 5% in the 12 months ending September 2011. The Credit Union National Association is forecasting another 5% share growth for 2012, while also predicting a 3% increase in loan demand. If reports from retailers about holiday shopping trends are any indication, credit unions could see improvement in loan demand. It remains to be seen whether holiday shopping trends point to improving loan demand, or if high unemployment will hold the line on members' big ticket spending. Maintaining adequate liquidity could be trickier in 2012, said Freedland.

Although today's liquidity profile is strong, credit union managers must continue to protect their long-term cash needs, the consumer is fickle and can change buying habits abruptly due to sales promotions, government tax provisions, even the prospect of landing a new job, the corporate said. Portfolios must be managed proactively through 2013, setting aside a reasonable cushion of available funds and paying greater attention to the investment ladder, it added.

3. Don't fall for the "bond of the day." The bond-of-the-day strategy won't work in 2012, said Catalyst. Credit unions will need to become more selective in their purchases. This year, the structure will be as important as the coupon. The credit union may have to give up a higher coupon to gain some protection. Common sense says to buy along the yield curve, keep a close eye on short-term needs, and watch the portfolio cash flow structure closely, the corporate added.

Choosing portfolio duration is not always straightforward. Strategically, investment duration targets depend on the credit union's prevailing loan-to-asset ratio. The lower the ratio, the further out on the curve a credit union should consider going with its investments. For most active credit union portfolios, that means extending out to the three- to four-year area of the curve. Extending much past four years at this time will not provide enough yield to make up for a lack of liquidity, the corporate concluded.

WOCCU calls for Distinguished Service Award nominations (01/12/2012)

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MADISON, Wis. (1/13/12)--The World Council of Credit Unions (WOCCU) is seeking nominations for the 2012 Distinguished Service Award (DSA), the international credit union system's highest honor.

World Council of Credit Unions' 2012 Distinguished Service Award will be presented at the World Credit Union Conference July 18 in Gdańsk, Poland. Nominations are due March 30. (Photo provided by the World Council of Credit Unions)
The awards will be presented at this year's World Credit Union Conference, July 15-18 in Gdańsk, Poland.

Nominations are due March 30.

"Credit unions worldwide are able to excel thanks to the committed efforts of people and organizations who believe in their mission," said Brian Branch, WOCCU president/CEO. "Help us honor those who have given outstanding service by recognizing them with this prestigious award."

The DSA honors the exceptional achievements of individuals and organizations whose activities have furthered WOCCU's vision of "improving people's lives through credit unions."

The DSA is not an annual award, rather WOCCU bestows the special honor based on the proven achievements and worthiness of candidates in the eyes of the awards committee.

Individual recipients may be WOCCU member organization officers, directors or representatives; international credit union pioneers; field technicians with a long and outstanding service record; or individuals whose actions have benefitted global credit union development. WOCCU presents up to three individual awards in a single year.

Institutional recipients may be organizations or agencies that have provided financial or technical assistance to develop international credit union movements and their service infrastructures over an extended period of time. WOCCU presents only one institutional award each year.

To download a nomination form, use the link.

KCUA Kansas CUs outperform national trends

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WICHITA, Kan. (1/13/12)--Third-quarter 2011 statistics indicate Kansas credit unions continue to beat national trends, said the Kansas Credit Union Association (KCUA) Thursday.

Kansas credit unions show solid performance in most areas such as assets, shares and loans, including a 5.4% loan growth, where national trends show a decline, KCUA said.

Membership at the state's 101 credit unions has increased 3.4%, five times the national average of 0.65%. Kansas credit unions added 20,636 members between September 2010 and September 2011.

Kansas also is a nationwide leader in auto loans, with a year‐to‐date market share of 23% at the end of the third quarter. This is more than 50% higher than the national average of 14.5%, KCUA said.

The data indicate that Kansas credit unions, serving more than 625,000 Kansas consumers, remain a stable option for financial services to both individuals and businesses, the association added.

"For the past year, the numbers have been good," Bob Mayes, KCUA vice president of credit union support services, told News Now. "Kansas credit unions never tightened that much when the [national] credit crunch came and we kept lending to members."

Auto loans have been a consistent source of good business for the state's credit unions. "With auto loans, some credit unions have developed a loyal following, some have a strong indirect program and some have a strong recapture program," Mayes said.

Members borrowing auto loans know they are getting a good deal, Mayes explained. "Members have trained themselves because they know they are going to get the best deal at credit unions, so they go there time and again."

Regarding the economy, Kansas never had it as bad as some of the coastal states during the tough financial times the past several years, but it still had some challenges, Mayes said.

"Kansas credit unions continue to grow, and our mortgage originations also have grown," he said.

Statistics for Kansas credit unions' third-quarter performance were compiled by Callahan & Associates.

Four common mistakes credit unions make online

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DES MOINES, Iowa (1/13/12)--A new white paper from PolicyWorks provides credit unions with tips for ensuring their online marketing and advertising efforts meet compliance and disclosure standards.

"Credit unions are held to many of the same regulations governing the big banks and the way they advertise their products and services," wrote author Kyle Woodmansee, PolicyWorks compliance officer. "Therefore, they need to apply as much scrutiny and due diligence to their creative messages as do large financial institutions."

The white paper addresses four questions related to communicating online:

  1. Is the newsletter really 'for members only?' Once they are published, online newsletters that previously were mailed only to members are open to public viewing. Once a newsletter becomes available to the public, new regulations apply.
  1. How free is "free?" Free checking is a key differentiator for credit unions in the wake of the new interchange rule and Bank Transfer Day. It's important for a credit union's marketing team to fully understand the fee structure behind "free checking" before advertising it as such.
  1. Is the giveaway being promoted more than $10? Giveaways are popular marketing promotions. Credit unions, though, are governed by specific rules about communicating a giveaway that is considered by the National Credit Union Administration to be a "bonus"--a premium, gift, award or other consideration work more than $10 given to a member for opening, maintaining or renewing an account or increasing an account balance. There is a large list of disclosures that must accompany the promotion. Those disclosures require screen space and bandwidth.
  1. Does the message pull the disclosure trigger? There's a long list of promotional terms that will trigger warning terms for an examiner. "No closing costs," "0% annual percentage rate," and "No balance transfer fee" are among them. Most of these require additional disclosures. Providing those disclosures online--in a YouTube video, for example--can be a challenge.