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Card violates one bank one CU rule say defense CUs

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ALEXANDRIA, Va. (5/14/08)--A new rewards MasterCard offered by Chase Card Services is prompting the defense credit unions to request the Department of Defense halt issuing the card. The credit unions say the card violates the “one bank, one credit union” rule allowing only a single bank and credit union for each military base. The Military Star Rewards MasterCard is a collaboration between the Army and Air Force Exchange Service (AAFES)--which manages the military exchange credit card program--and Chase Card Services, an affiliate of JP Morgan Chase (Marine Corps Times May 5). The defense credit unions also said that the card violates the Pentagon’s own prohibition against the exchange operating banking services. The card, which debuted May 1, gives users two points for every dollar spent on the military installations at commissaries, exchanges, gas stations and other retail outlets. The card also can be used outside installations, unlike the military exchanges’ regular Military Star card. In essence, AAFES and J.P. Morgan Chase are issuing a co-branded card for military personnel to use on and off base. This is a violation of the “one bank, once credit union” policy, Arty Arteaga, president/CEO of the Defense Credit Union Council--which represents credit unions on U.S. military bases--told News Now. “Only the one bank and one credit union can provide financial services to military personnel per the policy,” Arteaga said. “The legal counsel at Defense Finance and Accounting Services agrees with this. However, AAFES does not. So on April 29, we asked the Department of Defense general counsel for a ruling. At this time, we are waiting for that ruling. If the office of the general counsel decides there’s a violation of the rule, AAFES would have to request an exception to that policy before it could proceed. “The Army and Air Force are aware of our concerns, and they know we oppose the granting of an exception for the policy,” Arteaga said. “We are addressing an issue with AAFES, we’re not fighting JP Morgan Chase,” Arteaga added.

Americas CU Conference plans event at Rainbow Room

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MADISON, Wis. (5/14/08)--Attendees at the America's Credit Unions Conference and Expo (ACUC&E) in New York City will spend their last evening in the Big Apple at an event in the world-famous Rainbow Room.
Click to view larger imageAttendees at the America's Credit Union Conference and Expo June 29-July 2 in New York City can spend their last evening in the Big Apple eating and dancing in the famed Rainbow Room in the Rockefeller Center. (Photo provided by the Credit Union National Association)
ACUC&E, scheduled for June 29-July 2, is the annual conference presented by the Credit Union National Association (CUNA). CUNA's Power Up Party will be 8-10:30 p.m. Tuesday, July 1, at the Rainbow Room, located on the 65th floor of Rockefeller Center. The room overlooks the north, south and east side of Manhattan. From its opening day in 1934, the Rainbow Room has epitomized Manhattan luxury. It was named for the lighting effects from a floor made of 360 glass blocks atop more than 2,600 red, green, blue and amber lights. A custom-made pipe organ synchronizes the lights and colors with the music while patrons dance to big band sounds. Attendees will gather to socialize over appetizers and cocktails, then dance on the revolving dance floor. The event is included with attendees' registration. Guests may attend if they purchase the Guest Program. Dress will be business casual. CUNA is expecting a record attendance for the conference, said Todd Spiczenski, vice president of CUNA's center for professional development. "Currently the exhibit hall is nearly sold out, and credit union attendees are registering at a record pace," he said.

Pennsylvania CUs closed in rare noreaster

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HARRISBURG, Pa. (5/14/08)--A rare spring storm--known as a nor’easter--knocked down trees and power lines in southeastern Pennsylvania, resulting in a power outage that closed three credit unions Monday. The outages resulted in the late morning closings of Delco Postal CU; P.S.T.C. Employees FCU; and Upper Darby Belltelco CU, all located in Upper Darby, Pa. (Life is a Highway May 13). Power was restored to the area by 7 p.m. Monday. The outage was describe as “a minor nuisance” with everything up and working fine Tuesday morning, John Schmidt, CEO, Upper Darby Belltelco, told the Pennsylvania Credit Union Association. Bob Manning, CEO of P.S.T.C. Employees, stayed at the credit union and distributed checks that had been processed before the power outage to members who came to pick them up. Manning said members were understanding of the situation and that this demonstrates why credit unions are better than banks. “You wouldn’t see a banker standing at the door handing out checks to customers who needed their money,” Manning said.

Wisconsin league meeting Tell the CU story

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WISCONSIN DELLS, Wis. (5/14/08)--Share the credit union story, attendees at the Wisconsin Credit Union League's 74th Annual Convention, held May 7-10 in Wisconsin Dells, were told. "I know you believe in the credit union story, but the problem is that we're leaving the story to the banks to tell--and the story they tell is more like a Stephen King horror novel," said league President/CEO Brett Thompson, addressing the convention. "Our reluctance to tell our story will doom us. Our detractors can go everywhere we can go, and they have a lot more money to do it," he said. "They can offer more products and services; they can offer
The Wisconsin Credit Union League’s executive committee was announced at the league’s Annual Convention May 7-10. From left are: Dean Wilson, Focus CU, Milwaukee; Pat Lowney, Lakeview CU, Neenah; Jerry Kuschel, P.C.M. Employees CU, Green Bay; Jack Gill, First Community CU, Beloit; and Kevin Hauser, Westby (Wis.) Co-op CU.
The Wisconsin Credit Union League’s newly elected board of directors includes, from left: Scott Roesch, Fond du Lac (Wis.) CU; Mike Mallow, Sheboygan (Wis.) Area CU; Lora Benrud, WESTconsin CU, Menomonie; and Paul Kundert, University of Wisconsin CU, Madison. (Photos provided by the Wisconsin Credit Union League)
great service; they can offer creative, slick ad campaigns," he added. "But they can't say it's about people, not profit; they can't say it's about member-owners; they can't say it's about lower cost payday loan alternatives; they can't say it's about not making the subprime loans to begin with; and they can't say it's about having more branches in low-income census tracts without a legal requirement to do so. "You can say that," he concluded. During the league's annual meeting, attendees approved changes in the league's districts and credit union representation, according to the league's newsletter The League (May 12). The board size will be reduced to nine members from 15. Five will be elected from the regions and four will be elected from asset categories. The league also elected its executive committee and new board (See photos).

CUSO role CU changes addressed at NACUSO conference

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NEWPORT BEACH, Calif. (5/14/08)--Change for the credit union industry must come from within, not from outside pressures or influences such as mergers and charter conversions, fear of other financial institutions or the fallout from others' subprime lending, says Dan Clark, The New York Times best-selling author. Clark, a contributing author to the "Chicken Soup for the Soul" series, presented the keynote session at the National Association of Credit Union Service Organizations (NACUSO)'s 2008 Annual Conference in Las Vegas April 28. It is organizations like NACUSO asking members to fundamentally change from the inside that provides the real power to make a difference, Clark said. He told the more-than 400 attendees to stop worrying about mergers and start figuring out how to work collaboratively. To be relevant to current and future members, he said, the industry must look inward at what it does from the grassroots level. Credit union and CUSO leaders must not assume that people, especially young people, know the difference between a credit union and a bank, Clark said, recommending the industry educate people and prove the credit union difference through its actions. According to NACUSO President/CEO Thomas C. Davis, who opened the conference, there is a "need for CUSO members to drive credit union success. That's why we are in business." Describing the current state of the credit union industry as the best and worst of times, Davis said helping credit unions do those things that address tough industry issues will create an upturn in the inflection point of the industry life-cycle, enabling credit unions to begin a whole new growth curve. He noted the credit union industry can break with tradition, change its collective habits and collaborate to succeed much quicker than before. "Collaboration isn't just for today; this is for future generations. The decisions we make for the future of our industry, today, will echo in eternity."

Payday lenders propose using CU code for fees

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COLUMBUS, Ohio (5/14/08)--Payday lenders in Ohio have proposed using state credit union regulations for interest rate caps so they can charge more fees. If the industry proposal was enacted, payday lenders would be able to operate under a seldom-used section of the Ohio revised code that permits credit unions to charge 18% annual percentage rate and up to $10 for every $100 borrowed for a one-month period (Cleveland Business News May 12). House Bill 545 passed in the Ohio State House and could be voted on in the State Senate as early as this week. However, the statute that the payday lenders want to be regulated under may soon be gone. The Ohio Credit Union League agreed Friday not to protest the removal of the statute that payday lenders want to be regulated under, John Kozlowski, league general counsel told the newspaper. Credit unions have not used the statute, which was originally sought by credit unions to ease interest rate caps so they could create loan products to compete with higher-cost payday loans, Kozlowski said. Credit unions used their creativity to come up with short-tem signature loans and payday alternatives such as StretchPay--two products that are below the state’s 24% interest cap, Kozlowski told the paper.

NACUSO speakers highlight third-party due diligence

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NEWPORT BEACH, Calif. (5/14/08)--Credit unions should improve strategic planning, ensure balance in third-party contracts and perform due diligence. This message was delivered by Gigi Hyland, National Credit Union Administration (NCUA) board member, at the National Association of Credit Union Service Organizations (NACUSO) Annual Conference April 29 in Las Vegas. The NCUA recently published a letter on third-party relationship evaluation, and Hyland spoke about the key regulatory issues involved. Credit union service organizations (CUSOs) should create a working process of knowledge for regulators to understand what CUSOs do and do not do for credit unions, she said. Guy Messick, NACUSO general counsel and attorney at Messick and Weber in Media, Pa., presented information on complying with NCUA’s letter. He also noted that NACUSO President Thomas Davis serves on the Credit Union National Association committee on the issue. “NCUA’s admonitions to credit unions regarding their relationships with third parties are a good thing, for safety and soundness reasons and the effective management of credit unions,” Messick said. “The norm is for credit unions to have ad hoc relationships with numerous vendors, and with no person in the credit union knowing all of the contractual terms or even how many vendors serve the credit union.” One credit union that recently took inventory of its third-party relationships found that it had over 200, Messick noted. NCUA also is asking credit unions three questions, Messick said:
* Does outsourcing fit with the credit union’s strategy and risk tolerance? * Is the proposed vendor a credible and effective provider? and * How will the credit union monitor the relationship and manage the risk?
CUSOs need to be ready to help credit unions meet their duty in evaluating and monitoring the relationship. They should have due diligence packages to hand to credit unions. CUSOS also should provide credit unions with performance reports, and non-CUSOs should do the same, Messick added. It is critical for credit unions to reorganize their management structure to manage the new credit union outsource-rich model. “It is not your father’s credit union anymore, where the vast majority of key services are provided by employees,” Messick said. “Credit unions outsource a multitude of key functions, and this trend will continue as credit unions look for greater expertise and lower operating costs. “There should be a service-provider policy approved by the credit union’s board and implemented by staff. Each credit union needs to have a senior management position whose job is to manage and monitor third-party relationships and implement the board’s service provider policy. Accountability is crucial.”

Dollar Where will CUs be in 2020

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NEWPORT BEACH, Calif. (5/14/08)--Where America’s credit unions find themselves in 2020 will be determined by their vision in 2008 and the decisions that accompany the vision, said Dennis Dollar, former National Credit Union Administration (NCUA) board member, at the National Association of Credit Union Service Organizations (NACUSO) Annual Conference April 29 in Las Vegas. In the future, credit unions will be the dominant community-based financial institutions in most communities because bank mergers will create more nationwide megabanks, Dollar predicted. The megabanks will lead to a disconnect with local citizens who seek a personal touch. Credit unions also will dominate community banking sectors in the year 2020, Dollar added. Other predictions for 2020:
* A risk-based capital system will be implemented to bring credit unions into the regulatory mainstream; * Field-of-membership rules will still exist, but will be safety and soundness-driven; * Credit union directors will face more fiduciary responsibilities requiring continuing education and some type of director compensation will be authorized for increased responsibility; * Credit unions will retain federal tax-exemption status; * Credit unions’ political activism must continue; * Credit union service organizations will exceed the number of credit unions; * Credit unions will face greater regulatory pressures, and this will drive mergers; * Credit unions will market cooperatively nationwide; and * Shared branching will be a key credit union differentiator, with nearly all credit unions participating nationwide, thus reinforcing a national branding campaign.