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Ex-Chase exec Raphaelson cites CUs better fees

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CHICAGO (2/28/12)--Options, including credit unions, abound for consumers  with different banking needs, according to syndicated personal finance columnist Elliot Raphaelson, a retired Chase Bank vice president and author of two books on fiancial and retirement planning.

"Fortunately, we have many more options than we did even a few years ago, thanks to such innovations as online banking," he says in his "The Savings Game" column (Wisconsin State Journal Feb. 26).

While most of the options listed are banks, Raphaelson  devotes three paragraphs to credit unions in his column. He notes that "credit unions generally offer lower fees, lower loan rates, and higher interest rates on deposits than the competition. They are able to do this because, as nonprofits, they have a tax advantage over banks. Some credit unions provide various services by volunteers, which also gives them a competitive advantage."

"Although some credit unions have restrictions regarding membership, in most areas you will be able to find a credit union to join," he writes, noting that several years ago when he bought a new car, "I used a local credit union that offered the best rate."

He advises readers to go to the Credit Union National Association (CUNA)  and points readers to CUNA's website.

Use the link to read the full article.

We Dont Do Banks studies families on assistance

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MADISON, Wis. (2/28/12)--A new report from the Filene Research Institute paints a picture of low-income consumers' financial habits while illuminating the challenges and opportunities credit unions have in serving them.

Members of this group "especially feel the costs of accessing cash, which for many is their payment and savings vehicle of choice. Contrary to stereotypes, they seem wary of payday loans and even responsible short-term debt. And many of them devise elaborate savings mechanisms outside of traditional savings accounts," said Filene.

The brief makes several policy recommendations and spells out several lessons for credit unions designing products for cash-centric consumers like those profiled in the report. Lessons include:

  • Prepaid cards are seen as a substitute for a financial institution;
  • Interviewees prize predicable, transparent fees; and
  • Credit unions should offer transparent basic accounts.

CU members surveyed see improvement in economy

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RIVERWOODS, Ill. (21/28/12)--Credit union members were more optimistic about the economy and their personal finances in January than in December and more optimistic than non-members, according to the Discover U.S. Spending Monitor survey for January.

The respondents also were asked about their spending and saving expectations for next month. Here's the breakdown for members:  37.6% expect to spend more next month while 53% plan to spend the same and 8.4%, less.  Of those surveyed, 48.1% of members are expecting  to have less discretionary and entertainment expenses, 46% will spend less on household improvements; and 42.1% expect to spend less on major personal purchases.

More than one third (35.4%) of members surveyed said they would save or invest less money next month. That compares with 40.3% who said so in December.   Also, 12.9% said they would save more (compared with 8.7% last month); and 49.2% would save the same amount (compared with 47.3% the previous month).

The Discover U.S. Spending Monitor is a monthly index of consumer spending intentions and capacity based on interviews with a random sample of 8,200 U.S. adults, including about 2,500 credit union members. The surveys are conducted by Rasmussen Reports, an independent survey research firm. For the full findings, use the resource link.

Woman gets a day in prison in St. Paul Croatian fraud

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CLEVELAND, Ohio (2/28/12)--A federal court in Cleveland, Ohio, sentenced a woman to one day in prison for her role in a $2.5 million loan fraud ring that led to the collapse of Eastlake, Ohio-based St. Paul Croatian FCU--one of the largest credit union failures in history.

Ruth Cendol, 55, of Kirtland, Ohio, also was ordered by U.S. District Judge Christopher Boyko to pay restitution totaling $260,000 and was placed on three years of supervised release. She had pleaded guilty to one count of bank fraud. Court records alleged that Cendol was one several defendants who allowed illegal transfers to her loan account at the credit union (News-Herald Feb. 22).

More than 1,000 fraudulent loans totaling more than $70 million were allegedly made to 300 account holders from 2000 to 2010 (News Now Jan. 4).

The fraud scheme resulted in nine arrests, including two central figures in the ring:  Koljo Nikolovski, 49, of both Eastlake and Skopje, Macedonia, who pleaded guilty to 18 counts of bribery, bank fraud and money laundering; and Anthony Raguz, 51, of Mentor, former CEO of the defunct credit union, who pleaded guilty to  issuing the loans and accepting more than $500,000 in bribes, kickbacks and gifts from people obtaining the fraudulent loans. Raguz is scheduled for sentencing on June 11. Nikolovski's sentencing has been set for April 23.

The credit union was placed into conservatorship on April 23, 2010, and closed the following May 1. It held $238.8 million in funds from 5,400 members when it collapsed, costing the National Credit Union Share Insurance Fund $170 million. The collapse has prompted lawsuits by the National Credit Union Administration seeking to recoup some of the losses (News Now Jan. 4).

Court grants more time in NCUA v. Wachovia MBS lawsuit

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WICHITA, Kan. (2/28/12)--A federal judge Monday granted Wachovia Capital Markets an extension to file a response to the National Credit Union Administration's (NCUA) complaint in a lawsuit over residential mortgage-backed securities (RMBS) sold to corporate credit unions.

Wachovia has until April 4 to respond to NCUA's complaint in the U.S. District Court for the District of Kansas, Wichita. The consent order was signed by Magistrate Judge Kenneth G. Gale.

On Jan. 31 Judge Julie A. Robinson ordered the NCUA to show cause why NCUA's lawsuit against Wachovia Capital Markets LLC (now known as Wells Fargo Securities LLC)  over RMBS sold to corporate credit unions should not be dismissed for lack of prosecution (News Now Feb. 6).

NCUA filed a response to the show-cause order with the court Feb. 22 , in which NCUA said it served Wachovia within the timeframe allowed by federal rules and worked with the bank on an extension of times for a response to NCUA's complaint.

NCUA also said Wachovia's original deadline was well within the 120 days allowed for service process, with no undue delays or prejudice to Wachovia.

Wachovia and NCUA on Feb. 22 filed a mutual consent motion for extension of time for Wachovia to file a response to NCUA's complaint.

The lawsuit alleges that originators of the RMBS had systematically abandoned the stated underwriting guidelines, resulting in riskier RMBS that the corporates would not have bought, had they known, said NCUA.  Wachovia representatives sold about $100 million in RMBS to U.S. Central and WesCorp in 2006, and U.S. Central purchased approximately $80 million in RMBS underwritten by Wachovia, according to court documents (News Now Feb. 6).

NCUA placed U.S. Central and WesCorp into conservatorship on March 20, 2009. On Oct. 1, 2010, the corporates were placed into involuntary liquidation. NCUA is suing as the liquidating agency to recoup some of the losses.

Tower CU members OK merger with Connexus

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WAUSAU, Wis. (2/28/12)--Members of Tower CU, with $45 million in assets, on Sunday approved a merger with $410 million Connexus CU during a special meeting on Sunday.

Both credit unions are based in Wausau, Wis.

"Difficult economic times combined with new regulatory requirements and increased competition challenged us to evaluate our ability to serve our members as we would like," said Hal Osborn, Tower CU president. "A merger with Connexus CU will ensure that our members will receive the products and service to meet their every need now and in the future," he said.

The merger is expected to be completed later this spring.

Tower is the second Wausau-area credit union to announce merger plans with Connexus this month. Maple Hill CU, with $11 million in assets, approved its merger with Connexus on Feb. 16.

Big bank exodus good for smaller FIs J.D. Power

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WESTLAKE VILLAGE, Calif. (2/28/12)--In 2011, roughly 9.6% of large, regional and midsize bank customers defected  from those institutions, and credit unions and small banks were the beneficiaries, says new research  released Monday from J.D. Power and Associates.

The research firm's  "2012 U.S. Bank Customer Switching and Acquisition Study" noted that "consumer backlash against bank fees, coupled with poor service and unmet customer expectations, has fueled increases in defection rates among customers of large, regional and midsize banks."

"On the heels of 'Bank Transfer Day' on Nov. 5, 2011, the beneficiaries of the increased exodus from larger banks are primarily smaller banks and credit unions," J.D. Power said in its news release announcing the study results. The firm surveyed more than 5,000 customers who shopped for a new financial institution or new account during the past 12 months.

"Acquisition of new customers by smaller banks and credit unions has increased by 2.2 percentage points to an average of 10.3% in 2012 from 8.1% in 2011," said J.D. Power.

The report noted that the defection rate of customers at midsize to larger banks averaged between 10% and 11.3% last year, while small banks and credit unions lost only 0.9% on average, a significant decline from the defection rate the smaller institutions saw in 2010, said the firm.

The 9.6% of customers who said in 2012 that they had switched during the past year to a new provider is up from 8.7% who switched in 2011's study  and 7.7% in 2010's study.

About a third of customers at big banks reported fees as the reason they looked elsewhere. The report also indicated that many big-bank customers were already unhappy with the customer service there, so when fees were announced or raised, they had more incentive to switch.

"Regardless of bank size, more than one-half of all customers who said fees were the main reason to shop for another bank also indicated that their prior bank provided poor service," said Michael Beird, director of the banking services practice at J.D. Power and Associates.

J.D. Power also noted that consumers thinking about switching institutions should:

  • Shop around to compare terms and services;
  • Avoid being swayed by promotion gifts/cash alone.
  • Read account brochures and disclosures carefully, and ask questions.

Students are CUs first junior board of directors

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WHITEFISH, Mont. (2/28/12)--Whitefish (Mont.) CU, has selected its inaugural junior board of directors.

Four seniors and three juniors were selected by Whitefish High School to serve on the board. Junior board members will conduct their own board meetings, write articles for the credit union newsletter and implement a community service project, said Sue Schenck, Whitefish CU's business development director.

"One of the really important functions of a credit union, and also part of the credit union philosophy, is financial education," said Schenck. "This is a great way to get the credit union philosophy out there and hopefully have some fun with these students while we're doing it."

During their monthly meetings, the students will learn about the 77-year history of Whitefish CU and its place in the communities of northwest Montana. Guest speakers will teach junior board members about the grassroots movement that brought about credit unions in America and basic credit union philosophies.

Board members include:

  • Hailey Vasquez, senior, chair;
  • Abby Wagner, senior, vice chair;
  • Perrey Sobba, junior, board secretary;
  • Joseph Perry, senior;
  • Ally Pickeral, senior;
  • Kelsey McFeely, junior; and
  • Rachelle Brown, junior.
The junior board of directors will meet until the end of the school year.

Schenck said she and Whitefish CU "expect great things this year from these amazing students," and plan to continue the program again with another group of high schoolers in January.

CU System briefs (02/27/2012)

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  • SAN DIEGO (2/28/12)--A man dubbed by the Federal Bureau of Investigation (FBI) as "the well-dressed bandit" pleaded guilty on Feb. 21 to a string of holdups in San Diego area credit unions and banks (The San Diego Tribune Feb. 26). Anthony Pernelle Burgess, 30, of San Diego faces up to 20 years in prison at his sentencing, set for May 14. He pleaded guilty to three San Diego holdups in 2010 and four in 2011. One Carmel Valley bank was robbed three times, and a Solana Beach credit union was robbed twice …
  • ST. JOSEPH, Mich. (2/28/12)--Leaders from credit unions in the Greater Southwest Chapter in Michigan convened in St. Joseph, Mich., Feb. 22 with U.S. Rep. Fred Upton (R-Mich.) to discuss H.R. 3993, which would permit credit unions access to supplemental forms of capital. Participants pointed out that credit unions stand out as the only depository institutions in the U.S. without the ability to augment retained earnings to build capital. Two credit unions in Upton's district--United FCU and First Community FCU--merged failing institutions into their credit unions last year. The mergers, approved by the National Credit Union Administration, resulted in lower capital ratios at the acquiring institutions, said the Michigan Credit Union League (Michigan Monitor Feb. 27). The credit unions asked Upton to consider sponsoring HR 3993. Upton, second from left in the front row, said he appreciated the information and would take a closer look at the legislation. (Photo provided by the Michigan Credit Union League) …
  • DEWITT, Mich. (2/28/12)--Astera CU member Lee Preston, left, his son Mike Preston, and Sheila Mitchell, senior member service representative for Astera's DeWitt, Mich., branch, hold a check for the $100,000 Grand Prize Lee Preston won in Michigan credit unions' Save to Win program designed to encourage credit union members to save their money.  He was randomly selected in a computerized statewide drawing from more than 16,500 credit union members who deposited money into Save to Win accounts in 2011. Preston said he will use the money to help four grandchildren with college expenses. "You've taken a lot of worry off this old retiree," he told the credit union. He is retired from General Motors' former Fisher Body plant in Lansing. His advice for those who are not credit union members:  "I would say get involved in a credit union." As of Dec. 31, about 175 of Astera's members saved more than $300,000 at the credit union. Other Mid-Michigan area credit unions participating in the program reported these savings:  CASE CU, more than $678,725 saved by 261 members; CP FCU, more than $1.8 million saved by 731 members; EECU, more than $361,506 saved by 130 members; Lake Trust CU, more than $8 million saved by 1,821 members; and Portland FCU, more than $883,456 saved by 225 members. The program was launched in 2009 by the Michigan Credit Union League, the Filene Research Institute and the Doorways to Dreams Fund. The league also has a video of the event. (Photo provided by the Michigan Credit Union League) …
  • DEARBORN, Mich. (2/28/12)--Donald J. MacKinnon Jr., former CEO of what is now DFCU Financial in Dearborn, Mich., died Jan. 25, the Michigan Credit Union League has learned. MacKinnon was 93. He helped organize more than 100 credit unions and is a member of the Credit Union Hall of Fame in Washington. He was CEO of the then Dearborn FCU. Ken Bixby, who served as league president/CEO from 1982 to 1996, said he met MacKinnon in 1959 while Bixby was serving as an NCUA regional director. Bixby "was a hero of mine in the history of credit unions…and, a mentor in many ways even when we were in disagreement over what the law would permit." "Improved member service was at the forefront of any of his concepts," said Bixby (Michigan Monitor Feb. 27) …

One in five CUs abandon Twitter accounts study

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MADISON, Wis. (2/28/12)--Many credit unions are struggling to develop a following on Twitter, and about one in five credit unions surveyed have abandoned Twitter entirely, according to a new study released by the Financial Brand.

But the study also showed that many credit unions weren't very active in developing a following. The average credit union studied sent about one "tweet" every other day, or 0.6 tweets per day.

The Financial Brand analyzed 350 "activated" credit union Twitter accounts. The study's sample size represents over 5% of all U.S. credit unions, and a minimum of 10% of all those on Twitter.

Accounts were considered "activated" if the credit union's profile had been customized with an avatar/logo, at least one tweet had been sent through the account, and the account had at least one follower. For the study, any account that had not tweeted in the last three months was considered dormant or abandoned.

The study found that the more often a credit union tweets, the higher its growth rate of new followers. The top 20 credit unions sent an average of 1,486 tweets, or about 1.5 tweets per day. Credit unions with the fastest growth rate for followers--those adding at least two new followers daily--send an average of at least three tweets per 24-hour period.

The typical credit union using Twitter has 300 followers, adding about one new follower every two days, according to the study. That credit union follows 150 other Twitter accounts.

Most credit unions have activated their Twitter accounts since December 2009. The majority of tweets sent are one-directional, often with links back to a press release or similar credit union Web page. Very few @replies are sent by credit unions to other Twitter users.

Southern Oregon FCU, Grants Pass, Ore., topped the list of most followers with 10,242. The Golden  1 CU, Sacramento, Calif., was next with 4,002 followers. Southern Oregon FCU has $709 million in assets, and 71,660 members. It has one follower for every seven members, or one follower for every $69,000 in assets.

Of the 350 credit unions included in the study, 74 (21.1%) had abandoned their accounts. They created their accounts in late 2009, and sent about100 tweets before giving up.

Smaller credit unions abandoned Twitter more frequently than larger instituions. Of the 74 credit unions that gave up on Twitter, 47 (63%) had less than $200 million in assets. Only four (6%) of the 66 credit unions in the study with more than $1 billion in assets dropped out.

The study noted if consumers had any interest in connecting with financial institutions on Twitter, they'd have done it by now. "As a tool to keep tabs on other financial institutions, to connect with industry peers, and to spread press releases, Twitter can be very effective, no doubt. But Twitter's usefulness beyond that is highly disputable," the study concluded.

To view the study, use the link.

People with disabilities to staff CU branch

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ESSEXVILLE, Mich. (2/28/12)--FinancialEdge Community CU, Bay City, Mich., is building a new branch that will be staffed by people with disabilities.

FinancialEdge Community CU President/CEO Jeremy Coberley, left, and Do-All Inc. President/CEO Chris Girard prepare to begin building a branch staffed by people with disabilities. (Photo provided by Michigan Credit Union League)
The new branch represents the second phase of FinancialEdge's partnership with Do-All, a non-profit organization in Bay County, Mich. providing employment services and community opportunities for individuals with disabilities, said the Michigan Credit Union League (Michigan Monitor Feb. 27).

The credit union received a $5,000 grant from the Michigan Credit Union Foundation and $10,000 from the National Credit Union Foundation to help with the project.

Last fall, the credit union established a branch that is only open to Do-All trainees and staff at the nonprofit company's main facility in Bay City.

The newest branch--called Do-$ave--will be inside Do-All's largest store in the neighboring town of Essexville. The store will be open to the general public when it is completed in the fall.

The branch initially will be open one day per week, said Pam Swope, Financial Edge marketing manager. "We'll grow the hours as we need them," Swope said.

FinancialEdge has worked with trainees from Do-All for years, but the idea for the branches came from Do-All President/CEO Chris Girard, who was looking for new opportunities for the trainees employed by the company.

FinancialEdge President/CEO Jeremy Coberley said he hoped the partnership with Do All would serve as a model for similar projects at other credit unions.

The branch will offer most of Financial Edge's regular services, and will typically be staffed by two Do-All trainees along with one Do-All staff coach and a credit union representative, Swope said.