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Environmental homes hitting mortgage wall

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HOT SULPHUR SPRINGS, Colo. (3/19/10)--A credit union in Hot Sulphur Springs, Colo., is finding that members who build unique environmental homes have trouble getting loans because they can't get appraisals. Earth-friendly homes made of earth, tires, concrete and recycled trash "have been no match for the new resolve of the banking industry after the housing bust," according to The Wall Street Journal (March 18). Banks are picky about examining sales of comparable homes before deciding whether and how much to lend. This leaves the odd-duck homes, no matter how well built, in a lurch. Case in point: Credit union members Jon and Laura Hagar are trying to refinance the line of credit into a long-term fixed-rate mortgage for their rural Colorado house made of 17,000 old tires, said the Journal. They stacked tire bales and plugged the gaps with cans, bottles, plastic plates and other junk, which was then covered with concrete, clay and stucco. In 2007, to pay for the construction, the Hagars took out a $240,000 line of credit from Red Rocks CU, Highlands Ranch, Colo., said the Journal. The appraiser at the time couldn't find a comparable home that had been recently sold but said the house would be valued at $500,000, based on a recently sold straw-bale home and other houses in their area. They moved in during 2008. When interest rates dived last year, the Hagars tried to refinance. However, last February, the credit union's loan officer, Bill Schimel, said they had hit a wall. No home built from tire bales had been sold recently in the state. Lenders said they can't value the property, which meant a regular mortgage was out of the question. Red Rocks CU Vice President Don Arkell is still looking for a way to refinance the Hagars' loan by testing the secondary market, but he told the Journal the house is so unusual he may not be able to sell the loan to investors. In that case, the credit union would have to keep the loan on its own books. That situation doesn't set well with regulators concerned about the health of small financial institutions. Red Rocks is focusing on making loans that would see easily if it needed to raise cash. Arkell told the Journal the situation is bleak for people in properties that are hard to value.

Texas CUs to develop small loans for modestlow incomers

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DALLAS (3/19/10)--The Texas Credit Union League is working with REAL Solutions-designated credit unions in the state and the National Credit Union Foundation (NCUF) to develop a small loan product geared toward low- and moderate-income borrowers. The program will be launched March 30. "Our goal is to get more money in the hands of the borrower," said Natasha Melugin, the league's REAL Solutions program director, noting that the short term loans will be affordable for low-to-moderate income Texans. The loan product, currently available only at participating REAL Solutions credit unions, includes:
* An interest rate capped at 18% instead of up to 400% annual interest rate charged by predatory lenders; * The ability to pay back the loan in installments up to 90 days instead of within one to two weeks required by payday lenders; * The ability to build a positive credit rating using the credit union; and * A forced savings component, requiring the borrower to deposit 10% of the loan into a savings account.
More than 50 Texas credit unions participate in the REAL Solutions, a signature program of NCUF.

Pennsylvania governor signs robbery law

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HARRISBURG, Pa. (3/19/10)--Pennsylvania Gov. Ed Rendell has signed a law that establishes robbery of a financial institution as a second degree felony regardless of the method used to commit the robbery. The Pennsylvania Credit Union Association (PCUA) supported the measure, which was introduced each session since 2005 by state Sen. Mike Waugh (R-York) (Life is a Highway March 18). Bank robbers often make threats verbally or with notes under the assumption that their crime will be considered less severe without a weapon, Waugh said. The new legislation's goal is to deter bank robberies. PCUA applauded the General Assembly and the governor's actions, saying that many credit unions throughout the state have experienced an increase in robberies. "Bank crime [experts list] Pennsylvania as third behind California and Texas in the number of bank robbery occurrences," said Christina Mihalik, vice president of governmental affairs. "Increasing state penalties for this crime will work to make financial institutions a safer place for customers and employees and their communities."

CU to sell auto business attacked by dealers

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RACINE, Wis. (3/19/10)--Educators CU has decided to divest its auto dealership, Educators Auto and Lease, and is in the final stages of a purchase agreement. “We hope to finalize it in the next week,” Jim Henderson, Educators CU senior vice president, told News Now. The dealership is being divested after the Wisconsin Automobile and Truck Association filed a complaint in 2008 with the Wisconsin Office of Credit Unions (OCU), saying that the state’s credit union charter statute does not allow credit unions to offer the service. Educators said it believed the complaint was filed to prevent competition--each year, more than 700 individuals purchase used vehicles from the credit union (News Now Nov. 4, 2008). The OCU initially ruled that the State of Wisconsin Credit Union Statutes allowed credit unions to only lease cars, not sell them. The credit union appealed the ruling, and had 18 months to have the law clarified or divest the business. The credit union worked with state legislators to add an amendment to the state budget bill that would allow the credit union to continue its business, but it was vetoed by Gov. Jim Doyle. The credit union then looked into a separate bill on the matter, and while legislators were more than willing to work on it, after talking to the governor’s office, Educators realized that it had no desire to change the law, Henderson said. With the sale of the business in process, Henderson said he doesn’t expect the business to undergo any material changes after the purchase. The new owner, Tim Stark, has said he plans to keep the program the same. The dealership offered consumers no-haggle pricing; a 60-day safety net, which covers the cost of most mechanical repairs for two months after the purchase; and a three-day return policy. The goal of Educators’ auto business had always been to provide consumers with a no hassle car buying experience, and help them find the right car for their needs instead of just selling them a vehicle, Henderson said. Stark currently manages the dealership and will rent the 100-car facility from the credit union. The entire dealership staff will become his employees (Journal Times March 18). “We’re not totally satisfied, but happy the program is continuing,” Henderson said. “The new owner is planning to keep it the same ... and we think it’s going to be successful for him, too.”

Vermont interchange amendment would hurt CUs

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MONTPELIER, Vt. (3/19/10)--An amendment to Vermont Senate bill S.138 has brought the controversy over merchant plastic card fees to the statehouse, and it would be a “disaster for credit unions,” said the Association of Vermont Credit Unions (AVCU). Prior to Tuesday’s press conference announcing the amendment, S.138 had primarily dealt with many of the same issues which the Credit Card Accountability, Responsibility, and Disclosure (CARD) Act of 2009 already addressed at the federal level (NewsLines Express March 19). Those provisions of the bill were removed, leaving only the amendment offered by the Vermont Grocers Association and Vermont Retail Association. The bill seeks to reduce fees that merchants pay to plastic card issuers such as credit unions, and networks and processors. It also seeks to allow merchants to disregard the rules of the credit card networks; rules that, in effect, ensure that a credit union debit card is honored and treated exactly the same way as a debit card issued by a large bank. Both sides of the amendment have already drawn national attention and received support from beyond Vermont’s borders, AVCU said. The Merchant Payments Coalition, which is backed by giant retailers such as Wal-Mart, is supporting the position of the grocers and retail associations. The credit union position--that this potential legislation would severely restrict consumer choice and damage small businesses--is supported by the Electronic Payments Coalition and the Credit Union National Association (CUNA). Select small business owners claiming that the card processing fees they pay every month are driving them out of business joined four state senators to speak about the proposed amendment to S.138 at Tuesday’s Statehouse press conference. They said the fees are confusing, unfair and “abusive.” “This legislation aims to help the Vermont consumer and store owner by prohibiting these abusive practices,” said Senate President Pro Tempore Peter Shumlin. AVCU President Joe Bergeron disagrees. “This amendment as proposed would have a significant negative impact on the very entities it seeks to help … Vermont consumers and small businesses,” he said. “And it would be a disaster for credit unions that are trying to provide the growing variety of card payment options their members demand.” Merchants are seeing rising costs for accepting credit and debit transactions because the sheer volume of these payments has grown significantly in recent years, AVCU said. With the decline of checks and growth of plastic, the responsibility for guaranteed payment has also shifted from the merchant to the card issuer. “Credit unions and other card issuers must absorb the costs of data breaches and fraud over which they have little control,” Bergeron said. “When a purchase is made with a fraudulent card, the merchant gets paid but the credit union takes the loss. Interchange provides help in offsetting a fraction of these ever-increasing costs.” Although the senators have the best interests of consumers and small business owners at heart, the proposed amendment would have unintended consequences that only those who are intricately familiar with card payment systems fully understand, Bergeron added. Vermont merchants now benefit from participating in a national marketplace, and state laws in this area could change that. Vermont merchants could discriminate against credit union-issued debit and credit cards, effectively harming credit unions and their members who depend on their debit cards and credit cards. Customers of Vermont businesses could face unknown circumstances each time they sought to use a card with a Vermont business, diminishing the usefulness of debit and credit cards to the consumer. “The plastic card payment system is a complex arrangement of issuers, processors, and data networks,” Bergeron said. “While we are not unsympathetic to rising small business costs, the solution needs to be studied in greater depth to ensure that this complex system remains equitable and fair for all of its component parts. We’ve already provided significant testimony and education to the legislature in this area and credit unions will continue to do so whenever asked.” CUNA opposes legislation that would affect interchange fees as such action would adversely limit consumer options, competition and technological innovation.

Arizona league applauds payday lenders defeat

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PHOENIX (3/19/10)--An Arizona State Senate committee Tuesday voted down a payday lending industry-sponsored measure that would have indefinitely continued payday lenders’ exemption from state laws that limit interest on loans to more than 36% a year. The move was applauded by the Arizona Credit Union League. The Senate Appropriations Committee killed the measure on a 5-3 vote. The exemption, approved about 10 years ago, expires June 30 (Azdailysun.com March 17). Austin De Bey, Arizona league vice president of governmental affairs, was at the Tuesday hearing. “Arizona’s current payday lending model works against the credit union philosophy of ‘People Helping People,’” he told News Now. “As we began to see more and more members needing help after falling victim to the debt trap, it became time for the league and member credit unions to tell our legislature the ‘truth’ about the product. “Arizona credit unions stepped up once again and played a key role in defeating the latest attempt to remove the sunset date,” he concluded. “Our position is that credit unions see the harmful effects these loan products have on our members,” the league said in an e-mail to News Now. “We are often times the ones that are left to pick up the pieces after a member has fallen victim to a payday lending debt trap. The voters spoke in 2008 and it is time for the industry to either operate under the 36% usury cap or leave the state of Arizona.” Payday lenders were allowed to operate and had a special carve out to charge triple-digit interest rates starting in 2000, said the league. Arizona’s usury cap is 36% for all other lenders. When the law was created, lawmakers put into place a sunset date for 10 years after the law’s effective date. The sunset date is July 1. In 2008, the payday lenders attempted to circumvent the legislature with a voter protected initiative that would remove the sunset date, the league added. The campaign cost them $13 million. At that time, the Arizona league joined the opposing campaign, “No on Prop 200.” The league said payday lenders gave a misleading message that the law would reform the industry, when in truth it would allow payday lenders to continue to charge a 391% annual percentage rate. The proposition was defeated by a vote of 60% to 40% in the 2008 election, the league said. The league joined Arizonans for Responsible Lending, a coalition to oppose the removal of the sunset date again in 2010, and through its grassroots and lobbying efforts it was able to help the proposition.

BizKid aired on 99 of PBS stations

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FEDERAL WAY, Wash. (3/19/10)--BizKid$, the youth-focused and credit union-funded financial education show, is airing on 99% of PBS stations. The show began filming Season Four in January and has been shown on 340 of the nation’s 343 public television stations, including 74 of the top 75 markets. Episodes have been aired more than 70,000 times since the show first aired in January 2008, according to the Washington Credit Union Foundation. Many stations also created projects in their communities in partnership with area credit unions and their schools to extend the educational impact of the series, said Jamie Hammond, show executive producer. “This gives credit unions more face time with young adults,” added John Annaloro, foundation president. “This is a highly sought-after demographic, who will be the future consumers in the years ahead. Teaching them about the virtues of thrift and entrepreneurship, and linking this message to credit unions is so powerful for our movement.” Fundraising efforts for the new season are ramping up, with a goal to raise $1.3 million in the credit union community. The production team hopes to get 65 episodes, or five full seasons, at which time the show can run on a daily basis nationwide. The foundation manages the Biz Kid$ project. The show is underwritten by a coalition of America's Credit Unions, comprising more than 150 credit unions, credit union foundations and other supporting organizations. The largest funder is the National Credit Union Foundation. A new donation recognition system also was recently implemented so contributors will receive thank-you gifts for supporting the show. BizKid$ also has been invited by the New York Stock Exchange to ring the opening bell on April 28 to celebrate National Financial Literacy Month. Credit union representatives can be part of the ceremony.

CU System briefs (03/18/2010)

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* COLORADO SPRINGS, Colo. (3/19/10)--Ent FCU has launched its first free iPhone application--an Ent Service Center and ATM Location Finder--on iTunes. The Colorado Springs, Colo.-based credit union's members with an iPhone or an iPod touch can use the Ent Location Finder to find the nearest Ent Shared Branch, Ent ATM or CO-OP Network ATM throughout the U.S. "Unlike text-based locator tools and Web page listings, the iPhone's GPS functionality finds the closest locations automatically, eliminating the need to know their current ZIP code or nearest cross street," said Victoria Selfridge, director of marketing. The application displays the closest 18 ATMs and/or Service Centers, connects directly to Google Maps for driving instructions, and displays the location name, hours of operation and unique additional member services for each Ent Service Center ... * RICHMOND, Va. (3/19/10)--Dorothy J. "Dot" Hall, retired president of Virginia CU, Richmond, died Tuesday at her home in Hanover, Va. She was 79. She joined the credit union in 1957 as a bookkeeper and retired as president in 1999 after 42 years. She became treasurer of the board and the general manager of the credit union in 1972. Her title was changed to president in 1986. When she began working for the credit union, it had 2,500 members and less than $1 million in assets. When she retired, it had 123,000 members and more than $600 million in assets, and E. J. Face Jr., commissioner of the State Corporation Commission Bureau of Financial Institutions, noted her efforts as "an inspiration to her board, the staff of the credit union, and perhaps most important of all, to the membership of the credit union." "For many people, Dot Hall was the credit union," said Jane Watkins, who succeeded her as president/CEO. Hall also served as president of the Richmond Chapter of the Virginia Credit Union League, as a league director, and as a national director from Virginia ...

WOCCU Bolivia program expands service to rural areas

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LA PAZ, Bolivia (3/19/10)--World Council of Credit Unions’ (WOCCU) development program in Bolivia--a three-year-plus financial sector support program--ends March 31 after increasing financial access for Bolivia’s rural poor.
Click to view larger image World Council of Credit Unions (WOCCU) Bolivia Project Director Rolando Salazar speaks at the inauguration of the Center for Economic Initiatives Promotion, a microfinance provider in Santa Cruz that received funding from WOCCU's Rural Financial Expansion Grant program.
To engage Bolivia’s entire financial sector and extend services to marginalized rural areas, the program set out in 2006 to administer grants to credit unions and microfinance institutions that piloted innovative outreach initiatives. The program was funded by the U.S. Agency for International Development (USAID). This and other sector-wide initiatives, which addressed the needs of credit unions and other microfinance providers, drew nearly 25,000 people into formal financial institutions, said WOCCU. Other accomplishments of the $2.4 million program included the development of microinsurance, the formation of an association of financial associations to foster the sector's development, widespread consumer information campaigns and the launch of Bolivia's first member-owned ATMs. The Ohio Credit Union League (OCUL) and Corporate One CU, Columbus, Ohio, also participated in the development of Bolivia’s credit unions through WOCCU’s International Partnerships Program. OCUL representatives taught their Bolivian counterparts about financial services delivery methods, documentation processes and advocacy techniques. Corporate One created software that allowed Bolivia’s credit unions to manage their own liquidity needs.
Click to view larger image Banco Sol used a grant from World Council of Credit Unions’ program to help fund three full-service mobile banking units with two tellers and a driver in the Bolivian cities of La Paz, Santa Cruz and Cochabamba. (Photos provided by World Council of Credit Unions) .
The program received a grant in April 2007 to fund grants for financial expansion initiatives to disadvantaged populations. Thirty proposals were submitted from a variety of institutions with 15 awarded a total of $284,000 through September 2009. Participant organizations attracted more than 15,000 new savers and nearly 10,000 new borrowers, exceeding the original aggregate goal of 10,000 new savers and 4,700 borrowers. Banco Sol, a microfinance institution awarded one of the grants, used its funds to launch three mobile banking units in La Paz, Cochabamba and Santa Cruz. Trucks converted into full-service branches now travel to populations with little or no access to financial services. Grant funds covered about 30% of the $60,000 startup cost for each unit and the rest was paid by the institution itself. Also in 2007, the program began a market analysis to determine whether microinsurance should be offered through credit unions and other participating institutions. In 2008, agreements were drafted and three policies were launched. By July 2009, five policies had been launched, including the first micro auto insurance policies to reach the Bolivian market. The micro policies are more affordable than traditional insurance policies, WOCCU said. WOCCU’s Bolivia program also helped credit unions increase the depth of their services by installing ATMs in rural and fringe urban areas.

N.Y. association-supported candidate wins Senate seat

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ALBANY, N.Y. (3/19/10)--New York State Rep. Jose R. Peralta (D-Metropolitan) won a special election for a Senate seat Tuesday that was vacated by ousted State Sen. Hiram Monserrate. Peralta was endorsed by the Credit Union Association of New York. Peralta has always had a clear understanding of the issues credit unions face, the association said. He co-sponsored credit union bills that would allow credit union participation in municipal deposits and the excelsior linked deposit program. “With his history of championing issues important to our credit unions, the members they serve and the communities they live in, we are happy that Peralta will now have a voice in our state senate,” said William J. Mellin, association president/CEO. Peralta was elected to the state assembly in 2002. As chairman of the banking subcommittee, he has expanded the number of branches serving low-income communities.