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CU System brief (02/24/2011)

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* NEW YORK (2/25/11)--Michigan's Save-to-Win program was featured in the Freakonomics blog on The New York Times website Wednesday, according to the Michigan Credit Union League. The blog said the program, a savings program with a lottery element, had named its second winner, Charmain Hanners of Alpena Alcona Area CU, Alpena, Mich. Hanners won the grand prize of $100,000. To view the article use the link …

Banking CU bills make progress in New Jersey

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TRENTON, N.J. (2/25/11)--New Jersey Gov. Chris Christie signed into law a measure to create a state Banking Development District Program to encourage banks to establish branches in underserved areas, said the New Jersey Credit Union League (The Daily Exchange Feb. 24). While the bill's definition of a bank includes credit unions, credit unions technically are excluded because under a 40-year-old statute, they are barred from becoming eligible municipal depositories. The statue, the Government Unit Depository Protection Act (GUDPA), was enacted before credit union deposits became federally insured. A bill that would update the GUDPA law to allow federally insured credit unions to quality as eligible public depositories has passed the state Senate and is pending in the Assembly Financial Institutions & Insurance Committee. Also, the state Assembly passed a bill to make permanent a temporary authorization that expanded the range of investment vehicles for the New Jersey Cash Management Fund and state pension funds to include obligations guaranteed by the Federal Deposit Insurance Corp. or the National Credit Union Share Insurance Fund. The Senate must pass the bill next before it goes to the governor for signature. "While both developments are moves in the right direction, they fall short of enabling credit unions to better serve New Jersey's communities and property tax payers," said NJCUL President/CEO Paul Gentile. "The irony isn't lost on credit unions. It would seem that banks need an incentive to do what credit unions readily embrace, and yet even when technically included, credit unions are still excluded because of a decades-old conflicting statute," he added Although credit unions are considered safe for municipal deposits and pension funds channeled through the state, "local governments are still denied the benefits of increased competition when soliciting bids from potential depositories," he said.

McGrath gets 14 years in CU National Mortgage scam

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NEWARK, N.J. (2/25/11)--The New Jersey man at the center of the fraudulent mortgage loans that defrauded nearly $140 million from 28 credit unions, Fannie Mae and others was sentenced to 14 years in prison Thursday by U.S. District Judge Katharine Hayden in Newark (Reuters Feb. 24). Michael McGrath, 47, of Pinebrook, N.J., was president of the U.S. Mortgage Corp. and a principal of its subsidiary, Credit Union National Mortgage Co. Both companies filed for a Chapter 11 bankruptcy during February 2009 in Newark. McGrath admitted to conspiring with others from January 2004 to January 2009 to fraudulently sell credit union loans and use the proceeds to finance his company's operations and investments for himself. He also admitted diverting the funds that should have been paid to credit unions on mortgage loans he sold to Fannie Mae to pay for bad investments (News Now Aug. 12, 2010). McGrath pleaded guilty in June 2009 to two counts of conspiracy, including one to commit mail and wire fraud and one to commit money laundering, stemming from the scheme. He faced up to 30 years in prison under federal guidelines but his plea bargain called for a prison term as short as 12 and a half years. His lawyer told Reuters McGrath helped recover $13 million of the losses. The fraud sparked a number of lawsuits against Fannie Mae and insurance companies by credit unions seeking to recoup some of the losses. Four credit unions are still pursuing civil litigation against Fannie Mae.

Prize-linked savings bill passes Wash. state Senate

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OLYMPIA, Wash. (2/25/11)--One of a handful of proposals that seem to be on a fast track through the Washington Legislature, the Northwest Credit Union Association’s (NWCUA) Prize-Linked Saving (PLS) bill (SB 5232) on Wednesday passed a Senate floor vote, 46-2. With its affirmation of the PLS legislation, the Washington State Senate has voted to “encourage financial institutions to develop innovative products that create incentives to encourage consumer savings, particularly savings by low-income consumers,” according to the bill. “The household savings rates in America have been in a decade-long decline,” said NWCUA CEO John Annaloro. “Credit unions are seemingly the only group offering such innovative solutions to a complex societal trend, and always in keeping with the credit union historical mission of building the personal wealth of the average working woman or man.” The bipartisan support of the legislation that would allow savings by linking a special savings account to a series of monthly prizes and a larger, yearly prize, was summarized by its prime sponsor, State Sen. Derek Kilmer (D-26) and Ranking Minority member State Sen. Janéa Holquist Newbry (R-13). “This [legislation] rewards thriftiness, and that is a good thing,” Kilmer said. “This program doesn’t just encourage people to save, it’s actually shown to improve their saving habits. This isn’t a new government program. Rather the bill just enables the private sector to offer this product and I’d urge the body’s support.” Speaking in support of the legislation, Holquist added, “I think this is an innovative, creative way to encourage savings and I would ask for your support.” The legislation will now move to the House State Government & Tribal Affairs Committee, a body that has already heard and passed a companion measure to SB 5232, House Bill 1326. House Bill 1326 is currently in the House Rules Committee awaiting floor action. The NWCUA expects that the House State Government & Tribal Affairs Committee will schedule a hearing for SB 5232 in the next few weeks.

Pa. small-loans program saves consumers nearly 15M

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HARRISBURG, Pa. (2/25/11)--Christmas gifts, taxes, school clothes and funeral expenses are just some of the reasons cited as ways to use the 43,000 small-dollar loans that have been issued by credit unions in Pennsylvania, using the Credit Union Better Choice program. Through the Credit Union Better Choice payday lending alternative product, credit unions offer borrowers a 90-day loan with a $500 limit. Since launching in 2006, the 43,000 loans issued by Credit Union Better Choice have totaled $20.5 million. The program has saved borrowers nearly $15 million over using a traditional payday lending product, according to the Pennsylvania Credit Union Association (PCUA). Since the program’s inception, 79 credit unions with 222 locations have agreed to offer Credit Union Better Choice loans. During the final six-month cycle of 2010, about 8,173 loans totaling $3.8 million were issued by credit unions. Also, borrowers placed $380,000 into savings accounts during the six-month period. The program is offered through participating credit unions and is a partnership of PCUA and the Pennsylvania Treasury. “Credit unions were founded on the principles of small dollar lending,” says Jim McCormack, PCUA president/CEO. “For many living paycheck to paycheck, a short-term loan can help meet unexpected expenses,” said McCormack. “Every Pennsylvanian should be afforded access to loans at reasonable fees and rates.” “The economy is moving in the right direction, but the reality is that many people--even those who are working--are still having trouble making ends meet, perhaps because of a large, unexpected expense like a car repair,” said State Treasurer Rob McCord. “Many of those people have too often turned to predatory, pay-day lenders to make it through to the next paycheck, but then they found themselves drowning in exorbitant fees and outrageous interest rates. The Better Choice program provides them an alternative, he added “This latest report is great news. It shows people are taking advantage of the opportunity to avoid bad loans--and saving themselves millions in the process.” A typical $500 payday loan costs consumers $15 for every $100 borrowed for two weeks, or roughly $450 during a 90-day period. A $500 Credit Union Better Choice loan costs consumers about $42.50 for the same 90 days and at the end of the loan term, the consumer has $50 in a savings account, which helps develop a savings habit. Also, the program builds upon this new wealth-building component by providing financial education to consumers to help them make better informed financial decisions. Pennsylvania consumers saved an average of 80 cents in loan fees for every dollar borrowed through a Credit Union Better Choice loan, rather than through a typical loan from a payday lender. This translates into nearly $15 million that consumers kept in their pockets by using credit unions that offer Credit Union Better Choice loans, said PCUA. To learn more about the program, use the link.

Poll Georgians cautious on spending turnaround

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ATLANTA (2/25/11)--Georgia consumers are not optimistic about the state's economic condition, according to a poll from Georgia Credit Union Affiliates (GCUA). Just 12% of consumers surveyed said they believe the economy has improved in the past year and 40% said the economy was getting worse. The remainder characterized the state's economic situation as either "the same" or "getting worse" than last year--sentiments that could impact consumer saving and spending in the state, said GCUA in its quarterly Georgia Credit Unions' "Paying Attention" report. The report polled more than 4,000 credit union members and compiled aggregated data from credit unions statewide. While consumers are working to build a buffer of savings by cutting expenses and delaying large purchases, they still are unprepared to deal with any further financial setbacks, the report indicated. "As national statistics start to show an increase in consumer confidence, Georgia credit union members are still wary about their own personal financial health," said Mike Mercer, president/CEO of GCUA. "If the economy strengthens, consumers could become more optimistic. But, in the meantime, we expect to see cautious plans for spending and especially borrowing. In fact, loan demand at Georgia credit unions has been very soft," he said. Other key findings of the survey:
* Of those polled, 32.9% said they experienced changes in their employment situation during the recession, ranging from layoffs to pay cuts to taking a second job. * About 35.7% said they have no reserve savings to cover essential expenses if they were to lose their job or other income source. Also, 18.9% said they have savings to cover more than one year without a source of income. * About 65.5% have changed their personal savings habits the past six months, including spending less or cutting expenses like eating out and taking trips. * Consumers surveyed were more wary than in 2010 about making large purchases; 63.3% indicated they do not plan to purchase any big-ticket items in 2011. That compares with 51.2% who avoided big expenditures last year. * Half said they will pay for large purchases with cash from savings.
GCUA also compiled data from 39 credit unions representing 91% of credit union assets and 83% of members in Georgia. Data reflect a trend toward savings, with lending figures varying. Savings deposits at credit unions rose at an annualized rate of 5.42% during 2010, slightly less than the 6.24% increase in 2009. Checking account balances grew by 13.12% in 2010. New-vehicle loans continued to decline with more consumers opting for used-car loans. New-vehicle loan balances fell 10.42%, while used-car balances rose 7.16%, continuing a trend from 2009. First mortgage balances increased by 9.89%, and the number of bankruptcy filings among members rose 12.47% in 2010.

CUNA launches Volunteer Network 247

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MADISON, Wis. (2/25/11)--Recent regulatory changes and the increasingly complex and demanding role of credit union volunteers have driven the Credit Union National Association’s (CUNA) launch of the CUNA Volunteer Network, an online community and resource center for credit union volunteers. The CUNA Volunteer Network keeps members informed and connected with their credit union peers by providing exclusive access to current industry news and research, CUNA Volunteer Network listserv’s community of peers, board-training courses and discounts on educational opportunities. “It’s a CUNA priority to provide board members the best possible resources to help them strongly contribute to their credit unions’ success,” said James Carrick, CUNA’s director of strategic alliances and volunteer education. “We see the great value directors garner from networking opportunities while attending CUNA schools and conferences. “Due to tight budgets, personal schedules, lack of time and other factors we understand that attending these events is challenging, yet volunteers recognize the need for training and timely industry interaction,” Carrick added. “This is exactly what the CUNA Volunteer Network provides: access to leading industry training, business insight, tools and peer advice, 24/7.” The CUNA Volunteer Network membership benefits include online access to:
* Immediate communication with board members nationwide; * Twenty downloadable board training courses; * Free enrollment in CUNA’s Volunteer Certification Program; * Exclusive white papers and case studies; * Savings on CUNA educational events; * Credit Union magazine; * Directors newsletter; * Complimentary handbook PDFs; and * Current educational resources.

Bankrate study CUs keep free checking alive

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NEW YORK (2/25/11)--Free checking accounts are "alive and well at many of the nation's top credit unions," according to Bankrate's Second Annual Credit Union Checking Study. The study was released Thursday. The study examines fees, account balance minimums and the cost of ATM use at the 50 largest credit unions in the nation. " found that 96% of the nation's largest credit unions offer a checking account that is free, or can become free with minimal effort," said Greg McBride, senior financial analyst for "Even with the continued declines in the prevalence of free checking, it remains within the grasp of most Americans and credit unions are a viable option," he added. Among the findings:
* Of the 50 largest credit unions, free checking accounts were available at 38 of them. * An additional 20% of credit unions will waive fees, typically with direct deposit and/or e-statements. * Similar to trends among regional banks the past year, credit unions saw a slight decline--to 76% from 78%--in free checking accounts. They saw an increase--to $26.05 from $24.88--in average fees for bounced checks, as well an increase to $2.10 from $2 in ATM surcharges. * Nearly half (23) of the credit unions surveyed do not require a minimum opening balance on their free checking accounts.

MarylandD.C. New Jersey leagues exploring merger

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COLUMBIA, Md. and HIGHTSTOWN, N.J. (2/25/11)--The Maryland & District of Columbia Credit Union Association (MDDCCUA) and the New Jersey Credit Union League (NJCUL) have agreed to explore a potential merger. The boards of MDDCCUA and NJCUL have signed a letter of intent to begin researching a merger of the two associations. "The missions of the two associations are aligned," said Miguel Boluda, chairman of MDDCCUA and CEO of PAHO/WHO FCU. Both associations "are focused on advocacy as their core purpose. Both are committed to increasing consumer awareness of credit unions and to ensuring future credit union growth." The ability of the merged organization to add value for the affiliates in the core areas of advocacy, education and compliance was the primary reason for moving forward, Boluda said. MDDCCUA and NJCUL identified potential areas of added value to the membership:
* Enhanced consumer awareness; * Stronger political and regulatory advocacy committed to a solid local presence in New Jersey, Maryland and the District of Columbia; * Powerful regional events; * Additional compliance services; * Improved communications and marketing; * Savings and innovation in education content and delivery; * Additional products and services from the service corp.; * Organizational depth; and * Operational efficiencies.
NJCUL Chairman and McGraw-Hill FCU CEO Shawn Gilfedder said the merger will create a more effective association at a time when powerful advocacy is most needed. "A strong association will be vital as we work to improve the operating environment for future credit union growth," he said. "Both associations have made tremendous strides in advocacy in recent years. Combining resources provides opportunities to leverage the strengths of each association and deliver even more value to the combined membership." Boluda and Gilfedder emphasized that state-level advocacy in Maryland and New Jersey, and local advocacy in the District of Columbia, will be in full force during the merger. Also, the staff and leadership teams of MDDCCUA and NJCUL will continue to operate normally. Jennifer Simmons, interim CEO, will continue to lead day-to-day activities at MDDCCUA. Should a merger be approved, NJCUL President/CEO Paul Gentile will lead the merged association. "There is rapid change happening in the credit union space," said Gentile, who has led NJCUL since late 2007. "It is vital that credit unions are being effectively positioned with lawmakers, regulators and consumers. Our goal is to unite these two associations in a way that enhances the products and services to the membership, with an intense focus on advocacy." The associations are targeting year-end to complete the merger, pending due diligence and member approval, said Boluda and Gilfedder.

CUs offered behind-scenes look at Ritz-Carlton service

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MADISON, Wis. (2/25/11)--Credit Union National Association World-Class Service Leadership Institute will offer credit unions an opportunity to discover the strategies and tactics that help The Ritz-Carlton create its service culture. The institute will allow credit union leaders--from CEOs to branch managers--a first-hand look at how The Ritz-Carlton’s award-winning service culture permeates its entire global organization. Attendees will discover how the hotel’s “total engagement” approach influences every process and decision across its operation. The three-day institute, held at The Ritz-Carlton in Denver, May 1-4, is not a common occurrence for the hospitality-industry giant. The behind-the-scenes look has been made possible because of CUNA’s long-standing relationship with The Ritz-Carlton. “This kind of open access isn’t something that other businesses are able to experience,” said Angela Prestil, CUNA director of sales culture development. Specific strategies, such as making a risk-free hire, initiating a daily 10-minute meeting, and generating total engagement from employees will be discussed. “Credit unions will discover that to improve service in general--you must improve it in specifics,” said Rick Olson, featured speaker at the institute. During the institute, Olson will join Jeff Hargett, The Ritz-Carlton’s corporate director of learning and content delivery and a certified speaker for The Ritz-Carlton Leadership Center, in speaking about how to infuse the hotel’s strategies into credit union operations and service.