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Collections credit lawsuits up loan mods lower scores

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WASHINGTON (3/22/10)--Consumers' debts and foreclosures have prompted the number of lawsuits involving collection and credit issues to increase 53% during fiscal 2009. And in a separate trend, consumers trying lower their debt under the government's mortgage assistance program are learning one result of their participation is a lower credit score. First, the lawsuits. According to the Administrative Office of the U.S. Courts, suits filed by individuals or state regulators under the Fair Debt Collection Practices Act (FDCPA) and the Fair Credit Reporting Act (FCRA) climbed to 6,463 during the fiscal year ended Sept. 30 (PaymentsSource.com March 19). However, the numbers were lower than the record counted for the 2009 calendar year by WebRecon LLC. The research firm tallied 8,287 FDCPA cases alone. The courts' count may not have properly categorized all FDCPA and FCRA cases, the firm said. A significant number of the suits were against credit reporting agencies. The numbers of foreclosures brought in federal courts under the Truth-in-Lending Act tripled to 1,517 for the fiscal year, according to the courts' data. Now, the loan modifications. According to housing counselors in New York and Michigan, borrowers who make their payments on time but sign up for the Obama administration's "Making Home Affordable" program are finding their participation knocks as much as 100 points off their credit score (The New York Times March 19). Their scores take a dive when they enter the $75 billion program's trial period in which they must make at least three payments. Delinquent borrowers have damaged their scores already. But credit agencies maintain that a loan modification request signals to them that the homeowner, even if managing to pay bills, is having difficulty. The problem is more serious for those who enroll in the Obama program but are then ruled ineligible. Homeowners accepted into the program and who succeed in getting their loans permanently modified will see lenders updating the credit bureaus. Their new status neither helps nor hurts their score. If they continue to pay bills as agreed--they will see the score increase over time, one agency told the Times.

U.K.s co-opCU bill receives Royal Assent

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LONDON (3/22/10)--A key British credit union bill that would allow credit unions to serve more people left underserved by the global financial crisis and to mobilize secondary capital has received Royal Assent, according to the World Council of Credit Unions (WOCCU). Parliament announced the Royal Assent for the Cooperative and Community Benefits Societies and Credit Unions Act Thursday. Royal Assent--the monarch's agreement to make the bill into an act--is considered a formality but is required before the bill can become law. Dave Grace, WOCCU vice president of association services, has worked the past 18 months with the United Kingdom's (U.K.) working group and the Association of British Credit Unions Ltd. on drafting the bill. The U.K.'s Financial Services Authority (FSA), which regulates the country's credit unions, took steps to broaden financial cooperatives' abilities in recognition of their relatively stable position during the banking crisis, Grace said. The law will allow credit unions to serve a wider swath of consumers, issue interest-bearing shares, and gain access to alternative capital. Lawmakers also are increasing capital and liquidity requirements for the nation's 500 credit unions to provide greater protection for consumers, said WOCCU in a news release about the working group's proposal in November. Proposed regulations will raise the level of governance standards, increase minimum liquidity requirements for credit unions and raise capital-to-asset ratios for smaller institutions. The new regulations would be phased in over a two- to three-year period.

Governor signs FI-oversight bills in Wash. state

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OLYMPIA, Wash. (3/22/10)--Washington Gov. Chris Gregoire signed two bills designed to strengthen the regulation of the state-chartered credit unions and banks. "This legislation updates our existing laws and allows us to more effectively fulfill our mission as regulators," said Scott Jarvis, director of the Washington State Department of Financial Institutions (DFI). "In these times--more so than in just about any outside the Great Depression--effective financial regulatory oversight is crucial to maintaining sound financial services." Linda Jekel, director of DFI's Credit Union Division, noted that "While DFI has not had to close a credit union yet during the existing financial crisis, the credit union bill addresses some potential shortcomings in Washington's Credit Union Act." She said the bill "provides DFI with an improved regulatory toolbox in order to protect consumers' financial interests." For credit unions, EHB 2830 would:
* Add tools to permit stronger regulatory oversight and earlier enforcement of troubled credit unions; * Update and streamline early regulatory action for troubled credit unions by providing for early regulatory intervention when a credit union becomes undercapitalized; * Strengthen fiduciary duties of board members; * Give DFI authority to suspend credit union directors for harmful activities; * Authorize DFI to fine credit unions for material violations of credit union act or rules; and * Modernize DFI's conservatorship and receivership provisions for credit unions.
A similar bill, EHB 2831, addresses banks. It gives DFI enforcement powers over bank holding companies; improves the Division of Banks' authority when institutions are less than well-capitalized; brings DFI's enforcement authority in line with federal standards for prompt corrective action for institutions that are less than well-capitalized; and clarifies factors the division uses in closing an unsafe and unsound bank.

Filene report CUs inspire more loyalty

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MADISON, Wis. (3/22/10)--Credit unions consistently and significantly outperform banks in key areas including: quality of support, value, ease of conducting business and products and services, according to the Filene Research Institute. In Filene’s latest report, credit unions continue to improve in their Net Promoter Score (NPS), a loyalty measure for increasing member retention, repurchase and referral. Exploring Ongoing Member Loyalty: Net Promoter in Credit Unions shows not only that credit unions often engender more loyalty than regional and national banks, but how many of them do it. The report found that credit unions perform better when they measure loyalty and use the findings to drive change to improve the member experience. The report highlights case studies to illustrate how credit unions use Net Promoter to gain market share by focusing on what is most important to members. The authors, Dr. Laura Brooks, vice president of research and consulting at Satmetrix, and Michelle Bloedorn, executive director of the Member Loyalty Group, explore how credit unions create customer loyalty and deploy best practices by measuring NPS, which weighs a company’s promoters against its detractors. The report provides credit union case studies and data from high-performing credit unions. Among the findings:
* Credit unions outperform banks in quality of member service and support, and ease of doing business; * Credit unions that track their member feedback and proactively communicate that to employees influence behavior and improve performance; and * Members who are more likely to recommend the credit union to colleagues and friends are also more likely to hold more accounts, stay with the credit union longer, and be more profitable. Credit unions can increase members’ likelihood to recommend by identifying important member touch points (online, retail, contact center) and then improving these processes to exceed member expectations.
Brooks and Bloedorn say there is still room for credit unions to improve. The best-in-class credit unions used Net Promoter to differentiate their member experience and committed the time and resources necessary to act on the feedback and hold their employees accountable. Exploring Ongoing Member Loyalty: Net Promoter in Credit Unions is available free to members of the Filene Research Institute and is available for purchase by non-members. For more information, use the link.

ITimeI magazine reports Bethpages tips for small-biz

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BETHPAGE, N.Y. (3/22/10)--A Bethpage FCU executive told Time magazine that there are some alternatives business owners should consider when putting up their personal assets to get a loan from a financial institution. Every year, millions of business owners put their personal assets on the line for loans, according to Time (March 18). If the business doesn’t thrive, then the owners are in danger of losing their assets. The article’s author, Gigi Berman, told the story of her husband, whose credit line was cut by his bank. The bank told him and his business partner they had nine days to pay back a seven-figure amount the bank had loaned him. To avoid situations like these, Bethpage (N.Y.) FCU senior vice president Michele Dean suggested pledging accounts receivable and asking for a guarantee that gets smaller each year as borrowers build a credit history. “There are other bargaining chips in lieu of or to reduce the personal guarantee that banks may not go out of their way to reveal,” she told the magazine.

Sentencing of U.S. Mortgages McGrath delayed to May

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NEWARK, N.J. (3/22/10)--A U.S. District Court in New Jersey has again postponed the sentencing date of Michael McGrath, president of the former U.S. Mortgage/Credit Union National Mortgage company, for the fraud of nearly $140 million from credit unions and Fannie Mae. The sentencing date is reset for 10 a.m. ET on May 18 before Judge Katherine S. Hayden, according to the criminal docket for the case. At that time Hayden will determine whether to accept the recommendation for 12 1/2 to 20 years in prison made in a plea bargain. McGrath also is to pay restitution (News Now Jan. 11). McGrath pleaded guilty in June to one count of mail and wire fraud and one count of money laundering conspiracy in defrauding $139.6 million from 28 credit unions, Fannie Mae and others (News Now June 12). McGrath admitted to conspiring with others from January 2004 to January 2009 to fraudulently sell credit union loans and use the proceeds to finance U.S. Mortgage's operations and investments for himself and his company. He also admitted to diverting funds that should have been paid to credit unions for mortgage loans sold without authorization to Fannie Mae to help offset bad investments in mortgage-backed securities, according to prosecutors (Reuters June 11). Both U.S. Mortgage and Credit Union National Mortgage, which were based in Pine Brook, N.J., filed for Chapter 11 bankruptcy during February 2009 in Newark. They listed more than $200 million in debts to Fannie Mae and the 28 credit unions. The bankruptcies have led to several lawsuits by credit unions seeking to recoup losses against Fannie Mae and against insurance companies. McGrath pleaded guilty in June. Since then five sentencing dates have been set and postponed: Oct. 1, 2009; Nov. 30, 2009; Feb. 1; March 22; and April 19. On Thursday the court reset the date for May 18.

Arizona league names legislators of the year

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PHOENIX (3/22/10)--The Arizona Credit Union League hosted its annual State Governmental Affairs Conference March 9. The league also honored State Rep. Nancy McLain (R-3), House Banking and Insurance chairman, with the league’s Legislator of the Year Award.
Click to view larger image Arizona Secretary of State Ken Bennett provided a “Tissue Box Guide” to the state budget during the Arizona Credit Union League’s State Governmental Affairs Conference in Phoenix March 9. (Photo provided by the Arizona Credit Union League)
The conference was held at Arizona Central CU, Phoenix. Speakers and topics included:
* Sen. Debbie McCune Davis (D-14), Legislative Update on Payday Lending; * Christian Palmer, editor of Yellow Sheet/Capitol Times, Media in Advocacy; * Sen. Barbara Leff (R-11), 2010 Senate Update; * Arizona Secretary of State Ken Bennett, “Tissue Box Guide” to the Arizona state budget; and * Arizona Treasurer Dean Martin, Arizona state budget update.

CU System briefs (03/19/2010)

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* FEDERAL WAY, Wash. (3/22/10)--Washington State Rep. Sharon Tomiko Santos (D-37) Thursday was presented her 2009 Desjardins Award at a
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gathering in Tacoma of Washington credit union leaders and members of the state's financial education community. Because of legislative duties, Santos had been unable to accept her award during the Credit Union National Association Governmental Affairs Conference in Washington, D.C. last month. The award recognizes Santos' seven years of legislative leadership and innovation in the area of financial literacy. ( See News Now March 3 by using the link). "I could not do anything if I did not have the strength of the partnerships around this table. I am appreciative of the Washington Credit Union League, and obviously the Credit Union National Association for recognizing our work," Santos said. Gov. Chris Gregoire sent a letter of congratulations to be read at the gathering, and the group learned Santos was recognized in a proclamation by Rep. Adam Smith that was read into the Congressional Record. Santos is shown receiving the award from John Annaloro, left, league president/CEO, while her husband Bob looks on. (Photo provided by the Washington Credit Union League) ... * HIGHTSTOWN, N.J. (3/22/10)--The New Jersey Credit Union League's
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Cooperative Advertising campaign kicked off its latest efforts to reach new audiences with the credit union message (The Daily Exchange March 19). On March 15, the campaign--dubbed Ad Co-op--began appearing at 28 train stations throughout the state. Bus advertisements also can be found inside busses in Bergen, Hudson, Union, Middlesex, Mercer, Monmouth, Camden, Burlington and Atlantic counties. Shown here are ads in the Newark train station. Also, in today's issue of The New York Times, a special credit union advertorial will feature Ad Co-op advertising and an interview with league President/CEO Paul Gentile. (Photos provided by the New Jersey Credit Union League)