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Global panel Regulatory pendulum likely to continue swing

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GDANSK, Poland (7/18/12)--
Click to view larger image Credit union trade association executives and regulators joined together for a panel discussion Tuesday at the World Credit Union Conference in Gdansk, Poland.
The recent global financial crisis has caused the pendulum of credit union regulations to continue its swing toward more stringent oversight. But its movement can affect both credit unions and regulators who oversee them. So says a panel of trade association leaders and regulators that kicked off Tuesday's general session at the World Credit Union Conference in Gdansk, Poland.

The conference, presented by the World Council of Credit Unions (WOCCU), convened Sunday and will end today.

Entitled "Point Counterpoint: Finding Regulatory Balance in the Era of International Standards," the panel was moderated by WOCCU Secretary Louise Petschler, CEO of Abacus Australian Mutuals, and included representatives from Canada, Great Britain and the U.S. 
Click to view larger image Panel participants sharing a lighter moment during discussions included, from left: Mark Lyonette and Martin Stewart of Great Britain, and Bill Cheney, president/CEO of the U.S.'s Credit Union National Association.
They were:

  • Bill Cheney, president/CEO of the Credit Union National Association (U.S.) ;
  • John Kutchey, deputy executive director and chief operating officer of the National Credit Union Administration (U.S.);
  • David Phillips, president/CEO of Credit Union Central of Canada;
  • Andy Poprawa, president/CEO of the Deposit Insurance Corp. of Ontario (Canada);
  • Mark Lyonette, chief executive of the Association of British CUs Ltd.; and
  • Martin Stewart, head of United Kingdom's Banks and Mutuals of Great Britain's Financial Services Authority.
Click to view larger image Regulators don't write the rules, they just enforce them, said Canada's Andy Poprawa.
Topics ranged from the International Credit Union Regulators' Network, which Poprawa chairs and for whichWOCCU serves as secretariat, to the impact of Basel III and the correct balance to properly enforce financial regulations that enable credit unions to operate both safely and effectively. Both sides admitted that balance was sometimes difficult to find and maintain, with a need to differentiate between complex commercial banks and consumer-focused credit unions.

"In Great Britain, we're a small segment and we're worried we'll be swept up with other financial institutions," Lyonette said. "Fortunately, credit unions are getting good political and public support."

To some panelists, the swing away from traditional "light touch" regulations to a tougher stance raised concerns about the future of the movement.

"Credit unions aren't asking for more regulation," CUNA's Cheney said. "If we continue down the path we're on without distinction between banks and credit unions, we may end up with no local financial institutions."

"Remember that regulators don't write the rules," Poprawa cautioned, speaking for regulators everywhere. "It's not us you have to convince, but your respective governments."

Click to view larger image Don't lose sight of credit unions' democratic process when selecting board members, stressed audience member Penny Reeves, Canada.
The group also discussed regulatory impact on small start-up credit unions and the need for directors educated in a broad range of skills to provide effective oversight for their institutions. A better educated and balanced board on which members have financial services industry experience will help keep the credit union on track and moving in the direction of member service, according to Stewart.

"But let's not lose sight of the fact that credit union directors are elected by the members," said Penny Reeves, a director for Canada's Servus CU and a former World Council director, who raised her question from the audience. "We can't afford to lose that democratic principle."

All regulators on the panel agreed that credit unions got good marks during the financial crisis for helping consumers instead of turning their backs on them like many banks. The resulting good will follow credit unions well into the future, according to Kutchey.

"In the U.S., credit unions were a shining symbol of service during the financial crisis," Kutchey said. "Bank Transfer Day [Nov. 5, 2011, when 1.3 million Americans began moving their money from banks to credit unions] also had a positive outcome for credit unions."

Continued global advocacy by WOCCU will be critical to helping set the regulatory tone for international groups like the Basel Committee on Banking Supervision, as well as providing appropriate reference points for local regulators to better steady the regulatory pendulum from swinging too far in the wrong direction, the panel said.

Click to view larger image We need to exercise restraint in enacting new regulations, said Canada's David Phillips as panel moderator Louise Petschler looked on. (Photos provided by the World Council of Credit Unions)
"In Canada, the prime minister established a body that operates on the one-to-one rule," Phillips said. "If you're going to draft a new regulation, you have to repeal an existing regulation that has similar financial impact. That speaks to the need for exercising some restraint on our regulatory burden."

The day continued with breakout sessions on ethical investing, attracting members through social media, creating integrated credit union system business models and the new face of technology fraud. A special session on building the credit union brand took a look at World Council-led efforts by credit union and trade association professionals in Australia, Canada and the U.S. to rebrand the global credit union movement. Results from the session will be used in the next phase of the project's development process.

The 2012 World Credit Union Conference ends today with a closing general session presentation by Bank 2.0 author Brett King, World Council's annual awards ceremony and reception at the historic Gdańsk shipyard, the birthplace of Poland's Solidarity movement.

Vermont CU says its targeted in bank battle

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MONTPELIER, Vt. (7/18/12)--Vermont State Employees CU (VSECU)  has filed an appeal with the Vermont Department of Financial Regulation (DFR)  after DFR issued a cease-and-desist order notice to prevent VSECU from using the word "banking" in its marketing, communications, and ads to describe its services.

VSECU, a $573 million asset credit union based in Montpelier, is the only credit union with statewide field of membership in Vermont and believes it is "being unfairly targeted in a battle with banks," it said in a press release Monday.  The DFR oversees both state-chartered banks and credit unions in Vermont.

The battle is over a disagreement about who can and cannot use the word "banking" to describe the services offered by a regulated financial institution. DFR believes the word is reserved for banks only and intends to forbid VSECU from using it, the release said.

DFR served a notice June 18 of intent to issue a cease-and-desist order that would prohibit VSECU from using the terms "[to] bank" and "banking" in its marketing, communications and advertising.

Over the past several months the credit union provided evidence to DFR that "clearly shows this action is misguided and will unfairly inhibit the growth of cooperative not-for-profit banking for Vermonters," the credit union said.  "DFR has not changed its position, and it is pressing forward apparently because of continuing complaints from bankers. VSECU intends to fight this notice and vigorously defend the right to freedom of speech and to advance credit union banking for all Vermonters."

"We're not sure where this issue will go from here," said VSECU CEO Steve Post. "We're prepared to follow this through to the end, regardless of how long it takes to ensure that we can continue to tell our story using a vocabulary that is simple, honest and commonly understood," he said in a written communication to VSECU members.

VSECU filed its appeal on Monday and is waiting for a hearing to be scheduled. Its petition for declaratory relief indicates that DFR's proposed order "is unsupported by law, illegal, unconstitutional on its face and as applied to VSECU, and would open VSECU to substantial future penalties and damages if it were to be entered as a final order."

The DFR in its proposed order cited Section 14103 of title 8 in the state law that says:

"No person shall advertise or put forth any sign as a bank, banking association or trust company, or in any way solicit or receive deposits or transact business as a bank, banking association, financial institution or trust company, or use the words 'bank,' 'banking association,' or 'trust company' or other similar sounding word or name unless it is a financial institution reporting to and under the supervision of the commissioner or is authorized to conduct such business in this state under federal law, or unless the commissioner approves the activity or word or name used in writing after giving due consideration for whether the activity, word or name will confuse or mislead the public as to the nature of the business of the entity."

The department's proposed order said the credit union is not one of the entities that may use these words  "or any other similar sounding word or name, including but not limited to 'banking,' 'banker,' 'banking co-op,' 'banking cooperative,' and 'not for profit banking cooperative,' to describe itself, its services, or its activities."  These words are "limited to financial institutions" and using them "is misleading and, at a minimum, significantly blurs the lines between a credit union and a bank and will confuse the public," the DFR order notice said.

Court documents filed by VSECU maintain it offers the same financial services as a bank does, is engaged in the "business of banking" or the "banking business," and is classified under Vermont and federal law as a "financial institution."  It noted the DFR had direct knowledge of its use of the word "banking" in its ads for a five-year period and did not take any regulatory action, and DFR as recently as June 13 "acknowledged that some of VSECU's use of banking and [to] bank  in its advertisements is permitted."

VSECU's  petition makes these points:

  • The state law does not prohibit a credit union from using the words "banking," "[to] bank," or "banking cooperative" to describe its activities or its form of entity.
  • State law is pre-empted by federal law, as determined by the National Credit Union Administration.
  • Applying the state law to prohibit VSECU from using "banking" and "banking co-op" would violate the Vermont Common Benefits Clause because VSECU competes directly with banks and federal credit unions in accepting deposits and lending money, which fall under the generic term, "banking."
  • The order would violate VSECU's First Amendment right of free speech, and it is vague and overly broad, violating the credit union's due process rights under the Fifth and 14th Amendments to the U.S. Constitution.
  • The department should refrain from arbitrarily asserting a new position with the use of the words to describe the activities of state chartered credit unions, the credit union argued.

Pa. CUs assets up 6 in 1Q

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HARRISBURG, Pa. (7/18/12)--Pennsylvania credit unions grew at a 6% annual rate during the first quarter to reach more than $37 billion in assets, according to the Pennsylvania Credit Union Association (PCUA).

Membership in the 520 Pennsylvania credit unions grew by 2% to a record 3.7 million members, said PCUA's new, enhanced Pennsylvania Credit Union Profile, a quarterly statistical analysis of credit unions using data from National Credit Union Administration call reports.

The report also compares credit union statistics with those of commercial banks and details other indicators such as unemployment rates, housing prices and inflation rates.

On a year-over-year basis, Pennsylvania credit unions grew: 6% in assets, 4% in loans, 6% in savings, and 2% in membership.

Nationally, credit unions grew by 7% in assets, 2% in loans, 7% in savings, and 2% in membership. There are 7,162 credit unions with more than $1 trillion in assets and 94 million members operating in the U.S.

"Providing statistical analysis regarding the state of an industry is an important function of a trade association," said PCUA President/CEO Jim McCormack. "Our improved version not only provides a snapshot of the credit union movement, but also provides comparisons of credit unions to banks, along with other economic indicators that impact operations."

Micro branch delivers in-line fin ed to underbanked

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OAKLAND, Calif. (7/18/12)--Self-Help FCU in East San Jose, Calif., is delivering "in-line" financial education to help lead low-income people to economic opportunity and security, according to the National Credit Union Foundation (NCUF).

Pictured is a flier for Self-Help FCU's "5 for me" saving account, which was developed to encourage unbanked check-cashing customers to open savings accounts and start the habit of saving regularly. It is a basic savings account with an automatic savings feature tied into check-cashing transactions. When members open this account, they agree to have $5 automatically transferred into it every time they come in to cash a check. (Photo provided by Self-Help CU)

The credit union received an NCUF Financial Education Grant this year to implement, analyze and refine its in-line education model, which delivers 'bite-size' financial management concepts at the teller line when consumers are focused on their financial decision-making. The new education model is being piloted in Self-Help FCU's Micro Branch, a check-casher credit union hybrid designed to meet the needs of unbanked families.

"By providing educational interventions during financial transactions and coupling them with access to asset-building products and services, Self-Help FCU creates opportunities to transition education into action and effectively change financial behavior," said Jeannine Esposito, Self-Help communications and development associate.

Established in January 2010, Self Help FCU's Micro Branch serves East San Jose, Calif., which consists mainly of Latino immigrant population. Based on the one-mile-radius census data around the branch's location, there are an estimated 20,000 unbanked and under-banked Latinos. In California more than 47%--or nine million--Latinos are unbanked, with nearly 200,000 in San Jose, said NCUF.

As a result, alternative providers--such as check cashers, pawn shops, consumer finance companies and payday lenders---have emerged to fills a void in financial services.

"The people in check-cashing lines are missing something valuable: a place to save money, the chance to develop or repair credit ratings, personal security from robbery, and access to responsible credit," said Lois Kitsch, NCUF national program director. "These basic financial services are the gateway to financial stability and capital access, which are critical steps toward upward economic mobility."

The Micro Branch attracts low-wealth customers where they live by:

  • Providing relevant and accessible transaction, depository and credit products;
  • Being located in their neighborhood, with the extended hours they need; and
  • Being perceived as both familiar and supportive, through design and staffing.
As customers establish relationships with the Micro Branch, member service representatives nudge them toward products and services such as credit union membership and savings accounts that can assist them in building assets and achieving financial self-sufficiency. The Micro Branch serves 1,538 customers, and 20% of them have become members of the credit union. All customers received initial education when they registered with the branch to cash checks.

In the Micro Branch's first year of operation, Self Help had a significant impact in the area and proved its ability to attract customers. Now in its third year, Self Help FCU is focused on building the financial stability of its members.

Its in-line financial education consists of:

  • Teller line interventions--Delivering targeted scripts and /or marketing materials to customers at the point of transaction that nudge them toward an account, a savings product or a credit-building loan.
  • Community outreach interventions--Using the same marketing materials and scripts when participating in local community events, including neighborhood resource fairs, volunteer income tax assistance site days, non-profit partners' open houses, and so on.
  • In-branch marketing interventions--Creating posters, post cards and other marketing collateral designed to provide "bite size" education, delivered in an interesting and thought-provoking manner. For example: "Did you know the average Micro Branch consumer spends more than $300 in check-cashing a year and that the average Micro Branch member spends an average of $65 in account fees a year?"
  • Cross-selling savings accounts--Interacting with customers during their check-cashing transactions so they will open a "5 for Me" savings account. Self Help FCU incorporated the behavioral economic concepts of frictionless savings, the power of defaults, and future commitments with its on-the-ground experience in serving the unbanked to create the savings product.
  • Evaluation and analysis--Holding regular team meetings to review successful interventions and share best practices, which augments training materials for staff.
  • Staff training--Incorporating training into weekly team meetings to review the introduction of new marketing interventions, practice teller-line interventions and review community event interventions.
Also, during the second half of 2012, Self Help FCU's in-line financial education activities will consist of:

  • Market research (quantitative)--A data-driven analysis of its customer base to determine which customers have progressed along the product suite. For example, the credit union looks at which check-cashing customers decided to open an account and how long it took.
  • Market research (qualitative)--Phone and in-person interviews or focus groups conducted to understand how customers are using products and what interventions have worked on them.
  • Customer profile flags--Flags in Self Help FCU's core processing system of potential clients who share characteristics from their success stories and are prime for cross-serving opportunities.
The long-term goal is to use the Micro Branch and in-line education model for any unbanked and underbanked population statewide and nationwide, potentially reaching millions of individuals, said NCUF.

Mexicos Ramirez receives Global Womens Athena Award

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Dolores Rivera Ramírez (center) received the 2012 Athena Award from the Global Women's Leadership Network.
GDANSK, Poland (7/18/12)--The Global Women's Leadership Network's 2012 Athena Award was given to Dolores Rivera Ramírez, general manager of Caja Zongolica in Veracruz, Mexico. Rivera was honored with the annual award at the Global Women's Leadership Forum, held in conjunction with World Council of Credit Unions' (WOCCU) World Credit Union Conference, taking place this week in Gdańsk, Poland.

The award honors outstanding achievement in support of credit union development, particularly as it relates to worldwide credit union women's leadership development.

Rivera has been a key leader in the international movement since starting a credit union in 1994 to meet the needs of poor residents in her rural community in Mexico's Veracruz state. Under her leadership, the credit union grew to more than 40,000 members.

Rivera has worked with WOCCU since 2003 to implement savings mobilization and outreach programs in Mexico. She was among the first to help pilot handheld transaction technology to deliver financial services remotely to credit union members in rural Mexico, a program that is expanding to other countries.

Gabriela Zapata (center) accepted the Athena Award for Dolores Rivera Ramirez, whose travel delays made her miss the ceremony. Zapata shares the moment with World Council of Credit Unions President/CEO Brian Branch and Global Women's Leadership Network Chair Sue Mitchell at World Credit Union Conference in Gdańsk, Poland.  (Photos provided by the World Council of Credit Unions)
"The future of financial services lies in electronic delivery to members when and where they want those services," said Brian Branch, WOCCU president/CEO. "The success of Caja Zongolica and the transferability of the lessons they learned will help move the global credit union movement forward in important and meaningful ways."

Caja Zongolica capitalized on its existing Semilla Cooperativa [Cooperative Seed] program, through which the credit union delivers services by sending representatives to members in remote areas. Rivera helped expand the World Council program and credit union outreach using handheld transaction devices, an experience she shared with Global Women's Leadership Forum participants in Las Vegas in 2010.

Based on information gained during that presentation, Ventura County CU in Ventura, Calif., adapted the program to serve local farm laborers.

International development professional Gabriela Zapata, consultant with the Consultative Group to Assist the Poor, accepted the award on behalf of Rivera, who experienced travel delays that prevented her from attending Saturday's awards ceremony.

The Global Women's Leadership Network, co-founded by WOCCU and the Canadian Co-operative Association, provides women with the opportunity and resources to make a measureable difference in each other's lives, and in their credit unions and communities. The international network, which meets annually in conjunction with the World Credit Union Conference, engages members with professional and personal development through social media and educational forums and provides the tools for women to connect and seek confidential advice from their peers.

For more information, use the link.

CUAD announces new board of directors

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BISMARCK, N.D. (7/18/12)--The Credit Union Association of the Dakotas announced the election of three board members at its annual business meeting, held June 29 in Rapid City, S.D.

Peter Butterfield, CEO of Dakota Plains FCU, Lemmon, S.D., and Shannon Webster, vice president of marketing at Town & Country CU in Minot, N.D., were newly elected to the CUAD board.

Veronica Holweger, manager of Riverfork FCU in Grand Forks, N.D., was re-elected to the board. 

Headquartered in Bismarck, N.D., CUAD serves 73 credit unions in North and South Dakota, representing more than 406,000 members, with assets in excess of $4.6 billion.

Filene report examines cooperative management

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MADISON, Wis. (7/18/12)--Modern consumers prize loyalty, particularly in the climate of distrust of financial institutions that has arisen since 2008, according to a new study from the Filene Research Institute. Loyalty is an inherent advantage of cooperatives, including credit unions, given their emphasis on democratic participation, ethics and transparency Filene said.

Loyalty can also drive growth, leading to lower costs and higher revenues, according to the Filene study, "Exploring Cooperative Management." This means loyalty should be measured systematically, the study said.

Areas that generate and build loyalty include:

  • Commitment and involvement of management to loyalty-oriented action and reinforcing behaviors;
  • Internal benchmarking;
  • Determination of member needs;
  • Analysis of the competition's capacities;
  • Ongoing measurement of member satisfaction and loyalty;
  • Analysis of feedback; and
  • Ongoing improvement.
The Filene study explores the ways credit union management should resemble and differ from the management of for-profit businesses.

Among the implications the study found for credit unions:

  • Changing need for cooperative finance. Most North American credit unions were originally organized around a group that was poorly served by existing providers. However, today most North Americans have access to an overabundance of financial services.
  • Defining a cooperative mandate. The oversupply of financial services in many communities means that credit unions must justify their existence as a cooperative in a competitive market.
  • Being risk averse. Cooperative financial institutions are, on average, more risk averse than their competitors, leading to different, market-steadying behaviors.
  • Providing reasons for growth and profitability. The traditional cooperative model has not always prioritized growth as a goal in itself, but without minimum levels of growth, profitability, and capital accumulation, the credit union business model is unsustainable.
  • Returning value to members. Boards and management have a fiduciary duty to return value to members. That value, not limited to money, may be returned in various ways, but its form should be well defined and closely monitored.
  • Engaging members. Ensuring that members' needs stay front and center is a key aspect of good cooperative leadership, said the report. To discover and address those needs in large and growing credit unions, leaders must use or, if necessary, create engagement and communication channels.

Bethpage UFCW Local 342 FCUs announce merger

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BETHPAGE, N.Y. (7/18/12)--Bethpage FCU, the largest credit union in New York, announced that the National Credit Union Administration (NCUA) has approved its merger with UFCW Local 342 FCU, Mineola, N.Y., which was effective July 1.

UFCW Local 342 FCU is a union-based credit union with $5.6 million in assets and one branch location serving 2,071 members. Its branch will close when the merger is complete, and members will be directed to the Bethpage Mineola branch or to any of its 25 other branches.

"This merger will allow former UFCW Local 342 FCU members to enjoy greatly expanded convenience, value and financial services as members of the largest credit union in New York and Long Island," said Linda Armyn, senior vice president at Bethpage.  Calling the merger "an ideal fit," Armyn noted that UFCW Local "was seeking the best solution for its members to continue to offer the extraordinary value and services of a credit union, backed by the financial standing and support of Bethpage."

Bethpage, which has more than $4.5 billion in assets, will offer 425 surcharge-free ATMs, and  full services, including commercial, residential and auto loans; home financing; title services; Individual Retirement Accounts and other savings accounts; and free checking.

Members can also obtain property and casualty insurance; homeowners and auto insurance; life, long-term care and disability insurance, and investment services through Bethpage Investment Strategies. They also will gain access to mobile and online banking and Bethpage's Shared Branching/Banking services.

CU System briefs (07/17/2012)

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  • FARMERS BRANCH, Texas(7/18/12)--Two Texas CUs--Coastal Community FCU in Galveston and Resource One CU in Dallas--will receive the Juntos Avanzamos (Together We Advance) designation for their Hispanic outreach programs from the Texas Credit Union League, the league said Tuesday (LoneStar Leaguer July 17). In August, the credit unions will be presented a flag that designates that they are committed to serving the emerging Hispanic market. "Through the process, we were able to identify opportunities for improvement, and also learn how we could better leverage our strengths," said Resource One CU President/CEO Jim Brisendine. "It is our hope that this designation as a Juntos Avanzamos credit union will illustrate our commitment to meeting the financial needs of this community," he told the league …
  • HARRISBURG, Pa. (7/18/12)--A staffer from Trevose, Pa.-based TruMark Financial CU met recently with state Rep. Curtis Thomas (D-181)  at his district office.  Randi Marmer, the credit union's assistant vice president of community relations, met with the longtime credit union supporter, who wanted to learn more about the credit unions branch and services in his district. Marmer provided insight about the North Philadelphia branch and the credit union's partnership with Asociacion Puertoriquenos en Marcha.  The credit union volunteered to assist Thomas at upcoming community forums and plans to participate in his Senior Expo on Aug. 2 to discuss the benefits of credit union membership and the scams targeting the elderly. Shown are Marmer, Thomas, and Legislative Assistant Natalie Davis. (Photo provided by the Pennsylvania Credit Union Association) …