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CUNA employees play good Samaritan on layaways

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MADISON, Wis. (12/20/11)--Employees at the Madison, Wis., offices of the Credit Union National Association (CUNA) were so moved by a story Friday on Yahoo! about anonymous donors who paid off layaway plans at K-Mart for those in need--that they wanted to try it--and found out what a difference a few people can make.

After reading the article, Courtney Cantwell and Meghann Dawson, employees of CUNA's Center for Professional Development, called a nearby Wal-Mart that offered layaway services and learned it had 50 to 60 layaways that needed to be paid for and picked up by the end of the day Friday.

"Meghann and I decided we would go after work and pay our own good fortune forward. We didn't have a ton of money to contribute, but we wanted to do something. Then we thought about opening it up to the small group of folks who were at the office," said Cantwell.  Dawson e-mailed  some staffers on third floor. Other floors got wind of it. Between 10.35 a.m. and 3:30 p.m. Friday, the two collected $519 from co-workers. "We were once again astounded by the gratitude of our co-workers," said Cantwell.

They took the money after work and visited the layaway area, telling Mike, the manager on duty, that they wanted to pay off as many layaways as possible with the funds and that kids would get priority.  The manager pulled up a list of layaways and a box of receipts and set aside receipts for toys, bikes, and other kid-friendly items. Listed on each was the person's name and contact information.

Cantwell and Dawson took turns calling. They left messages on answering machines but continued to call until a person answered. "We introduced our selves--first names only--and told them we were calling to let them know their layaway had been paid off--they could come to Wal-Mart to pick up their purchases," they said.

Some were confused and thought Dawson and Cantwell were Wal-Mart employees with reminders to pick up their merchandise.  Some thought the calls were pranks. Many broke down in tears when informed. Some had under $50 left on their layaway bill, an amount many would consider small, but it made a huge difference to them.

One woman arrived at the store right after the call and asked if the callers were still in the store. She wanted to thank them personally and give them a hug. She said she had planned to leave the little pink bike at the store because she couldn't afford to pay the balance, but because of their generosity the bike will be under the tree.

One woman simply didn't believe them. But later, Cantwell received a voice mail from her. "God bless you for the rest of your life," the recipient said. "These toys are for my two great grandsons--they're four, they're twins. I've had them since April of this year. I got them out of foster care. This is going to be such a blessing for them. And I really, really can't say how much I appreciate this."

After the calls, Dawson and Cantwell had $30 left, so they walked around the store trying to figure out what to do next. They saw two women at a Subway, buying four subs. "We are buying your dinner," they told the women.

All in all, they paid off nine layaways and bought one family dinner. The article that they had read sparked others elsewhere to do the same. For a look at the article that started it,  use the link.

Judge directs NCUA RBS to negotiate settlement on WesCorp

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LOS ANGELES (12/20/11)--A U.S. District judge in Los Angeles has ordered the National Credit Union Administration (NCUA) and RBS Securities Inc. to start negotiating a settlement of NCUA's lawsuit against the firm over the losses incurred when Western Corporate FCU collapsed.

NCUA and the Royal Bank of Scotland "shall appear before a retired judicial officer or other private or non-profit dispute resolution body for mediation-type settlement proceedings," said the order, which was signed by U.S. District Judge George Wu on Dec. 7 in the U.S. District Court for the Central District of California.

NCUA is seeking $629 million in damages from RBS, alleging that the firm violated federal and state securities laws when it sold securities to WesCorp. The agency claimed that RBS sellers and underwriters made numerous material misrepresentations in the offerings documents that caused WesCorp to believe the risk of loss associated with the investment was minimal (News Now July 19).

The suit is one of several in which NCUA is seeking about $2 billion total for losses to the corporate system. NCUA also sued RBS  and J.P. Morgan Securities LLC in a U.S. District Court in Kansas related to securities purchased by the now defunct Lenexa, Kan.-based U.S. Central FCU.

NCUA has also filed suits against JP Morgan Chase in the U.S. District Court for the Central District of California, as well as separate suits against Goldman Sachs and Wells Fargo, which succeeded Wachovia Bank, for investments that led to losses for corporate credit unions.

In November it was announced that NCUA had reached settlements in its suits with Citigroup and Deutsche Bank Securities over their underwriting of residential mortgage backed securities to five failed corporates. Neither Citigroup nor Deutsche Bank admitted any fault in the settlements. Deutsche Bank has agreed to pay the agency $145 million, and Citigroup agreed it will pay $20.5 million (News Now Nov. 15).

Maine league hosts meeting with regulator

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PORTLAND, Maine (12/20/11)--The Maine Credit Union League hosted a meeting Dec. 13 of state-char­tered credit unions and the state Bureau of Financial Institutions. Representa­tives from the bureau and credit unions discussed topics including call report issues, recent rules, a foreclosure survey, troubled-debt restructuring and the upcoming legislative session.

Christian Van Dyck of the bureau outlined the effects of recent rule activity on credit unions. This includes a new rule that repeals and replaces the previous Tangible Net Benefit Rule so that it no longer applies to supervised financial organizations; and a repeal of the Truth-In-Lending, Regulation Z-2, rule (Weekly Update Dec. 16).

The Maine league worked closely with the bureau to help craft the final lan­guage of the new rule, which now follows Reg. Z. Both rules became ef­fective Sept. 28.

An issue with the call report and corpo­rate assessments also was covered. The bureau's Chris­tine Pearson said that credit unions cannot accrue corporate assessments. "This is not permissible, and the National Credit Union Administration (NCUA) has also been very clear on this issue," Pearson said. "These assessments can only be recorded after the NCUA board declares it."

Bob Studley of the bureau reviewed the definition of Trou­bled Debt Restructuring (TDR) as "a restructured or modified loan where the creditor, for economic or legal reasons related to the debtor's financial difficulties, grants a concession to the debtor that it would not oth­erwise consider."

He reiterated that a TDR loan remains so for the duration of the loan. Superintendent Lloyd LaFountain said the bureau expects to be involved in legislative activity in the upcoming session, but will have a clearer picture once the session begins.

The bureau has been reaccredited for another five years, is not looking to raise assessments, and will continue to hold the daily examination rate at the same rate it had for the past three years, LaFountain said.

"This meeting was a productive dialogue between the bureau and state-chartered credit unions, and an important meeting in continuing efforts to maintain a strong, dual-chartering system," concluded Maine league President John Murphy.

Catalyst Ask four questions to avoid risk

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HARAHAN, La. (12/20/11)--Credit union executives making investments should consider four questions for wise lending and investing:

  • What is the potential loss of principal?
  • What is the impact on liquidity?
  • What is the expected return?
  • What is the long-term impact on earnings?
The answers to these four questions are critical for balancing risk and return, said Brian Turner, director of the advisory service for Catalyst Strategic Solutions, the investment arm of Catalyst Corporate FCU in an article in the Louisiana Credit Union League's newsletter, eNews Dec. 14. Balance is an important financial principle and the impetus for credit union examiners' focus on concentration risk, Turner said.

In a recent letter to credit unions (11-CU-16 State of the Credit Union Industry October 2011), the National Credit Union Administration (NCUA) stressed the need for concentration risk mitigation strategies, said Turner. An elevated percentage of real estate loans to total loans, in combination with declining real estate values nationwide have made these strategies necessary.

Turner said he agreed with the underlying notion that credit unions need to be mindful of concentration risk, but he cautioned against an overly simplistic approach to identifying concentrated risk exposure.

Some credit union managers and examiners identify product concentration risk with basic allocation ratios, Turner said. This approach is reflected in an NCUA supervisory letter that identifies variables with broad labels, such as "real estate loans," "member business loans" and "investments in mortgage-related securities." These labels identify certain asset classes rather than aggregate risk, he said.

"Concentration risk assessment should go beyond simply evaluating whether a credit union has 'all their eggs in one basket," Turner said. "It should encompass all areas of risk--namely credit, liquidity, earnings and capital--to determine the true extent of risk associated with each principle product and how combined product risk affects the overall balance sheet."

Turner offered examples:

  • A credit union with a relatively low loan-to-asset ratio might be in a position to absorb a higher level of interest-rate risk because it retains a lower level of credit risk and a stronger liquidity profile.
  • In a case where two institutions might have the same percentage allocation of fixed-rate mortgages, one institution's portfolio could have an average loan-to-value (LTV) of 50%, an average Fair Isaac Co. (FICO) score of 760 and a demographic distribution across multiple regions. The other might have an average LTV of 90%, an average FICO of 680 and be demographically isolated within two counties. These two credit unions most likely do not have the same risk profile and should devise different risk strategies, Turner said.
Credit unions should establish a balance-sheet structure that produces a stable earnings stream through a variety of economic and interest rate cycles, Turner said. That stability depends entirely on the relationship between the credit union's earning assets and funding base, he added.

CUANY CUNA file amicus brief in mortgage recording tax case appeal

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ALBANY, N.Y. (12/20/11)--The Credit Union Association of New York  (CUANY) and the Credit Union National Association (CUNA) have filed an amicus brief with the state's highest appellate court, the New York State Court of Appeals, in support of the Hudson Valley FCU, which is appealing a  New York state mortgage recording tax  (MRT) charged to the federal credit union.

The brief supports the Poughkeepsie, N.Y.-based Hudson Valley's argument that New York state's MRT is an unconstitutional tax on the power given to federal credit unions, their property and their franchises to provide mortgages, and that federal credit unions are federal instrumentalities and are therefore exempt from this kind of state taxation.

The term "franchises" encompass those specific powers granted to a federal chartered corporation, and absent congressional authorization, states have no right to tax the franchises granted to federal instrumentalities, said CUNA and CUANY in the brief.  They also argue that contrary to the lower court's ruling, the power to write mortgage loans is a franchise granted to federal credit unions that cannot be taxed.

On the federal instrumentalities argument, the brief noted that federal credit unions advance an important government function by providing people of modest means an opportunity to obtain financial services in a not-for-profit member-owned cooperative.

"The federal instrumentality status of credit unions cannot seriously be questioned," said CUANY and CUNA. "Federal credit unions were created in 1934 to provide financial services at low cost and on liberal terms to their members, especially to persons of modest means. In so doing, they have carried out the intent of Congress to insure that more Americans can have access to credit and important financial products such as mortgage loans," the document filed said.

Federal credit unions meet the Supreme Court's test for finding a federal instrumentality to be immune from state taxation, the associations said. Section 1768 of Title 12 of the U.S. Code defines the limit to which credit unions can be taxed by immunizing federal credit unions from state taxation except where expressly permitted by statute. Also, statutes delineating the powers of federal instrumentalities are to be interpreted without deference to state court determinations.

In filing the brief, the associations "took these steps out of concern that in challenging the federal instrumentality status of credit unions, the department was in fact questioning the legal foundation of the dual charter system."

It also noted that "a proper reading of controlling U.S. Supreme Court precedent necessarily leads to the conclusion that New York State's MRT is an illegal tax on federal credit unions and their mortgage lending activity, both because of the fact that the tax is a tax on property and because it unduly burdens the franchise granted by Congress to federal credit unions to make mortgages."

Hudson Valley FCU, a $3.2 billion asset credit union,  filed the suit on May 12, 2009, against the New York State Department of Taxation and Finance, Commissioner Robert L. Megna and the State of New York, seeking a declaratory judgment that the state may not impose the MRT on mortgages granted to secure loans made by the credit union because as a federal credit union, it has a federal tax exemption.

Last year, the New York Supreme Court, which is a lower trial court, dismissed Hudson Valley's suit, declaring it was not actionable. Justice Judith Gische in the original ruling described the MRT as a tax on the "privilege" of filing the mortgage under state law. New York, unlike most states that charge only administrative fees for recording a mortgage, charges a tax that amounts to more than 2% of the mortgage's face value in some areas such as New York City.

The credit union appealed to the Appellate Division of the Supreme Court of New York and oral arguments were heard in May. CUNA and CUANY also filed an amicus brief with the Appellate Division. The Appellate Division upheld the Supreme Court's ruling. The credit union's appellate petition with New York's highest appellate court, the New York State Court of Appeals, was granted in October.

More ATM disclosure suits filed vs. CUs banks

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MADISON, Wis. (12/20/11)--A New York resident is one of the latest consumers to file multiple lawsuits against credit unions and banks claiming they are not complying with disclosure provisions of the Electronic Funds Transfer Act (EFTA), which requires posting fees for using ATMs.

Last week, consumer Don Anderson filed EFTA suits against FirstLight FCU, El Paso, Texas;  Firestone Community FCU, Bridge City, Texas; Centric FCU, West Monroe, La.; Monroe Telco FCU, West Monroe, La.; and Capital One Bank. In recent weeks, he has filed similar EFTA suits against eight other banks.

In his suits filed last week against Firestone Community FCU in U.S. District Court for the Eastern District of Texas--Beaumont Division, and First Light FCU in U.S. District Court for the Western District of Texas--El Paso Division, Anderson said he was charged $2 and $2.50 respectively as a nonmember surcharge for using their ATMs.

In both instances, he claims that "at the time of the ... transaction, there was no notice posted 'on or at' the ATM … apprising consumers that a fee would be charged for use of the ATM."

In both suits, Anderson is asking for class action status, as well as an award for statutory damages associated with the surcharges, payment of costs of the lawsuit, and payment of reasonable attorneys' fees.

In similar suits during the past year, a Michigan couple--Nancy Kinder and Ray Harrison of Fowlerville, Mich., who are both retirees--have driven around the country looking for ATMs without proper fee notification signs. The two then photograph ATMs that lack legal signage and file class actions against credit unions and banks that own the ATMs, saying that nondisclosure of fees for ATM transactions violates EFTA, according to court records (News Now May 24).

A rash of lawsuits last spring prompted CUNA Mutual Group to warn credit unions to develop and write procedures for regularly inspecting their ATMs to ensure their signs are posted, to photograph the ATMs at the time of inspection, and to maintain the inspection log for all ATMs and have credit union management review the log (News Now April 25).

Measuring social media marketing impact difficult

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MADISON, Wis. (12/20/11)--More than ever credit unions are using Twitter, Facebook and other forms of social media to reach consumers, as evidenced in part by the success of Bank Transfer Day. A new study indicates that while executives expect the success of every marketing campaign to be measured, it is more difficult to quantify electronic marketing.

About 82% of executives surveyed said they expect every campaign to be measured according to the "2011 State of Marketing Measurement Report," a survey professionals conducted by Ifbyphone (eMarketer Dec. 16).

Yet, in breaking down the different marketing types, only 47% of U.S. marketers believe they can effectively measure the return on investment (ROI) of e-mail marketing. Other types of marketing saw even smaller percentages. For social media marketing, only 26% of marketers think they can effectively measure ROI.

About 62% said they track an overall net increase in sales to measure the success of marketing programs. Also, 57% look at the number of new customers acquired, 39% track the number of new leads generated, 33% look for an increase in customer retention and 33% measure a quantified increase in awareness.

The tools they used to measure marketing campaigns include Web analytics, cited by 48% of respondents; e-mail marketing software analytics (47%); leads from contact forms (38%); and social media monitoring (30%).

Among the marketing types for which respondents believe they can effectively measure ROI:

  • E-mail marketing--47% of respondents;
  • Direct mail--41%;
  • Online ads--40%;
  • Print ads--34%;
  • Trade shows--28%;
  • Social media--26%;
  • Search engine optimization--24%; and
  • Public relations--18%.
Measuring which keywords drive either the most clicks (40%), the most online conversations (40%) and the most phone calls (37%) were cited by marketers as challenges.

CU gets naming rights to Des Moines auditorium

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JOHNSTON, Iowa (12/20/11)--Community Choice CU, Johnston, Iowa, has signed a 10-year, $2.5 million deal to acquire naming rights to Veterans Memorial Auditorium, Des Moines.

The auditorium, which is in the midst of a $43 million renovation, will include eight exhibits dedicated to Iowa servicemen and women and images, personal stories and statistics from every conflict since Iowa's statehood in 1846, according to a press release from the Polk County Board of Supervisors..

Veterans will also benefit from a $25,000 donation made to the Des Moines Vets Center on behalf of Polk County, Global Spectrum, and Community Choice CU.

"The community expansion project that"  will provide a much needed benefit to the Des Moines and Central Iowa community while increasing the awareness for the sacrifices of Iowa's veterans and creating a proper and robust place to honor their service and memory," said Roger Reiser, Community Choice CU CEO.

CU System briefs (12/19/2011)

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  • HIGHTSTOWN, N.J. (12/20/11)--The Enterprise Holdings Foundation, the charitable arm of Enterprise Car Sales, donated $4,000 to support the New Jersey Credit Union Foundation's (NJCUF) financial literacy efforts. During this academic year, the foundation continued to support its Financial Reality Fairs program and the Building Economic Strength Together internship program, and entered a partnership on behalf of the state's credit unions with the New Jersey Coalition for Financial Education. From left are: NJCUF Treasurer Paul Gentile, NJCUF Chairman Ann South; Enterprise Car Sales' Kaushika Kansara, NJCUF Board Member Tracy Sussmann, and Enterprise Car Sales' Michael Kopp. (Photo provided by the New Jersey Credit Union League) …
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  • SAN ANTONIO (12/20/11)--Employees and their families of San Antonio-based SACU
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    participated in the nationwide program, 2012 Scarves of Special Olympics by knitting and crocheting scarves to be distributed to Special Olympics athletes who will compete in 2012. Thirty individuals signed on to design and create the scarves that had to meet dimension and materials criteria, including the color scheme of navy blue and red chosen for 2012 by the national organization. Texas had a goal of creating 3,000 scarves, and the credit union's team created nearly 80, said SACU employee Maureen Schneiderheinz. Her twin daughters, who knit, heard about the program and spread the word. (Photo provided by SACU) …