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CU System briefs (09/21/2012)

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  • HARRISBURG, Pa. (9/24/12)--The Pennsylvania Credit Union Association (PCUA) Board voted to keep the 2013 association dues at the same level as in 2012, PCUA said (Life is a Highway Sept. 21). "The association board recognizes that credit unions still face economic challenges, and I applaud the board [members] for their strong stewardship of association funds," said PCUA President/CEO Jim McCormack. He noted that this will enable credit unions to continue their voluntary support of the association's awareness campaign for its payday loan alternative program, iBelong …
  • AURORA, Ill. (9/24/12)--Anne Schaal, 66, of Sugar Grove, Ill., has been charged with the theft of more than $30,000 from Aurora (Ill.)  Firefighters CU over a five-year period (Courier News Sept. 21).  Schaal was formerly president of the $1.8 million asset credit union until an audit earlier this year discovered accounting irregularities.  She is charged with felonies theft and unlawful use of a credit card …
  • LINCOLN, Neb. (9/24/12)--Crystal Lankford, 35, of Seward, Neb., has changed her plea Wednesday to guilty in a plea bargain related to the embezzlement of nearly $662,000 from the credit union where she was employed (The Lincoln Journal Star and Associated Press Newswires Sept. 20). The theft allegedly occurred at H.B.E. CU, Seward, from 2006 to 2011. Lankford faced up to 30 years in prison but now won't face more embezzlement or bank fraud charges.  Her sentencing is set for January …
  • WASHINGTON  (9/24/12)--Bill Bynum, CEO of HOPE (Hope Enterprise Corp. and Jackson, Miss.-based Hope FCU) participated in an event in Washington, D.C., hosted by U.S. Sen. Mary L. Landrieu (D-La.) , chair of the U.S. Senate Committee on Small Business and Entrepreneurship, to discuss strategies for bolstering small business ownership and success among African-Americans. At the meeting, Bynum noted that HOPE "has demonstrated that properly structured financing and technical assistance can be the key determinant in an entrepreneur's ability to create jobs that stabilize communities." He told lawmakers that "community development financial institutions like HOPE can make a real difference for people seeking to start and expand their businesses. Many areas are overlooked by traditional lenders. The people in those communities are ready to be successful; they just need the right tools to take the next step." The group included leaders in business, national and local governments, academia, historically black colleges and universities, and entrepreneurship  …

Article highlights phenomenal growth of Minn. CUs

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MINNEAPOLIS and ST. PAUL, Minn. (9/24/12)--Minnesota credit unions attracted nearly 30,000 new members in the first half of 2012, and that jump in membership means they can lend more to consumers and small businesses, according to an article in the Minneapolis/St. Paul Business Journal ( Sept. 21).

The Minnesota Credit Union Network, which worked with reporter Jim Hammerand, helped provide perspective on what MnCUN President/CEO Mark Cummins termed as "pretty phenomenal" growth. The numbers are from the National Credit Union Administration's aggregate data for the first half of 2012.

The article, which also describes credit unions' growth nationwide, notes that the growth came from new members were disillusioned with banks  and switched. Many were referred to the credit union by existing members.

Lending to member businesses increased by nearly 7% and overall loans by 13%. "The new members and their business will help credit unions grow their earnings and business lending," the article reported. "Business lending is capped by regulators at 12.25% of a credit union's assets. Credit unions near the cap may cull their business portfolio to issue new loans.

It reported on the loan growth and business lending experiences of three credit unions:

  • Richfield-Bloomington CU, Richfield, which has sold parts of loans to other credit unions to avoid bumping the  member business loan  (MBL) cap;
  • Spire FCU, Falcon Heights, which increased consumer checking accounts by nearly 62% and business checking accounts by 31%. The new members allowed it to increase its business loans by 55.4% to $2.26 million in the first half; and
  • Affinity Plus FCU, St. Paul, whose "Ditch Your Bank" campaign netted it  7,475 new members during the last half of 2011 and 9,932 in the first half of 2012. The new members will allow Affinity Plus to expand into new markets, develop new products and expand business lending. In the article, CEO Kyle Markland said the credit union hired two business lending specialists to start building its business portfolio by the end of the year. Small business lending was always in the credit union's plans because it is an area vacated by a lot of banks.  "We're willing to put the resources we need to into this area," he told the publication.
Credit unions and the Credit Union National Association (CUNA) are urging Congress to increase the 12.25% of assets MBL cap to 27.5%. Doing this would help the economy by injecting $13 billion for new small-business loans and would help generate 140,000 new jobs the first year. Doing so would not cost the taxpayers, CUNA said.

To access the full article, use the link.

CMG on new normal CUs must educate on retirement

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ROCKPORT, Maine (9/24/12)--Credit unions have the opportunity and obligation to educate members about the "new normal" economy and what it means for their retirement plans, a CUNA Mutual Group speaker last week told attendees of the Maine Credit Union League Management Roundtable. 

"In 1935, life expectancy was age 60. Today, retirement plans are calculated based on a possible life expectancy of age 90 for men and age 92 for women," Niemann explained. "This means people are living much longer on their retirement savings than previous generations and, therefore, need our help to plan."

"Get out in front of members," Niemann advised. "Banks aren't out there educating their customers. You have a tremendous opportunity, seize it."

Credit unions should institute an extensive program of member education to help members understand and navigate the "new normal" economy, he said. This should include educating members about interest rates, investing options, insurance options, future economic trends and providing adequately for health care costs throughout their retirement, Niemann said. Member education  also should include making sure members are fully informed about issues such as Social Security, Medicare, tax planning, estate planning and retirement income planning, he added.

The "new normal" also impacts credit union leaders, Niemann said. Credit unions and their members must assume lower rates of return, lower interest rates and sluggish economic growth for the foreseeable future, which means both credit unions and members need to diversify their sources of income.

"Many credit union members are still too highly leveraged, so they won't be borrowing as much or at all," Niemann said. "This means you need to find other sources of income, such as fee income from investments, to compensate for lower revenue from traditional activities such as lending."

Fannie Mae alerts CUs to fraudulent invoices

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WASHINGTON (9/24/12)--Several Fannie Mae customers who use Desktop Underwriter (DU) have recently reported the receipt of fraudulent invoices, said an alert from Fannie Mae.

Fannie Mae is a CUNA Strategic Services provider.

The invoices purport to come from "FMFM Agency" or "Fannie Mae/Freddie Mac Regulatory Agency." The fake invoices bill the recipient for "DO/LP Agency Access Fees" and "Correspondent Agency Lender Access Fees." Those are not Fannie Mae-generated invoices and are likely fraudulent, Fannie said.

In some cases, to attempt to appear more legitimate, the invoice included names of aggregators with which the customer also may be doing business.

Fannie Mae reminds credit unions that it does not mail invoices for DU or Desktop Originator (DO) usage. All Fannie Mae technology invoices are available through its Online Billing Service.

Fannie Mae asks that credit unions inform their accounts payable areas of the situation in case they receive this type of invoice in the mail.

If a credit union has received an invoice that appears to be fraudulent, it should contact its Fannie Mae account manager directly and provide a copy of the invoice.

IAPI IUSA TodayI INBCI report CUNA on household wealth

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WASHINGTON (9/24/12)--Several national publications and large-market media outlets ran an Associated Press article that featured comments made by a Credit Union National Association (CUNA) economist regarding households' accumulation of wealth and how that will impact the U.S. economy.

The article resulted from a meeting and subsequent discussions that Bill Hampel, CUNA chief economist, had with Associated Press economics reporter Chris Rugaber.

The AP article was picked up by, among others, USA Today, NBC News, The Huffington Post, timesunion.com, The Washington Post, New York Post, ABC News and The Los Angeles Times.

Americans will add $1.5 trillion to $2 trillion to their net worth in the current July-September quarter, Hampel told AP. That would bring their net worth to about 4.3% below its pre-recession peak, he added.

"We're not there yet, but we're getting close," Hampel said. "Households are rebuilding their capacity to spend."

An increase in wealth could provide many consumers and businesses with the confidence and wherewithal to rachet up their spending, which would bolster U.S. economic growth and job creation, Rugaber wrote.

"That's a key goal of the bond-buying plan the Federal Reserve unveiled last week," he added. "The Fed hopes to drive interest rates down and stock prices up."

To read the article, use the link.

NCUF calls for proposals to CFSI Fund

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MADISON, Wis. (9/24/12)--The National Credit Union Foundation (NCUF) says credit unions can submit grant proposals to the Financial Capability Innovation Fund II (FCIF II), an initiative led by the Center for Financial Services Innovation (CFSI), which helps underserved consumers.

FCIF II will provide financial and technical assistance to nonprofit-led initiatives that promote financial capability among low-income and underserved consumers. Credit unions can submit applications in response to CFSI's Request for Proposals, which outlines the competitive process for distribution of $2.5 million of grant funding.

NCUF's board voted to refresh its annual grant program to make a bigger impact with its philanthropy. Instead of making a number of smaller grants for different projects, NCUF will make one large grant to a single project with national reach and relevance to the credit union system. NCUF is working with CFSI to find and fund a project that not only promotes financial capability among low-income consumers, but also has significant impact to the credit union movement.

"CFSI receives a plethora of groundbreaking proposals, and we want to elevate the number of ideas proposed by our community," said Bucky Sebastian, NCUF executive director. NCUF hopes a significant number of proposals will stem from credit unions, working on their own or with other organizations. "There is a strong connection between the member-centric, community-based mission of credit unions and the goals of CFSI and the Financial Capability Innovation Fund II."

Since CFSI's inception in 2004, it has provided $3.75 million in grants to support 16 strategies to improve access to high-quality financial products and services and consumers' financial capability.

"Credit unions are well-positioned to apply to the fund given the focus on projects that couple new or improved tools for education, guidance, or advice with well-designed financial products," said Sarah Gordon, CFSI vice president, advisory services and nonprofit investments.

Some examples of recent CFSI funded projects include:

  • PiggyMojo, a New York-based start-up, which is partnering with financial institutions to develop a tool to help low-income couples capitalize on "impulse savings" moments by using their mobile phone. By sending text messages, customers can move money from their prepaid card to a savings account whenever they decide to spend less.
  • Co-Opportunity Inc., a financial coaching and counseling program based in Connecticut. It is developing an online platform, MyBudgetCoach.org, to help volunteer budget coaches coordinate with their clients. By using technology in the online channel, the coaches can serve more clients.
  • Filene Research Institute, which is conducting the Lower Interest for Timeliness (LIFT) program. It offers reductions in annual percentage rates on subprime auto loans for borrowers who make on-time payments. Several of Filene's partnering credit unions will implement the program nationwide.
 

CFSI's Request for Proposals document details its funding criteria very clearly, Sebastian said. "One key component is that the project must 'break new ground,' meaning that it represents a new or improved model in the nonprofit field or financial services industry for promoting financial capability."

For more information, use the link.

Credit unions with 501(c)(3) affiliates can apply and other credit unions can apply in partnership with a 501(c)(3) organization.  Grant applicants should complete and send proposals to CFSI, not NCUF. The deadline to submit proposals is Nov. 2.  For inquiries about CFSI's Request for Proposals, send an e-mail to questions@cfsinnovation.com.

Members have spoken Tech CU wont convert to bank

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SAN JOSE, Calif. (9/24/12)--Technology CU will continue to operate as a credit union. Members of the San Jose, Calif.-based credit union voted last week against converting the $1.5 billion asset credit union into a mutual savings bank.

"Our members have voted and overwhelmingly indicated their preference to remain a credit union," said Barbara Kamm, president/CEO of Tech CU. "We respect this decision and appreciate that so many of our members weighed in on this important vote. Providing the highest level of service for members will continue to be our top priority--and we will do so under our credit union charter."

The credit union has 69,000 members. Roughly 25% of eligible members cast votes, with nearly 77% of the votes against the conversion.

Tech CU Board Chairman Mical Brenzel noted that the responsibility of its board and management "is to consider all strategic alternatives that may be in the best interest of Tech CU and our membership as a whole." He said the proposal to convert came out of a study of trends in the industry regarding the "tremendous increase in share insurance assessments" by regulators and the "continued reluctance of Congress to expand credit union lending powers." He said the board concluded that it would receive lower assessments from the banks' regulator, the Federal Deposit Insurance Corp.

"Members at the special meeting voiced frustration, saying we did not make a compelling case for charter change," said Kamm. She said the credit union was unable to communicate its view effectively because of rules that govern how credit unions can communicate about charter change with their members.

The National Credit Union Administration's (NCUA)  rules outline disclosure and voting procedures, plus procedures to facilitate communications among members and for members to provide their comments to directors before the credit union board votes on a conversion plan.

NCUA updated its rules in 2006 to require directors adopting a conversion proposal to determine that the conversion is in the best interest of members and that directors sign a document certifying that they have fulfilled their fiduciary duty to members in pursuing a conversion (News Now Dec. 14, 2006).

The rule also requires that boxed disclosures regarding the conversion be included in all related mailings distributed 30, 60, and 90 days before a membership vote. Boxed disclosures must include:

  • What a "yes" or "no" vote means in terms of the wording on the ballots; and
  • The effect of a conversion on the credit union member in terms of the loss of beneficial savings and loan rates and charges for services when average credit union products and services are compared with those of other financial institutions.
Both NCUA and the Credit Union National Association (CUNA)  have maintained that bank charters won't benefit members (News Now May 9, 2012, and Oct. 4, 2011). CUNA also has said that ultimately the decision to convert to a bank must be made by members of the credit union who own the institution based on all the facts provided with complete transparency. Check CUNA's Principles on Credit Union to Bank Conversions by using the link.

Technology CU has served the high tech work force in Silicon Valley for 50 years.

"We recognize our members' strong commitment to the credit union industry, and we dedicate ourselves to working within the credit union charter to ensure that Tech CU continues to perform safely, securely, and successfully in the future," said Brenzel. "Our members have spoken, and we look forward to the future as we remain a very successful credit union."

Gov. Shumlin meets with Vermont CUs

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COLCHESTER, Vt. (9/24/12)--
Vermont Gov. Peter Shumlin (center) greets some of the 25 credit union leaders who met with him Tuesday during an event hosted at the new Colchester office of the Association of Vermont Credit Unions.  (Photo provided by the Association of Vermont Credit Unions)
Vermont Gov. Peter Shumlin met Tuesday with about 25 credit union leaders from around the state at an event hosted at the Association of Vermont Credit Unions' (AVCU) new Colchester office.

The event was an opportunity for the governor to meet some of the people responsible for providing credit union services to nearly one out of every two Vermonters, AVCU said (Newslines Express Sept. 21).

Shumlin, a credit union member, expressed his support for the continued tax exempt status of credit unions and for their desire to provide increased business lending to the state's small business community, said AVCU.  He also commented on the increased importance of Vermont's local credit unions in light of bank consolidation and out-of-state decision making.

"Gov. Shumlin was a supporter of credit unions when he served in the state Senate," said Joe Bergeron, AVCU president. " In his first four years as Vermont's chief administrator, he has continued to recognize their important contribution to the state's economy and to Vermont consumers," he added.

Shumlin also updated credit union leaders on the favorable Vermont economy and unemployment situation, the continued Irene recovery, the needs of small business, and his reasons for continuing to pursue changes in the state's healthcare system.

Avoid disaster within disaster--lessons from CMG

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MADISON, Wis. (9/24/12)--Three lessons have been gleaned by CUNA Mutual Group's claims specialists and Disaster Response Team over the years from credit unions that have handled disasters better than others.

John Wallace, CUNA Mutual group vice president of commercial products, is offering advice to help others avoid "disaster within a disaster." CUNA Mutual said the advice relates to September's designation as National Preparedness Month by the Federal Emergency Management Agency (FEMA).

Review and update your insurance coverage, including extra expense coverage, said Wallace. "Understand what your insurance does and doesn't cover. If your policy doesn't provide 100% replacement value for property, be sure the credit union is prepared for the co-pay. Also, take into account any property improvements made since the last time you updated your policy limits."

Wallace also advises looking closely at coverage limits for extra expenses involved in providing member service during disaster recovery. It's difficult to over-estimate what it will cost to run a credit union when a branch or main office has been damaged or destroyed. Having adequate "Extra Expense" and other coverage limits for buildings, business personal property and data processing can be the major factor in how quickly and completely a credit union recovers from severe damage and the indirect losses.

Practice your disaster response plan, Wallace said. The National Credit Union Administration requires credit unions to have a written plan for disaster recovery, but if employees have never seen and practiced implementing the plan, chances are it won't work when disaster strikes.

"Having all employees read through and practice the plan helps you find bugs and work them out. And it's important for all employees to be aware of the plan because, in an emergency, any one of them may end up having to make quick, important decisions," he said.

Set up an emergency communications procedure. "When a disaster occurs and your insurance provider has been informed, your top priority should be communicating with employees to see who's available [and] who needs help, and to share the plan for restoring service," Wallace said.

Employees must know how to get in touch with the credit union in these situations. Every employee should have a "cheat sheet" with them or at home detailing first steps to take.  The cheat sheet should provide alternate locations designated for temporary branch service and include phone numbers and e-mails to use if phones or Internet service are available.

If phone or Internet service is unreliable, add "phone trees" to employees' cheat sheets that include the names and contact information of several other employees. Instruct employees to call each person on their list--they may get through to one co-worker who in turn has found someone else, and so on. "Word about who's available, who might need assistance, and what to do next can spread surprisingly fast this way," Wallace said.

Also consider setting up an agreement with your state league to provide a toll-free number for employees to call in a disaster situation.

CUNA Mutual Group provides resources to assist with disaster preparedness on its website. The page includes links to:

  • An Extra Expense calculator to help determine whether your credit union is adequately insured;
  • Disaster preparedness risk assessment tool;
  • Property and Business Liability product sheet;
  • Information on CUNA Mutual's Disaster Response Team; and
  • U.S. Government disaster preparedness websites.
Additional information for policyholders can also be found in CUNA Mutual Group's online Protection Resource Center. Use the link.