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With economy members will need more help

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MADISON, Wis. (8/9/11)--While credit unions assess the impact of this week's unprecedented downgrades in the U.S. government credit and market volatility on their net worth, they also can expect questions from members who will need their credit union even more--and from their staff concerned about their pension plans. Credit unions will need to reassure members and staff that the market volatility is a bump in the recovery, and help educate members so they have the information tools to weather the current environment and make solid money decisions. Expect members to broach several areas of concern with questions about:
* Whether their deposits continue to be safe and sound under the full protection of the U.S. government; * Whether they should stay with their current investments and ride it out for the long term, or make adjustments to "safer" investment vehicles; * Whether the current environment has a significant impact on how much they can borrow or on the cost of borrowing; * Whether they will still be able to buy a home or afford that college tuition; and * Whether they will continue to get good rates on their deposits.
Also, credit unions can expect staff--especially if they're near-retirement baby boomers--to have questions about their pension plans. Expect to provide more education for staffers in the current environment. Education will be a key advantage credit union members will have over bank customer s. Many credit unions offer home buying and refinance seminars as well as seminars on credit and money management topics--often free. This might be a good time to tailor some seminars to the specific questions members are asking.

iKiplingeri tells how to get a better deal with free checking

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MADISON, Wis. (8/9/11)--Consumers looking to dodge pesky bank fees can often find free checking at credit unions, according to an article scheduled for the September issue of Kiplinger’s (Kiplinger.com Aug. 8). The article, titled “How to Get a Better Deal at Your Bank,” directs consumers to asmarterchoice.org, the website the Credit Union National Association and the leagues have created to help consumers learn more about credit unions and locate one they are eligible to join. “Community banks and credit unions routinely offer free accounts with no minimum balance, no serv­ice charge and unlimited check-writing. You can find a credit union near you at www.asmarterchoice.org,” Kiplinger said. The article cites Consumers CU, Waukegan, Ill., as a community financial institution that offers a high rate of interest on its checking accounts. The credit union’s website advertised a 4.09% annual percentage rate on its Rewards Checking on Monday. The stimulus for aSmarterChoice.org came from a task force created by the American Association of Credit Union Leagues to raise awareness and foster credit union membership growth, especially among young adults. To read the article, use the link.

LSCU letter on taxation attacks Subchapter S banks

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TALLAHASSEE, Fla. (8/9/11)--A letter to the editor of The Tallahassee Democrat from the League of Southeastern Credit Unions (LSCU) attacks banks' Subchapter S agreements while pointing out the hypocrisy of bankers' claims that credit unions' congressionally mandated tax-exempt status is a "tax loophole." "This is the same argument the banking industry makes when it wants to deflect its inability to serve consumers and small businesses," wrote LSCU President/CEO Patrick La Pine in the article published Sunday. "The credit union tax exemption was established by Congress in 1934, affirmed by statute in 1951, and re-affirmed in 1998," he said. The letter is in response to Florida Bankers Association CEO Alex Sanchez, who called for Congress to close the tax-exempt status of credit unions in an article in the newspaper on Aug. 2. "This is not a tax loophole," La Pine added. "Subchapter S corporation banks receive a similar tax exemption to that of credit unions." He noted there were 2,300 Subchapter S banks, including 45 in Florida. "Sanchez's argument is hypocritical when members of his association receive a similar benefit to credit unions and he leaves that out," said La Pine. La Pine also noted that Florida credit union members enjoyed $300 million in benefits through lower interest rates, higher savings rates and lower fees last year. And he pointed out that Florida has the second-highest bank failure rate in the nation. "Not one Florida credit union has failed during this same period. Credit unions have money to lend and stand ready to help move Florida's economy forward," he concluded. LSCU serves credit unions in Florida and Alabama.

Asia Africa priorities for new WOCCU CEO Branch

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MADISON, Wis. (8/9/11)--Membership growth in Asia and Africa were among the priorities cited by new World Council of Credit Unions President/CEO Brian Branch in an interview with News Now Monday. “Asia would be a high priority for us,” said Branch, who took over leadership of WOCCU following the retirement of the Pete Crear. “We have members in Africa, but that’s an area we would like to see some expansion in as well.” In 2008, Branch, then WOCCU’s executive vice president and chief operating officer, spearheaded a development initiative with the People’s Bank of China and the China’s rural credit cooperatives to help bring affordable financial services to the country’s underserved. He said the People’s Bank seeks to create a more market-driven environment among China’s hundreds of rural cooperatives. Branch listed three areas of focus as he takes over leadership of WOCCU: increasing member organization growth in countries worldwide, expanding WOCCU’s development program, and further growing WOCCU’s service group. Through its development programs, WOCCU can provide access to the rural poor and help credit unions band together to build networks that help them to build scale, employ new technologies and provide more services, Branch told News Now. An example of this is WOCCU’s breakthrough work in helping the rural poor access financial services through mobile technology in Latin America and Haiti, he said. Branch also cited WOCCU’s International Partnership program, which pairs U.S. credit union leagues with trade associations from other countries. He cited a recent partnership between the Ohio Credit Union League and the Romanian credit union movement as an example of how credit unions worldwide can help each other “They need to have better legislation in Romania to offer the service that their members demand,” Branch explained. “They need to have more compelling products. They face the same challenges that our credit unions face in the context of the financial crisis and the recession. We had a group from Ohio go to Romania. They spent some time talking about how they manage the challenge of excess liquidity, lower returns on loans, higher delinquency, how to provision for that--the same kind of management challenges we’re used to. Credit unions worldwide face the same kind of management challenges.” Through its subsidiary, WOCCU Service Group, WOCCU provides much of the technology to credit unions in countries where it has programs. The foundation of the service group is IRnet, the International Remittance Network, which WOCCU developed in 2001 to help recent immigrants to the U.S. send funds back to their home countries. The concept has grown to include other retail delivery vehicles--such point-of-service terminals, ATMs, and mobile services. “It’s become a vehicle by which credit unions in other countries see an opportunity to collaborate and provide additional services that are very expensive for one credit union to provide, but much more reasonable if they work to do it collaboratively,” Branch said. While providing affordable and accessible financial services to so many areas of great instability is a challenge, Branch says the credit union model is very robust. “When these big changes happen throughout the world, the credit unions are so deeply rooted within their communities that that they continue to operate,” Branch said. “They are a source of stability for these communities.”

Connecticut CUs weather consumer skittishness

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HARTFORD, Conn. (8/9/11)--Connecticut's credit unions held $4.33 billion in loans at the end of March, down slightly from a year ago, but their loan quality remains strong and their loan underwriting standards have not changed, according to the Connecticut League of Credit Unions. Industry-wide capital ratios are nearly 10%, well-above what regulators require, and Connecticut's credit unions are in "outstanding shape considering the financial earthquake that hit a few years ago," said Tony Emerson, president/CEO of the league, in an article in HartfordBusiness.com (Aug.8). Delinquencies held by Connecticut's credit unions declined 8.4% the past year, and credit unions have set aside plenty of reserves to cover any potential bad loans in the future, said Emerson. According to data from the National Credit Union Administration, lending at the state's credit unions is down 1% from the same period in 2010 and 3% from 2010. Nearly every type of loan saw a decline, except first mortgages, which increased 9% from last year to $1.6 billion. As in other states, new-auto loans declined as consumers held off making big purchases until the job market improves. Connecticut credit unions hold $268 million, compared with last year's $366 million. Emerson told the publication that consumers stop borrowing money when the economy has problems. The decline in new loans means credit unions have less earnings capacity, he said. Hartford (Conn.) FCU President/CEO Ed Danek told the publication that the industry has done a good job of counterbalancing the impact of a difficult operating environment. He anticipates net income for 2011 will rise 300% compared with 2010, largely through improved credit quality and operating efficiencies.

Study Latino Community CU cut robberies against Latinos

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DURHAM, N.C. (8/9/11)--Robberies in Durham, N.C., decreased by roughly 14% between 1999--before Latino Community CU opened in 2000--and 2002, according to a University of Virginia study. The $103 million asset credit union was founded 11 years ago when there was growing concern about crime against Latinos. The credit union’s presence has helped reduce crime, said the study, “Perdido En al Traduccion: The Opportunity in Financial Services for Latinos” (heraldsun.com Aug. 5). The Latino population was targeted for robberies because of the perception they carry large amounts of cash or stash money at home, making them “walking banks,” Erika Bell, the credit union’s vice president of strategy and services, told the newspaper. The study, conducted at the Tayloe Murphy Center at the University of Virginia Darden School of Business, further suggests that if more Latinos deposited their funds in financial institutions, instead of taking the money home, they would be less attractive targets for robberies, the paper said. Latino Community CU’s deposits grew to $74 million in 2009 from $3 million in 2000, and the credit union has grown to 10 branches with 62 employees in 2010 from one branch with five employees in 2000. As of 2010, the credit union served 55,000 members--75% of which were not previously served by a financial institution, the study found. To read the article, use the link.

Fenwick Weavers Co-op says its worlds first CU

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FENWICK, Scotland (8/9/11)--The Fenwick Weavers Co-operative Society, a weaving cooperative founded in Fenwick, Ayrshire, Scotland, in 1761, has laid claim to being the world's first credit union.
Click to view larger image The village of Fenwick, Scotland, has laid claim to being home to the world’s first financial cooperative.
The Fenwick Weavers legacy program is celebrating the 250th anniversary of the cooperative this year. “Everyone needs to know where his roots are, and the Fenwick Weavers are recognized as the world’s oldest [financial] cooperative,” said John Smith, a retired British Aerospace Systems assembly line worker and lifelong Fenwick resident. He is voluntarily spearheading the effort to revive the cooperative’s legacy. “The past should not die, but should be kept going for future generations.” Smith is coauthor with John McFadzean of the 32-page booklet, “The Co-operators: A History of the Fenwick Weavers.” He and several board members of the Fenwick Weavers, no longer an active cooperative, manned a booth at World Council of Credit Unions’ (WOCCU) World Credit Union Conference in Glasgow, Scotland, last month, where they distributed copies of the publication. Members of the WOCCU board and staff visited Fenwick prior to the start of the conference to learn about the cooperative and its impact on the community. The cooperative, which signed its covenant on March 14, 1761, in Fenwick Church to avoid persecution from the ruling gentry, predates by 83 years the Rochdale Weavers Society, founded in England in 1844 and generally credited as the first financial cooperative. It also predates by 89 years the first formal credit unions, founded in Germany in 1850 by economist Franz Hermann Schulze-Delitzsch. The Fenwick Weavers formed out of necessity during harsh economic times to ensure a higher standard of living and more secure future through its members’ mutual cooperation. During its early days, the cooperatives’ members met at the town water pump--the only place they could gather without arousing suspicion--to discuss the cooperative’s affairs.
Click to view larger image Fenwick Weavers’ John Smith (center) explains the history of the world’s first financial cooperative to attendees at WOCCU's World Credit Union Conference in Glasgow, Scotland. (Photo provided by World Council of Credit Unions)
The group’s charter outlines several of the organization’s operating principles, including the need for honesty, member loyalty, fair pricing, majority decision-making and regular contributions to a fund for the poor. Members paid two shillings and six pence to join, which went to support the cooperative. On Nov. 9, 1769, another document was signed stipulating that the cooperative could purchase food in bulk to distribute to members, who would be allowed four weeks of credit before paying for the purchase. Documentation also exists showing that members could receive loans made at fixed rates from the cooperative funds. The documents are housed in the National Library and thought to be the first recorded instances of credit union activity in the world. In 1839, the economic outlook for the individual weaving trade turned bleak. The cooperative set up an emigration society that helped its members move to Canada, New Zealand, South Africa and the U.S. The population of Fenwick dropped from about 2,000 to fewer than 500 people. By 1873, the cooperative ceased operations and remained closed for 134 years until Smith, at the suggestion of his granddaughter, revived the Fenwick Weavers in 2007. A website is currently in the works at www.fenwickweaverscooperative.com. The group also hopes to one day establish a museum dedicated to the weavers in Fenwick as a way to strengthen the cooperative’s legacy. “There has been a lot of talk about cooperative history, and we hope our research on the Fenwick Weavers will encourage credit unions everywhere to dig a little bit into their own history,” said board member Margaret Smyth.

Fryzel to La. league AACUC CUs help in hardship

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NEW ORLEANS (8/9/11)--Credit unions were designed to help people--particularly during tough financial times, National Credit Union Administration (NCUA) Board member Michael E. Fryzel told the Louisiana Credit Union League. Fryzel spoke at the league’s annual meeting and convention in New Orleans Thursday, and the African American Credit Union Coalition Friday. He provided his outlook for the credit union industry and NCUA’s role within it. People look to Louisianans for inspiration, he said, citing the many natural disasters Louisiana has faced recently and how credit unions helped people get through them. “Credit unions were made to help people, and most especially in times of hardship. When it is time to join the sandbag line, credit unions band together in tough times and are there for their members,” he said. “Louisiana serves as a great example of triumph over hardship, and its credit unions continue to aid in helping their members overcome their own economic hardships as our country continues to move forward.” Fryzel also updated attendees on the industry’s corporate credit union crisis and its resolution status. “We are successfully working through the corporate problem, assisting those credit unions that have been impacted severely by the mortgage crisis and seeing our nation’s credit unions maintaining their focus on helping their members in every way they can,” he said. He gave kudos to the league and coalition for their efforts to reach out to prospective members, educate their communities about the benefits of credit unions and basic financial literacy, and expand outreach--particularly to minorities--for prospective employment opportunities with credit unions. “There is immense work to be done, and I believe that in certain communities, we have only begun to scratch the surface,” he said. “NCUA will work with you in your efforts to improve the financial lives of persons who need better knowledge and skills to help move themselves financially forward,” he added. Despite challenges, credit unions have a bright future. “We would all like to see the economy stronger and growing faster but, [with] the direction going the right way,” Fryzel said. “Delinquencies are declining, bottom lines are improving, and the corporates are regaining their health.”

Ariz. State CU Despite economy CUs lending

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PHOENIX (8/9/11)--Despite a weak economy, Arizona credit unions still are lending to their members because asset quality and capital have remained high amid challenges from the financial system crisis, an Arizona State CU executive wrote in a letter published Friday in the Phoenix Business Journal. “Arizonans can help the local economy by securing a loan with an Arizona-based financial institution,” wrote Paul Stull, senior vice president, strategy and brand, for the $1.27 billion asset, Phoenix-based Arizona State CU. “People may find that borrowing specifically from a credit union provides additional benefits, as these financial cooperatives are not-for-profit organizations owned and controlled by their members, who live and work in Arizona. “This significant difference affects how credit unions operate, with every effort focused on benefiting the member,” he added. Lower interest rates and fewer or lower fees for services also are benefits from obtaining loans from credit unions, instead of other financial institutions, Stull wrote. “While credit unions are not immune to the effects of the less-than-optimistic economy, numerous headlines are incorrectly touting the idea that these financial institutions are not lending at this time,” he said. “It may be difficult to find credit unions with the same lending flexibility that existed several years ago, but they still are actively lending,” Stull added. “In fact, many consumers and businesses unable to obtain loans from banks turn to credit unions to fill this void.”