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NCUAs MFOEL letter reassuring CUNA Mutual

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MADISON, Wis. (7/25/12)--The National Credit Union Administration's (NCUA) July 20 letter on multi-featured open-end lending (MFOEL) and blending lending brought a reassuring response to credit unions Tuesday from CUNA Mutual Group.

NCUA's letter to federal credit unions confirms regulations that continue to allow MFOEL. However, it limits the amount of information a credit union may gather during the advance request, which will limit the use of MFOEL for some credit unions, CUNA Mutual said.

"The lending regulatory environment is evolving rapidly and more change is expected," said Bill Klewin, CUNA Mutual Group's director of regulatory compliance. "CUNA Mutual has worked with credit unions on lending compliance issues for more than 30 years and provides lending products that ensures compliance," he said.

"We will help credit unions through this change and continue to be here for them as the many new regulations emerge," Klewin said.

The Credit Union National Association and CUNA Mutual Group in February had urged the Consumer Financial Protection Bureau and the NCUA to revisit the regulation of MFOELs and to possibly provide additional guidance on these plans, noting that elements of current regulations were confusing some credit unions. (See RELATED STORY, NCUA offers guidance on multi-featured open-end loans. Use the link).

In its letter, NCUA discussed blended or multi-featured lending (MFL) plans. The agency clarified that open-end and closed-end lending are two distinct regimens and each require their own application, timing requirements and disclosures for the member-borrower.

The letter discussed blended loan programs, which combine open-end and closed-end processes and disclosures. It makes clear such an approach is not the same as a MFOEL program and that it must follow the distinct rules for open-end and closed-end lending, depending on the nature of the transaction, CUNA Mutual said.

CUNA Mutual welcomes the NCUA's efforts to clarify the compliance requirements surrounding MFOEL and blending lending, Klewin said. The company will continue to support credit unions to ensure an effective balance of safety and soundness, member convenience and compliance requirements.

Its products support credit unions' requirements for compliant and efficient lending programs.  "As credit union staff review their lending policies and procedures, we are the dedicated resource to ensure selection of the best approach for credit unions and their members," Klewin said.

Credit unions with LOANLINER-related questions should contact CUNA Mutual at 800-356-5012 or e-mail at loanlinercompliance@cunamutual.com.

Law school profs op-ed on B word supports CU

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MONTPELIER, Vt. (7/25/12)--An op-ed article written by a Vermont  law professor about the battle between the state regulator and Vermont State Employees CU (VSECU) over the credit union's use of "bank" and "banking" in its marketing supports the credit union.

It also points out that the battle over words could really be a battle about taxation.

The state Department of Financial Regulation (DFR), which regulates state-chartered credit unions and banks, issued a notice June 18 of a cease-and-desist order against VSECU, prohibited it  from using the words, saying it was concerned that consumers and members are confused when the credit union uses them.

The $573 million asset VSECU requested a hearing over the matter, which centers on the use of "bank," "banker," "banking co-op," "banking cooperative," or "any other similar sounding word or name." The battle has attracted credit unions' and media attention across the nation (News Now July 19 and 20). 

Donald M. Kreis, associate director and assistant professor of law at the Institute of Energy and the Environment of Vermont Law School, noted in the Vermont Digger Monday that the question "turns on many things. But one thing it should not turn on is the subjective opinion of the commissioner of financial regulation that the legislature lets credit unions get away with not paying a tax he believes they ought to pay."

Kreis was referring to the state's bank franchise tax. He wrote that the ultimate decision-making authority [on the b-word battle] is vested in Financial Regulation Commissioner Steve Kimbell, who has made at least one public comment that "comes dishearteningly close to a suggestion that he would apply the law he is tasked with applying differently if only credit unions would volunteer to pay the franchise tax," said Kreis. The commissioner said the matter of the using the words is one of protecting the consumer so consumers know what kind of financial institution they are dealing with, said the op-ed.

Kreis was quick to point out that credit unions are exempt from the franchise tax in question.  "It's not up to the commissioner of Financial Regulation to determine whether the legislature did the right thing by exempting credit unions from a tax to which investor-owned financial institutions are subject," he wrote.

"On the merits, Kimbell should leave credit unions alone," Kreis wrote. "The plain language of the statute does not preclude credit unions from referring to banks or banking in its promotional materials. Even if the statute is ambiguous, it should be interpreted in a manner that advances its fundamental purpose--which is to protect the public from financial fraudsters, not credit unions," he added.

A credit union is a cooperative and  "the idea that consumers might confuse their local credit union with a financial institution with the word 'bank' in its name is absurd," wrote Kreis.

If the department rules against VSECU, "it will likely engender rather than resolve confusion. This is because federal law grants federally chartered credit unions the right to use the word 'banking' and its variants. The pending case applies only to state-chartered credit unions like VSECU."

"The cooperative difference provides a principled basis for the distinction Kimbell dislikes between credit unions and investor-owned banks when it comes to the bank franchise tax. The levy can, and should, be regarded as a tax on profits that would otherwise go to investors, of which credit unions have precisely none, " Kreis said.

He concluded with a "bitter irony": "the nation's oldest and perhaps its most venerable credit union happens to be in New Hampshire. The name of that state chartered credit union?  St. Mary's Bank."

To read the full article, use the link.

IReutersI Banks wont budge small biz turn to CUs

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CHICAGO (7/25/12)--Credit unions nationwide are increasing their member business lending (MBL) to small businesses, while banks commercial lending has declined, according to a Reuters article Tuesday.  

Eric McCarthy, a Phoenix entrepreneur, needed money to assemble an ice cream business, so he went to several banks, but none would help him.  

"I tried all of the big banks, literally all of them, and was shocked and surprised that I got turned down," McCarthy, who bought four Baskin Robbins stores in his area this spring with a $300,000 loan from Mountain America CU in Salt Lake City, Utah, told Reuters." The big banks didn't want to lend a little money; they wanted to lend a lot of money."

From 2008 through 2011, credit union lending surged 22%, said the article citing statistics from the National Credit Union Administration (NCUA). 

Meanwhile, commercial bank loans that are less than $1 million have dropped by more than 14%, compared with 2008 levels, according to data compiled by the Federal Deposit Insurance Corp. 

However, MBLs constitute only 4% of the roughly $1 trillion total credit union assets nationwide. Many credit unions want provide more MBLs, Reuters pointed out.

The Credit Union National Association (CUNA) and credit unions are urging Congress to increase credit unions' MBL cap to 27.5% of assets from 12.25%. Doing so would open up more opportunity to offer MBLs, inject $13 billion in business loans into the economy and create as many as 140,000 new jobs, with no cost to taxpayers, CUNA said.

Debbie Matz, NCUA chairman, told Reuters the cap is "arbitrary."

"Credit unions tend to make very small business loans," she added. "Generally banks don't even make a loan that small," she said, noting the average credit union business loan is about $230,000. "They're filling a very important need for small businesses."

Trust in big banks collapses CUs see largest gain

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CHICAGO (7/25/12)--Only 21% of Americans surveyed trust the financial system, the lowest point on record since March 2009, according to the most recent Chicago Booth/Kellogg School Financial Trust Index. However, trust in credit unions increased, rising to 63% from 58%.  

The overall decrease was largely driven by a drop in trust of big national banks, said the June 2012 report issued Tuesday.

The index measures public opinion over three-month periods to track changes in attitudes. The report is the 15th quarterly update and is based on a survey conducted in June. The previous survey (March) showed that 22% of the population trusted the financial system (PR Newswire July 24).

Key findings from the latest trust index include:

  • Trust in stocks and large companies edged up, while trust in mutual funds dropped to 25% from 28% in March.
  • Most Americans have a neutral view of the stock market, with 80% of survey respondents planning to leave their investments in the stock market unchanged. Also, the fear of a stock market collapse has subsided, with more than half of respondents saying that a drop of more than 30% within the next 12 months is unlikely. (Editor's note: The survey results were released before this week's market slide as a result of economic problems in Europe.)
  • On the employment front, 15% of respondents said they fear losing their jobs in the next 12 months. This is lower than figures reported in the earliest months of the financial crisis (23% in December 2008).  The all-time high of 26% was in March 2010.
"Trust in banks has collapsed," said Paola Sapienza, co-author of the index and the Merrill Lynch Capital Markets research professor of finance at the Kellogg School of Management at Northwestern University.

"Since last quarter's issue of the Financial Trust Index, trust in banks has fallen five percentage points to a low of 27%. It's worth noting that this data was collected in late June, so this drop could be reflective of consumer attitudes toward the news about JP Morgan's multi-billion hedging losses announced in late spring," Sapienza said.

Trust in national banks fell to 23% in the June 2012 report, from 25% in March. Trust in local banks increased to 55% from 51%.

"This suggests that the national banks may be 'too big to trust,' whereas there is still a relatively high level of trust in banks at the community level," said Luigi Zingales, co-author of the index and the Robert R. McCormack Professor of Entrepreneurship and Finance at the University of Chicago Booth School of Business.

Credit unions also have scored high in other national and local surveys on trust, loyalty and member satisfaction studies this year. They include:

  • Credit unions were rated No. 1 in a survey of 5,000 consumers asked to rate the reputation of 34 business sectors in a study conducted by Denver-based Prime Performance (News Now May 14). Credit unions topped all business sectors in reputation with an average reputation score of 5.78 on a seven-point scale with seven as "very good."  They were followed by grocery stores (5.50), and community banks (5.40). Regional banks came in seventh at 5.04 and national banks 18th at 4.15.
  • Credit unions topped the list of U.S. financial institutions in member/customer satisfaction, according to the 2011 Customer Experience with Call Center Representatives Survey by Prime Performance (News Now March 9). Members/customers claim they were more satisfied last year in their interactions with credit union and bank call center representatives than in 2010. Based on a recent interaction with a call center representative, credit union members rated their overall satisfaction with a net score of 83%. The comparable score for small banks is 79%. The industry average is 70%.  Falling below that are: large banks, 66%; Chase, 62%; Wells Fargo, 61%; and Bank of America, 56%.
  • Credit unions were among the top customer satisfaction rankings in Temkin Group's release of its 2012 Temkin Customer Service Ratings, which examines how U.S. consumers rate the customer service of 174 large companies across 18 industries (News Now June 28).
  • A National Cooperative Business Association (NCBA)/Consumer Federation of America (CFA) survey found more Americans think credit unions and other cooperative businesses have the best interests of their members and customers in mind more than do for-profit businesses (News Now May 3). The survey also revealed a favorable view of cooperatives in regards to their business trustworthiness and quality of service. Co-ops received higher marks across the board than for-profit businesses.
  • Credit unions outshone banks in consumers' perceptions of safety and soundness, with 40% of respondents saying they believe credit unions are the safest financial institutions, compared to 34% naming banks (News Now Feb. 23). Nineteen percent of respondents said they trusted both types of institutions equally. The numbers are the results of the 2012 Credit Union National Association (CUNA) National Voter Survey.
  • A CUNA survey in February found that 43% of respondents said credit unions were the best place for consumers to keep their day to day savings and checking accounts (News Now Feb. 22).
The quarterly Financial Trust Index survey is conducted by Social Science Research Solutions as part of its weekly national telephone survey, EXCEL.

Report 1 in 5 consumers considered switch last year

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SAN FRANCISCO (7/25/12)--About one in five checking account holders surveyed considered switching financial institutions in the past year, according to a new Consumer Reports National Research Center survey released Tuesday.

Frustration over increased fees for routine services was the prime reason for wanting to switch, but inconveniences such as transferring automatic transfers kept about half from making the switch, the national survey found.

"Unfair bank practices and rising fees are prompting more and more consumers to consider voting with their feet and taking their money to another bank or credit union," said Suzanne Martindale, staff attorney for Consumers Union, the policy and advocacy arm of Consumer Reports. "But many consumers don't follow through because moving your money takes a lot of time and money, and some bank policies make it harder than it should be. We need to make it easier for consumers to switch banks so they have a real choice when it comes to where to keep their money."

The results would seem to indicate that more consumers are primed to make the switch to credit unions, nine months after Bank Transfer Day, Nov. 5. During the fourth quarter of 2011, credit unions saw an increase of 737,000 checking accounts, according to the Credit Union National Association (CUNA) (News Now March 5).

Overall, credit union membership grew 399,721--to 93,052,509 from 92,652,788 during the fourth quarter, CUNA said.

A Consumers Union report published earlier indicated that when a consumer decides to switch financial institutions, the first thing the consumer usually does is open a new account at another financial institution. This process can take up to two weeks. Next, the consumer transfers any direct deposits and automatic payments out of the old account into the new account. Then the consumer closes the account at the old bank and moves remaining funds into the new account. Obstacles can crop up along the way that can turn into real headaches for consumers, the report said.

Consumers who considered switching were asked to name the top two reasons for wanting to move.

Among the most frequent reasons chosen:

  • 43% cited fee increases for routine services;
  • 38% said another bank was offering better terms; and
  • 26% pointed to poor customer service experiences.
Of those consumers who considered switching banks, more than half said they were hindered from doing so. Survey respondents cited multiple reasons why they didn't switch, including:

  • 63% said that concerns about the trouble it would take to transfer all their automatic payments and deposits to a new account kept them from switching banks;
  • 37% indicated that the process would take too much time and effort to complete; and
  • 28% said they didn't want to pay any fees to transfer their own money.
Consumers Union has called on Congress and the Consumer Financial Protection Bureau to consider reforms making it easier for consumers to move their money and increase competition. The Consumer Reports survey cited policy recommendations would make consumers more likely to switch banks.

Policy recommendations that consumer cited include:

  • Offering free, same-day electronic transfer of funds from the old bank to the new bank would make 47% more likely to switch;
  • Legally requiring banks to reroute all automatic payments or direct deposits to the new account within 14 days would make 37% more likely to move; and
  • Offering a portable account number that they could take with them to a new financial institution, similar to a mobile phone number, would make 32% more likely to switch.
 

Consumers Union also recommended that banks should be required to reduce check holds so consumers can quickly access deposits in new accounts; prohibited from reopening accounts after consumers close them; required to provide customers with clear and accessible account closing procedures; and assessing unfair fees for closing accounts.

CUNA provides interest rate info for Icredit .comI

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MADISON, Wis. (7/25/12)--The Credit Union National Association (CUNA) provided information for a credit.com article Tuesday, explaining to consumers how to determine if they are being offered or are paying for a good interest rates on autos, homes, mortgages and refinancings. 

For auto loans, CUNA's Daily (financial) Rate Comparison indicates the average five-year new-auto loan rate is 3.06% at credit unions versus 4.6% at banks.

The national average four-year used-auto loan rate is 4.34%, according to Informa Reserach Service's July 17 Interest Rate Review, with the highest rate at 11.25%, and the lowest at 1.50%, based on direct fixed-rate loans of $15,000 for two-year-old used-vehicle purchases, with a four-year repayment term.

CUNA also indicates that, as of July 19, the average 30-year fixed conforming mortgage rate is 3.67% through credit unions, and 3.59% with banks.

The national average interest rate is 3.87% according to Bankrate.com.

To read the article, use the link.

Two CUs cite robberies in closing branches

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COLLINSVILLE, Ill. and SIOUX CITY, Iowa (7/25/12)--Two Midwest credit unions--Scott CU, Collinsville, Ill., and Telco Triad Community CU, Sioux City, Iowa--have announced they are closing branches because of multiple robberies.

Citing four robberies within two years, including two within the last five weeks, Scott CU announced the closing of a branch in Cahokia, Ill., on July 13 (stltoday.com July 24). The robberies at that branch were more than those at 14 other branches combined.

Among the issues the credit union's board noted in announcing the closing was that two of the last three robberies involved weapons and the suspects from the last two robberies have not been arrested.

Local authorities told the board the branch location--along a main city thoroughfare near the interstate--invites crime.

In a related robbery, a couple accused of robbing another Scott CU branch, in Belleville, Ill., April 12 was sentenced last week to one year of probation. The couple immediately turned themselves in following the robbery.

Rita Bell, 58, and Jeffrey Bell, 56, each pleaded guilty to felony theft on July 17. The original charges of robbery were dismissed.

At the second credit union announcing a branch closure, Telco Triad Community CU cited four robberies and two attempted robberies in the past four years at its Council Bluffs, Iowa, branch (Omaha.com July 24).

The branch had also experienced a drop off in loans, but safety was the main reason for the closing, CEO Kay Beyerink said.

Some employees had left the credit union because of trauma that resulted from the robberies, Beyerink told the paper.

Fresno faith-based group helps move 750K from banks

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FRESNO, Calif. (7/25/12)--A Fresno, Calif.-based faith group has led the transfer of $750,000 in deposits from Bank of America, Wells Fargo, Citigroup, JPMorgan Chase and Goldman Sachs in the Fresno, Calif. area.

Faith In Community, an interdenominational group, joined with Occupy Fresno to transfer the funds to local communities through credit unions and small banks, the groups said.

A San Francisco faith coalition moved $10 million from Wells Fargo in February, and more groups joined the movement during Lent.

About 50 people rallied at St. Anthony Claret Catholic Church in Fresno Monday. They held signs with names of people who have transferred or will transfer their money from big banks to credit unions or local banks in the Fresno area (Fresno Bee via Thinkprogress.org July 23).

As a result of Bank Transfer Day, Nov. 5, credit union membership grew 399,721--to 93,052,509 from 92,652,788--during the fourth quarter of 2011, according to the Credit Union National Association.

Faith groups were among the biggest activists, moving $55 million from Wall Street banks before last Thanksgiving.

CU System briefs (07/24/2012)

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  • HARRISBURG, Pa. (7/25/12)--A teller at First Area FCU, Lewiston, Pa., thwarted a robbery after a masked man entered the credit union, gave the teller a note asking for money in $20 bills, and said he had a gun.  The startled teller asked the suspect for an account number. The question took him off guard and he got spooked and ran from the credit union, said the Pennsylvania Credit Union Association (PCUA) (Life is a Highway July 24). A short time later, a suspect was apprehended by police.  First Area CEO Bonnie Fisher told PCUA:  "We thought something like this would never happen to us because we have busy lobby traffic, but this shows you're never really ready for a robbery. It can happen to anyone at any time." The credit union reviews its robbery training annually but likely will do it more often "so our staff is ready and knows how to react," Fisher said. "Thankfully, no one was injured and the teller is doing fine," she added …
  • SEATTLE (7/25/12)--A Russian hacker who was indicted in May 2011 for denial-of -service cyberattacks on Amazon.com, Priceline.com and eBay, was arrested July 18 in Cyprus, announced Jenny A. Durkan, U.S. attorney for the Western District of Washington. The U.S. is seeking extradiction of Dmitry Olegovich Zubakha, 25, of Moscow, who was arrested for illegal hacking and denial of service attacks in 2008. He also is charged with possessing 15 or more unauthorized access devices and aggravated identity theft for a separate incident involving possession of more than 28,000 stolen credit card numbers in October 2009, said Durkan. Among the victims of the hacking were members of BECU, Tukwila (zdnet.com July 20) ...
  • COMPTON, Calif. (7/25/12)--Compton, Calif.-based Mid Cities CU President/CEO Melia Keller, left, presented key strategies to serving underserved markets at the World Council of Credit Unions' (WOCCU) Young Credit Union People (WYCUP) session at the 2012 World Credit Union Conference in Gdansk, Poland.  Keller touched on key aspects such as transitioning the unbanked and underserved markets through products they are familiar with and then financially incentivizing them through product discounts for education.  She also spoke about "buy here pay here" dealerships in Los Angeles and how her $25 million asset credit union provided a successful auto loan product that offers credit-challenged members a below-market rate on an auto loan if they agreed to add a Global Positioning System in their vehicle. Attendees from smaller countries were interested in this because they experience heavy auto-loan delinquencies, said the credit union  (Photo provided by Mid Cities CU) …
  • ROCKVILLE, Md. (7/25/12)--Jane Pannier, CEO of the nationwide Realtors FCU will become senior vice president, effective Aug. 1, of NeighborBench, a cloud-based platform that connects credit unions with a team of compliance experts, said NeighborBench. She has 20 years' experience helping credit unions with compliance. Before joining Realtors FCU, she was partner in The Rochdale Group …
  • ALEXANDRIA, Va. (7/25/12)--Charlotte H. Cash has been chosen as president/CEO of  Commonwealth One FCU, based in Alexandria, Va. Cash has 27 years' experience at Commonwealth One in every phase of credit union operations, said credit union board Chairman Rupert Jennings. For the past 12 years, Cash has been vice president, retail sales and marketing. During that time, Commonwealth One grew to more than $300 million in assets and 35,000 members.  Cash joined the credit union in August 1985 as marketing manager and has held numerous management and executive positions since. She is vice chair of the board of the Metropolitan Area Credit Union Managers Association. Cash said that, as president, she would "focus on the major differences between credit unions and banks.  Emphasizing our core philosophy of 'people helping people' will help grow and improved our credit union in a financial environment that has become increasingly competitive and complex." …