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Study Financial literacy down for high school seniors

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WASHINGTON (4/10/08)--High school seniors' knowledge of finance has dropped the past two years, says a new study. That doesn't mean, however, that credit unions' financial education efforts are for naught. High school seniors, on average, answered correctly less than half (48.3%) of questions about personal finance and economics in a nationwide survey released Wednesday by the Federal Reserve. The survey is conducted every two years by the Jump$tart Coalition for Personal Financial Literacy, an organization that promotes financial competence for students. The score compares with 52.4% answered correctly in the 2006 study. This year's was the worst score out of the past six surveys conducted so far. While the results are disappointing, they are "not entirely a surprise because financial education is required coursework in only a handful of states," said Jim Hanson, vice president of personal finance with the Credit Union National Association (CUNA). Credit union financial education efforts make a difference, "but it is difficult to measure the successes we've had," Hanson said. "Credit unions in all areas of the country can point to their efforts in schools and through organizations like the NEFE (National Endowment for Financial Education) High School Financial Planning Program, knowing they reached a half million young people. But success is hard to measure." CUNA has online programs like Guides to Independence that many teachers use in schools, and these help. "But the unfortunate truth is most young people get most of their financial education at home--and their parents don't know enough about money management," Hanson told News Now. "We know from pilot studies conducted for CUNA's Googolplex products that financial education works, but the effort has to be consistent, sustainable, relevant, and experiential. People learn by doing. They also learn when the subject matter is relevant to them--most high school kids aren't thinking about investments," Hanson said. Two years ago, CUNA held its first Financial Literacy Summit. "The No. 1 issue mentioned by nearly every speaker and credit union participant was measuring success," Hanson said. "There are a ton of financial education programs, but the problem is measurement. And every two years we get reminded how much work needs to be done." Hanson noted the recent trend of consumers overspending their budgets. "That means parents aren't managing their money very well. Is it really a wonder that their children don't know enough about finances? They model what they see," he said. "Clearly we need to start at an early age to have a lasting impact." It's also a question of resources in schools and credit unions. "Royal CU in Eau Claire, Wis., just opened its ninth elementary school branch office last week," Hanson said. "Its chairman, John Sackett, told me he could open more branches tomorrow, but the credit union just doesn't have the resources. That story could be repeated at every credit union committed to financial education and community service." College students--surveyed for the first time in the Jump$tart Coalition study--did better than their high school counterparts in the study. College seniors did better than college freshmen, suggesting that experience may be a factor. The first time many people manage a budget is when they leave home, often for college. "That's where student-run college credit union programs can be helpful. And online tools like MoneyMix--programs that have young people talking to young people about shared experiences--can be very beneficial," Hanson told News Now. Are there too many financial ed programs? The confusion isn't that there are too many programs, but "the problem is that many are not relevant to the target market or they aren't used," said Hanson. "What good does it do a credit union to have a youth club that doesn't make financial education part of the program? It may generate deposits from parents and grandparents, but if it doesn't include relevant education, what good is it?" "We make young people practice and take written tests and road tests before they can drive," Hanson noted. "But for many the first time they get their credit card is after they leave home, and they have no idea how to use it responsibly." What should credit unions who want to help do? "Get involved," Hanson advised. "Stop worrying about the return on investment of helping young people because waiting to determine when it will pay off financially is not the right reason to do this. "Credit unions are about helping people help themselves. That's what financial education does, and every little bit you can do will help--even if it's only one child." Other findings in the survey:
* Only 16.8% answered correctly that stocks likely would offer the higher growth over 18 years of saving for a child's education. And 37.3% thought a U.S. savings bond, noted for its conservative investments, would offer the highest growth. * Nearly 53% said they would have no liability if a thief stole their their credit card and ran up $1,000 in debt on the card. Liability is limited to $50 after the credit-card issuer is notified. Only 13% knew they might have to be responsible for $50.
For a complete report and resources to serve youth, use the resource links.

CUNA eSchool on current economy begins today

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MADISON, Wis. (4/10/08)--Credit unions can still register for the Credit Union National Association (CUNA) eSchool on credit unions' response to the current economy, which begins today and meets for six sessions. CUNA CU Response to the Current Economy eSchool meets at 1-2:30 p.m. CDT on Thursdays. In addition to today's meeting, the eSchool will continue on April 24, May 1, May 8, May 15 and May 22. CUNA developed the series of seminars to help credit unions understand the impact on their operations from the current turn in the nation's economy. Today's webinar will address the overall economic situation, its effect on credit unions and suggestions for taking action. Subsequent sessions will address specific strategies and services related to marketing, consumer lending, mortgage lending, investing/asset-liability management, and compliance. Today's webinar will provide a 30-minute overview, which can be purchased as an archive to present at the credit union's board meeting. For more information or to register use the resource link.

Missouri Corporate CU elects new directors

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ST. LOUIS, Mo. (4/10/08)--Missouri Corporate CU has elected two new members to its board of directors.
The Missouri Corporate Credit Union board for 2008 includes: (front row, from left) Cathy Stroud, Chris McCreary, Susie Venable, Ron Miller, and (from left, back row) Carol White, Dave Osborn, Steve Pierson, Phil Weber and Glenna Osborn. (Photo provided by Missouri Corporate CU).
Phil Weber, CEO, Central Communications CU, Kansas City and Carol White, CEO, Central Missouri CU, Warrensburg, Mo., were elected to one-year terms on the board of directors. They were elected during the annual membership meeting April 1 in Jefferson City. Re-elected to three-year terms were: Chris McCreary, CEO, United Consumers CU, Independence; J. David Osborn, CEO, Anheuser-Busch Employees’ CU, St. Louis; and Susie Venable, CEO, Saint Luke’s CU, Kansas City. McCreary was elected chairman and Venable was elected vice chairman. Secretary treasurer is Ron Miller, CEO, Edison CU, Kansas City. Other board members are: Glenna Osborn, CEO, Missouri Central CU, Kansas City; Steve Pierson, CEO, Postal Federal Community CU, Springfield; and Cathy Stroud, CEO, Community Financial CU, Springfield. Missouri Corporate has $1 billion in assets and serves more than 250 credit unions.

PCUA monitoring five mortgage bills

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HARRISBURG, Pa. (4/10/08)--The Pennsylvania Credit Union Association’s (PCUA) Governmental Affairs Department is monitoring five bills that address the manner in which mortgages are sold in the state (Life is a Highway April 9). The bills, which passed the Pennsylvania House, include:
* HB 1081,which would increase oversight of state-certified appraisers; * HB 1092, which would allow the banking department to release information on denial, suspension, revocation, fines, or other disciplinary orders against a licensee after a final order or adjudication by the secretary of banking. The department currently must wait until all court appeals are exhausted; * HB 1083, which would create a reporting system for lenders to inform the Pennsylvania Housing Finance Agency about loan delinquencies, giving the state an early warning system on state and regional trends in foreclosures; * HB 1084, which would exclude pre-payment penalties on residential mortgage loans of less than $197,000. The current threshold is $50,000; and * HB 2179, which would streamline the licensing and administrative process for mortgage brokers and bankers by creating a single license and creating a new licensing category for all mortgage originators, regardless of the type of lending involved.
A similar package of mortgage-relate bills advanced on a unanimous vote out of the state Senate last month. The House and Senate will confer with each other on versions, the PCUA said.

Philadelphia FCU offers higher deposit coverage

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PHILADELPHIA (4/10/08)--The Philadelphia FCU (PFCU) has qualified to insure regular member savings accounts up to $350,000 and retirement accounts up to $500,000. PFCU’s insurance limits are the highest combination of federal/private savings insurance available to members, announced the $541 million asset credit union’s board of directors. The coverage combines $100,000 per member for savings accounts and $250,000 or retirement accounts provided by the National Credit Union Administration with $250,000 per member provided by the Excess Share Insurance Corporation (ESI)--a licensed property and casualty insurer. Joint and certain other account relationships are insured separately and are subject to other federal guidelines. ESI accepts only credit unions that meet strict underwriting criteria. “PFCU’s acceptance into the program reflects the credit union’s commitment to safety and security,” said James McAneney, PFCU president/CEO.

Australian bank to fund indigenous CU branches

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MELBOURNE (4/10/08)--National Australia Bank Ltd. (NAB) will offer a $1 million interest-free loan to help fund new indigenous credit union branches in Australia's Northern Territory, the bank announced Wednesday. NAB also will provide other financial and in-kind support during the next five years to the Traditional CU (TCU), the nation's largest indigenous-owned and operated financial institution, said NAB's Australian head, Ahmed Fahour (Australian Associated Press Financial News Wire April 9). Fahour predicted the bank's support would boost TCU's presence in the Northern Territory by 40%. He made the announcement during a speech on social inclusion, financial disadvantage and the role business should play in addressing those issues.

CUs tell of innovations in biz services

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PORTLAND, Ore. (4/10/08)--Business lending is not an area credit unions should ignore, according to speakers at the second annual CU Business Group national convention in Scottsdale, Ariz.
CU Business Group held its second annual national convention, themed “Innovation in Business Services,” in Scottsdale, Ariz. Attendees heard stories from credit union speakers about maximizing business lending opportunities. (Photo provided by CU Business Group)
Speakers at the convention, themed “Innovation in Business Services,” discussed how they have maximized business lending opportunities. “We simply have to serve business in our market,” said Anna DeYoung, CEO, Sky FCU, Livingston, Mont. “We can’t let size be a deterrent.” Sky FCU maximized business opportunities through lending and deposit products, she added. Patelco CU, San Francisco, has a unique program that focuses on buying business loan participations, said Chris Oldag, Patelco senior vice president of lending. Oldag spoke about the challenges the credit union faced while building its $300 million participation portfolio, which he said is the largest in the industry. Participation in business lending increased in 2007, but so did the business loan delinquency rate, said Larry Middleman, president/CEO, CU Business Group. The rate was 1.82% in 2007, up from 0.53% in 2006. High performance compensation strategies for business lenders, branding and techniques for maintaining a mature business program also were discussed. The conference offered sessions on portfolio management and advanced deposit products. CU Business Group provides business lending, deposit and consulting services to credit unions nationwide. It has 11 corporate credit union partners.

Wisconsin regulator orders CU to stop used-car sales

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RACINE, Wis. (4/10/08)--Educators CU (ECU), Racine, Wis., has been selling used cars to its members for nearly 10 years. A few weeks ago, the credit union received a ruling from the Wisconsin Office of Credit Unions ordering it to stop its used-car sales operation. “This was news to us,” Jim Henderson, ECU senior vice president, told News Now. “We fully shared information [about our sales] with the office.” ECU received a letter in December from the office saying a complaint that had been filed by the Wisconsin Automobile and Truck Dealers Association in November. The association stated that the credit union’s sales were not a part of its charter. ECU responded to the letter at the end of January, maintaining that it had been authorized to sell cars, Henderson said. Office of Credit Unions Director Suzanne Cowan confirmed the ruling to News Now, adding that the credit union would still be allowed to lease and repossess vehicles. The credit union plans to appeal the decision, and should hear back by summer. If ECU’s appeal is denied, the sales office could close its doors, or be sold to a third party, he said. The Office of Credit Unions Monday stayed its order. “They were kind enough to do that,” Henderson said. Closing its retail sales “would really be a burden,” and the credit union would have to lay off some of its employees and close the office, he added. ECU began selling cars with a credit union service organization in Milwaukee during the 1990s. The credit union parted with the organization in 2001, and began its own sales. About four years ago, it built a separate office for the car sales and sent the information to the Office of Credit Unions--which granted its approval, Henderson added. ECU also has a used-car dealer license and fully owns its auto business--ECU Financial Services Inc. Because ECU’s sales have grown over the years, Henderson said there may be some who wish to eliminate the competition. “We have a lot of reputable dealers in the market who are honest--we are not looking to bash them,” he said. “But the Automobile and Truck Association is definitely trying to eliminate a pro-consumer program.” ECU has a “completely different” business model than mainstream dealerships because it’s focused on serving members, Henderson said. ECU purchases vehicles wholesale, performs a flat markup, and shares the information with members. There is no haggling or negotiations, he said. ECU also provides a safety net. Members have a three day cancellation policy, which allows them to bring the car back in the same condition for a refund if they choose to back out of a sale. ECU also has a 60-day guarantee where the credit union will pick up the cost of mechanical repairs not covered under warranty. Though the sales bring in car loans, “We’re not looking to make money,” Henderson said. “We try to identify members’ needs and cars that fit those needs.” The credit union placed an item on its website last night, explaining the ruling to members. ECU is in communication with the Office of Credit Unions, and “we still enjoy working with them,” he said.

Economy to impact card reward programs says study

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NEEDHAM, Mass. (4/10/08)--Credit card issuers with rewards and loyalty programs may need to include strategies that adapt to the economy and focus on the fundamentals of good credit management in those programs, says recent research.
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Although rewards programs have been effective for card issuers for nearly 25 years, the dramatic changes in the nation's economy means that many current programs are less relevant to consumers, said TowerGroup, a financial services research firm. The Needham, Mass.-based firm's new ViewPoint estimates that today rewards programs are a factor in nearly 70% of all transactions in the U.S. card industry. Consumers have embraced well-designed programs, and issuers have proved they can increase preference, drive purchase activity and create "top of the wallet" status for their cards through loyalty programs. However, more Americans today express less confidence in the economy, expect a reduction in household wealth, and face shakier employment status, said the report's author, Brian Riley, senior research analyst in the bank cards practice at TowerGroup. TowerGroup advises issuers to ensure that loyalty programs not only cause consumers to aspire to potential benefits such as a high-end vacation but also inspire them to keep their credit in good standing. Credit unions and other issuers should consider using card rewards to improve credit management, in lieu of rewards such as trips to Hawaii and luxury goods, said the firm. Issuers could include rewards options such as cash-based credits that can be applied to open balances, stimulating good consumer credit behavior and motivating consumers to pay down their balances. TowerGroup said rewards card issuers will be affected by four consumer trends this year: credit quality deterioration, revenue pressure; fragile economy; and vulnerable consumers.

Museum to premier CU-movement history DVD

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MANCHESTER, N.H. (4/10/08)--America’s Credit Union Museum board of directors approved plans for a premier showing of a video produced to celebrate the 100th anniversary of the founding of the credit union movement in the U.S. The decision was made at the museum’s annual meeting April 3. The “red carpet” premier screening of the DVD is scheduled for Oct. 23 at the Palace Theatre, Manchester, N.H., announced Board Chairman Gordon Simmons, CEO, Service CU, Portsmouth, N.H. (e-Weekly April 9). The DVD will trace the history of the U.S. credit union movement from its founding in Manchester to its present incarnation as a major force in helping families cope with many financial issues. At the meeting, the board received reports on current projects, including an update on the current filming of the DVD. The board also reviewed the continuing development of financial literacy tools called CU 4 Reality aimed at middle schools students. The educational tool provides a school curriculum and a reality fair in which children make their own financial choices, based on their chosen jobs and professions. The experience teaches children the benefits of smart financial choices, including sensible savings and borrowing alternatives.