News Now Archive

Filed on April 8, 2004, published the first business day after.

• Inside Washington
• Consumer groups: Preserve CU tax status
• Report: Sen. Shelby against taxing CUs
• Dollar’s final NCUA board meeting on Thursday
• NCUA: Review safekeeping practices
• Eakes testifies at Senate hearing
• Low-income CUs encouraged to apply for grants
• CU System briefs
• Vermont parity bill still in commerce committee
• Three leagues combat ID theft with programs
• College students' expectations too optimistic
• Study: Member loyalty tied to debit card use
• Maine CUs in state's first financial fitness event
• WOCCU, Missouri CUs partner with Barbados league
• Missouri’s 180th CU receives charter
• Market News
• News of the Competition
• Consumer brief
• DigitalMailer, Cavion Plus launch single sign-on
• WOCCU chairman notes growth of China's CUs

Inside Washington

• WASHINGTON (4/9/04)--The Federal Deposit Insurance Corp. (FDIC) is considering a rule change that could drive banks out of the business of offering stored-value cards. Bankers have been staking out a small but growing portion of the gift-card market usually associated with retailers, doing $3 billion worth of business last year, a sum could grow to $31 billion by 2007. But regulators are considering a rule that would largely consider the funds that back gift cards and other stored-value cards to be deposits, replacing a seven year-old legal opinion that viewed funds from the cards as deposits only in certain cases. An agency spokesman said the review is an attempt to be ready to deal with the funds if a card-issuing bank fails. However, an industry source said the new rule could force banks to comply with a slate of other rules, making the service more costly to offer (American Banker, April 8)...

• WASHINGTON (4/9/04)--The Office of Federal Housing Enterprise Oversight (OFHEO) issued a 28-page proposal to reform some operations at Freddie Mac and Fannie Mae. The changes would require a government-sponsored enterprise (GSE) to separate its chairman and CEO jobs, limit board members to 10 years of service, rotate its audit partners every five years, conduct a full auditor rotation every 10 years, and have its board and committees meet more frequently. The proposal would also require additional rules for the independence of board members, executive compensation based on legal compliance and organizational stability rather than just on the GSE's earnings, and a review of codes of conduct at least every three years. Regarding the proposed separation of chairman and CEO jobs, OFHEO said such a separation could have helped avoid an accounting scandal at Freddie, which forced the GSE to restate three years of earnings (American Banker, April 8)...

• WASHINGTON (4/9/04)--The Federal Reserve Board Wednesday proposed amendments to its Fair Credit Reporting Act (FCRA) regulations. The change would add a model form that all financial institutions could use if they give out negative information on customers to consumer reporting agencies. Under the Fair and Accurate Credit Transactions Act (FACT Act) amendments to the FCRA, the Fed was required to publish a concise, no more than 30-word form that financial institutions may use to comply with the notice requirement. A final model form must be issued by June 4 this year (American Banker, April 8)...

Consumer groups: Preserve CU tax status

WASHINGTON (4/9/04)--Two large and well-known consumer groups are questioning public statements the chairman of the Federal Deposit Insurance Corp. (FDIC) has made calling for the taxation of the nation's credit unions.

The Consumer Federation of America (CFA) and Consumers Union--publisher of Consumer Reports magazine--joined forces in a letter to FDIC Chairman Donald E. Powell, expressing "deep concern and disappointment" regarding those statements. The groups urged the FDIC head to refrain from any further similar comments.

The consumer advocates said federal and state tax exemptions should be preserved for all credit unions--regardless of size--noting the credit union movement's not-for-profit nature and its history of providing affordable, high-quality financial services.

"The taxation that you have called for would not only significantly weaken the capital position of credit unions, as recently noted by (NCUA) Chairman Dennis Dollar, it would severely limit their ability to serve their members in the future," wrote Stephen Brobeck, executive director of CFA and Janell Duncan, regulatory counsel of Consumers Union.

"The justification for the credit unions' tax status lies in their structure as not-for-profit financial institutions, cooperatively owned by their members. Because of their not-for-profit, cooperative character, credit unions have a history of providing consumers with affordable, high-quality financial services," the groups' letter said.

It continued, "Chairman Powell, we are puzzled as to why you would take a public position on an issue that seems unrelated to your role as a federal regulator and insurer of the U.S. banking system and would in fact work to the detriment of one important component of that system."

CUNA President/CEO Dan Mica Thursday expressed appreciation for the consumer groups' support on the tax issue.

"Consumers get it: Credit unions' tax status lies in their structure as not-for-profit and cooperatively owned financial institution, which are democratically controlled and provide affordable, quality financial services.

"The banks that Mr. Powell supervises may say that a ‘level playing field' is at issue, but we continue to maintain that a level playing field makes sense only if the game is between players of the same species. It is quite clear that the credit unions and banks are different--and that the playing field is already level enough, although perhaps tilted toward the banks."

Resource Links

Statement Stuffer: "Why CUs are tax-exempt"

Report: Sen. Shelby against taxing CUs

WASHINGTON (4/9/04)--Senate Banking Committee Chairman Richard Shelby (R-Ala.) came down squarely against taxing credit unions in a story that appeared yesterday on Dow Jones Newswires.

The article focused mainly on letters CUNA sent earlier this week to Shelby and Federal Deposit Insurance Corp. (FDIC) Chairman Donald Powell. The Powell letter restated CUNA's objections to the FDIC chairman's recent public statements in favor of credit union taxation.

The letter to Shelby rebutted arguments from the America's Community Bankers (ACB) trade group. CUNA pointed out the hypocrisy of ACB's support for rules making it easier for credit unions to convert to banks and its opposition to state statutes encouraging mutual savings bank conversions to stock-owned commercial banks.

But the story also quoted Sen. Shelby's response to a question on credit union taxation posed during a session with reporters that followed a committee hearing on national bank regulation. "I'm not for taxes," Shelby responded. "I'm not for taxing credit unions. You start taxing credit unions, you know who's going to pay the taxes--the members."

Upon seeing the Dow Jones report, CUNA Senior Vice President of Government Affairs John McKechnie underscored the importance of the Senate Banking Committee chairman's comments.

"This is exactly the message we've been communicating to Capitol Hill for the past month since the banking industry ratcheted up its attacks against credit unions," he said. "We are very gratified to see Sen. Shelby so forthrightly state his support of credit unions' tax status and make the key point that any tax on credit unions really is a tax on credit union members."

Dollar’s final NCUA board meeting on Thursday

ALEXANDRIA, Va. (4/9/04)--The NCUA board will meet for what will be Chairman Dennis Dollar's final meeting before he steps down on April 30.

Among the matters to be considered on the light board agenda:

• Quarterly Insurance Fund Report.

• Proposed Rule: Part 705 of NCUA's Rules and Regulations, Community Development Revolving Loan Program for Credit Unions.

• Proposed Rule: Section 701.36 of NCUA's Rules and Regulations, Federal Credit Union Ownership of Fixed Assets.

The monthly meeting is scheduled for 10 a.m. ET at NCUA headquarters in Alexandria, Va.

NCUA: Review safekeeping practices

WASHINGTON (4/9/04)--NCUA Chairman Dennis Dollar sent a letter to all federally insured credit unions that reminded managers to review safekeeping practices to ensure that they provide adequate protection against fraudulent investment schemes and potential losses.

The chairman's letter added the agency view that "state-chartered credit unions could also benefit" by following the same due diligence requirements that apply to federal credit unions.

Dollar noted recent losses suffered by credit unions holding investments with Bentley Financial Services Inc. and Entrust Group. Credit unions with Bentley-related investments incurred losses that may have been avoided with proper due diligence reviews.

The NCUA letter tells credit unions to perform adequate and appropriate due diligence of its prospective safekeepers and to periodically update those reviews to protect against potential fraud or misconduct by the safekeeper and any broker-dealer who may be acting in concert with a safekeeper.

According to the NCUA letter, an appropriate and adequate due diligence review includes:

• A determination that approved safekeepers are regulated by the SEC, or a federal or state depository institution regulatory agency such as the Federal Deposit Insurance Corp., or a state trust company regulatory agency.

• An assessment of the reputation of the safekeepers. The credit union should track and review publicity regarding the safekeeper, both positive and negative.

• Documentation of the capital strength of the safekeeper, showing that the safekeeper generally has substantially more capital than the amount of investment it holds for the credit union.

• The execution of a written custodial agreement with the safekeeper before any transactions take place. A credit union should make certain it enters into an "institutional" agreement and not a "retail" agreement, which could allow the custodian to use the retail customer's securities for other activities without notification.

• A review of monthly safekeeping statements, which are reconciled to the credit unions records.

CUNA's Mary Dunn, senior vice president and associate general counsel, said Thursday, "This letter is consistent with NCUA's risk management approach to examinations and with credit unions' ongoing responsibilities to perform due diligence when dealing with third parties such as broker/dealers."

Use the resource link to access NCUA's complete letter.

Resource Links

NCUA letters to credit unions

Eakes testifies at Senate hearing

WASHINGTON (4/9/04)--Martin Eakes, CEO of the Center for Responsible Lending and Self-Help, Durham, N.C., testified against the Office of the Comptroller of the Currency's (OCC) preemption of state consumer protection rules and state enforcement actions.

In his testimony before the Senate Committee on Banking, Housing and Urban Affairs, Eakes said the OCC's preemption issued in February "rolls back state legislation that has curbed abusive lending practices while preserving access to credit."

"The OCC's action will undermine creative efforts by states to protect their citizens from evolving financial abuses," Eakes told the committee. He added that the OCC's action has sought to replace state efforts "at a catastrophic cost to American homeowners."

Eakes warned that the federal preemption will make the national bank charter a safe haven for predatory lenders, and "blatantly ignores" congressional directives to refrain from interfering with states' efforts to protect borrowers from abusive lending practices unless the federal policy interest is clear and the legal basis is compelling.

Comptroller of the Currency John D. Hawke, Jr. appeared before the panel to defend his rule.

"The rule is based on well-established principles that the states do not have the constitutional authority to limit or condition the exercise of powers that Congress has conferred on the instrumentalities it creates, and that a state law cannot apply to a national bank if it ‘obstructs, impairs, or conditions' the bank's ability to exercise those powers--unless Congress has provided that the state law should apply."

However, the OCC rule also came under attack in a resolution Sen. John Edwards (D-N.C.) offered the same day as the Banking Committee hearing. The resolution says "Congress disapproves the rule...and such rule shall have no force or effect," according to the American Banker (April 8).

The Banker story notes the lead Democrat of the Banking Committee, Sen. Paul Sarbanes of Maryland, urged the regulator to scrap the preemption plan saying it was "at best, misguided and, at worst, a blatant attempt to increase the power of the OCC at the expense of homeowners, the sovereignty of states, and the intent of Congress." It adds that a similar effort may be under way in the House.

Low-income CUs encouraged to apply for grants

WASHINGTON (4/9/04)--The NCUA has made $350,000 available to low-income designated credit unions interested in providing members financial education assistance, homeownership assistance, or in providing training assistance for credit union officials and staff.

The funds will be available to credit unions through three new technical assistance grant {TAG) programs. The NCUA encouraged low-income credit unions to apply for the grant funding to cover the operational and administrative costs associated with starting or maintaining member assistance programs.

The $350,000 will go into the following three programs:

• The Financial Education Assistance Program which is intended to help credit unions provide members and potential members with practical money management skills and an introduction to financial planning. NCUA said $100,000 is allocated to this program, with an expected average grant of $7,500 per credit union.

• The Homeownership Assistance Program to implement or augment a mortgage lending program to members who also work with NeighborWorks Organizations which is the community development organization network of the Neighborhood Reinvestment Corp. $150,000 is allocated to this program.

• NCUA established the Officers and Staff Training Assistance Program to cover tuition and travel costs associated with recognized training courses. NCUA allotted $100,000 to this program, with individual awards not expected to exceed $20,000.

The agency also encouraged eligible credit unions to apply for low-interest loans of up to $300,000 as seed money for mortgage loans.

CU System briefs

• NASHVILLE, Tenn. (4/9/04)--Volunteer Corporate CU, Nashville, Tenn., has joined with Loomis Fargo & CO. to offer a new cash system for ordering and shipping of currency and coin to member credit unions. VolCorp offers members the ability to order currency based on individual cash requirement with no set-minimum order. Credit unions also will be able to order cash multiple days of the week with next-day and same-day deliveries available ...

• SALT LAKE CITY (4/9/04)--Third District Judge Frank Noel allowed Consumer Credit Counseling Service of Utah's CEO Scott McCagno to return to work Wednesday (The Salt Lake Tribune April 8). Last week, the Utah Division of Consumer Protection had seized CCS, frozen its bank accounts and removed McCagno from his leadership position. The division alleged that more than $64,000 in client funds was missing from a trust account. In lifting a previous court order, Noel said investigators failed to bring forth adequate evidence that proved clients were being harmed. CCS has not been affiliated with the National Foundation for Credit Counseling since February and lost its accreditation with the Council on Accreditation (Deseret News April 8) ...

• DUBLIN, Ohio (4/9/04)--CU of Ohio and BMI FCU, both in Columbus, have formed a shared branch partnership that is the first of its kind in the state, says CU of Ohio President/CEO Susan Birkhimer. Within CU of Ohio's Grove City office, BMI FCU members not only will be able to use the shared branching services but they also will be able to visit with a BMI FCU representative on site. The Grove City office is scheduled to open in mid-April (eLeaguer April 7) ...

• SAN ANTONIO and UNIVERSAL CITY, Texas (4/9/04)--Randolph-Brooks FCU, Universal City, Texas, and Firstmark CU, San Antonio, announced a shared ATM agreement, effective April 1. Members from both credit unions will be able to access their funds at 50 ATM locations across the state. The agreement provides expanded, surcharge-free access to nearly 300,000 members ...

• TIVERTON, R.I. (4/9/04)--John F. Carey, former police officer and detective, died April 4. He was 78. Carey was director and former treasurer of the Fall River (Mass.) Municipal Employees CU. He is survived by two daughters and five grandchildren (The Patriot Ledger April 5) ...

• POQUOSON, Va. (4/9/04)--Frank B. Thieme, former advertising director for The Daily Press, Hampton, Va., died April 4. He was 87. Thieme served as president of the Peninsula Newspapers CU (The Daily Press April 6) ...

Vermont parity bill still in commerce committee

MONTPELIER, Vt. (4/9/04)--The House Commerce Committee did not complete markup on the Vermont credit union modernization bill Wednesday, and with today's Good Friday holiday, discussion has been pushed to next Wednesday as well.

Vermont CU League President Joe Bergeron said the Department of Banking, Insurance, Securities and Health Care Administration (BISHCA) modernization bill was scheduled to be taken up today, but with legislative attendance slim because of the holiday, discussion was set for next week.

Items that have been approved for inclusion in the draft--but still subject to debate and discussion--are:

• Investments by credit unions in credit union service organizations (CUSOs);
• Longer time-frame to notify members of annual special meetings; and
• Ability for Vermont credit unions to maintain multiple kinds of fields of membership (SEG and community, for instance).

Bergeron said some of the issues remaining are business lending, which faces "substantial debate", and replacing "rural" with "geographic area" when defining field of membership areas.

Statistically, Vermont is "rural," but the designation is viewed as vague when applied to field of membership definitions. The proposed description would include "community, neighborhood or geographic area."

"Anything else is fair game as well," he said.

Gov. James Douglas supports the passage of the bill, which is a 150-page rewrite of Vermont's credit union statutes.

Last week, the National Cooperative Business Association gave the bill its backing by issuing a "call to action" to support the measure.

Three leagues combat ID theft with programs

MADISON, Wis. (4/9/04)--Identity theft and fraud are two key concerns of credit unions, and three leagues have stepped forward with programs to help credit unions protect their members--and themselves.

The Texas CU League (TCUL) has launched the Loss Avoidance Alert System (LAAS). LAAS provides a network to share timely, updated information on fraudulent or criminal activity aimed at financial institutions and consumers (LoneStar Leaguer April 8).

LAAS is a combined effort of the Southwest Automated Clearing House Association, the Independent Bankers Association of Texas, Community Bankers Association of Oklahoma, and Texas Savings and Community Bankers Association.

More than 1,200 financial institutions, including 600-plus credit unions in Texas, can take advantage of the program. TCUL Senior Vice President Mark Chatfield said one of LAAS' advantages is the wide acceptance and use of the program by 360 law enforcement agencies across the state.

Attendees at the TCUL annual meeting and conference April 22 can learn more by visiting the LAAS booth.

Meanwhile, the North Carolina CU League (NCCUL) has responded to credit unions' requests for help with identity theft. The Risk Management Council was organized in January to provide resources to risk management officers across the state.

The council enables credit unions to share information and build relationships with law enforcement agencies.

A main feature is an opt-in e-mail service that alerts credit unions across the state about fraud incidents. "This is a powerful real-time tool that allows our credit union partners to quickly share information about attempted identity theft and other forms of fraud," said Kimberly Bohannon, NCCUL assistant vice president for regulatory/compliance services.

Thirty Ohio credit unions were quick to sign up for the FinCrime.com service from the Ohio CU League (OCUL). FinCrime.com is an online tool to help prevent check fraud, counterfeit checks, identity fraud, robberies, new account fraud and more.

OCUL, the Ohio Bankers League and the Ohio Attorney General are sponsoring FinCrime.com, which is active in Ohio and 11 other states, according to the league's eLeaguer (April 7).

Financial institutions share information online regarding recently committed or attempted crimes. FinCrime.com automatically searches and cross-matches reported crimes and alerts all those involved. The cross-matching also allows law enforcement agencies to identify potential perpetrators of multi-institution crimes.

FinCrime.com will be featured at the Ohio CU System's Expo Hall April 22-23.

Resource Links

Security & Fraud: Update

Security & Fraud: Introduction

Webinar: Identity Theft & Fraud

STAR: Preventing Fraud

Statement Stuffer: ID Theft: How to Prevent It and How to Get Over It

College students' expectations too optimistic

LYNCHBURG, Va. (4/9/04)--A recent online Harris Interactive survey revealing that the nation's 5.6 million college students may be overly optimistic about their financial future illustrates what credit unions have known for years: that effective financial education starting at an early age is critical, says the Virginia CU League.

As part of its activities during the National Financial Literacy Month, the league is educating the public about the survey of 1,000 college juniors and seniors, conducted by Citibank Credit-ED. It found:

• Roughly 61% of upperclassmen expect to work full time within three months of graduation;
• Forty-five percent expect to earn an annual salary of $30,000 or more right after graduation, with 21% expecting to make $40,000 or more;
• Thirty-five percent believe they will achieve financial security (affording the lifestyle they want with little debt) within three years of graduation; and
• Fifty-nine percent expect to have no credit card debt when they graduate and no credit card debt a year after graduation.

Although the study found that college students know the importance of good credit habits, many fail to apply this knowledge. The league is offering a "reality check" from the Federal Reserve and National Bankruptcy Institute:

• In 2000, credit card issuers mailed 3.54 billion solicitations to consumers--an average three credit card offers per month per household;
• More young people filed for bankruptcy than graduated from college in 2001;
• Sixty percent of American households carry over a portion of their credit card debt every month; the average balance is more than $4,000;
• More than 70% of college undergraduates have credit cards; most have multiple cards with an average total balance of $2,748, and 20% who carry balances have debts of more than $10,000; and
• Ninety-five percent of college graduate students have cards; each has an average of four cards with an average total balance of $4,776.

According to a recent 2003 Virginia CU League Financial Literacy Survey, credit unions in Virginia and the District of Columbia have made more than 200 presentations to student groups during the 2002-2003 school year and have reached more than 4,500 students. During National CU Youth Week (April 18-24), credit unions will conduct a variety of events aimed at educating youth about managing their finances.

Resource Links

National Youth Savings Challenge

National CU Youth Week

Study: Member loyalty tied to debit card use

OAKBROOK TERRACE, Ill. (4/9/04)--A new study shows that member loyalty is higher among credit union members who use debit cards than those who don't.

Thirty-five percent of households with a checking account and debit card with a credit union would give the credit union all or most of their future loan business, says the study, conducted by Raddon Financial Group (RFG), a research and marketing group based in Oakbrook Terrace, Ill.

This compares with 30% of households with a checking account but no debit card, and 24% of households without a checking account at the credit union.

Of households with both a checking account and debit card with a credit union, 44% would give all or most of their deposit business to the credit union. This compares to 38% of households with a checking account but no debit card and 19% of households without checking.

"The data suggest that credit unions have another weapon other than price in their arsenal to create a greater affinity with members," says Bob O'Meara, vice president and director of research at RFG.

The results came from RFG's CEO Member Survey and is based on 169,619 responses.

Resource Links

Statement Stuffer: Cash Cards Teach Money Management

Maine CUs in state's first financial fitness event

AUBURN, Maine (4/9/04)--Maine's credit unions gave the minds of 150 high school juniors a workout on money management at the state's first Financial Fitness Money Management Experience Event Wednesday.

Fifty volunteers from credit unions and other organizations taught students from six highs schools in the Lewiston/Auburn area during the three-hour event at the central Maine Community College in Auburn. The "game of life" helps educate teens about money management and highlights the leadership role of Maine's credit unions in promoting youth financial education. Students received a scenario packet of their life at age 22, including occupations, income and credit history. They then mapped out their financial future from financing to housing to purchasing food and clothing. They visited 11 booths manned by the volunteers acting as their coaches to assist them.

"The junior year is an opportune time to start learning real-life financial responsibility," explained Jon Paradise, governmental and public affairs manager at the Maine CU League. Paradise served as master of ceremonies for the event. "They are in the process of planning their future, whether they decide to apply to go to college or to get a job after graduation, and it is critical that they gain a strong understanding of money and how to spend and save. This event was about helping teenagers realize that the financial decisions they make now can affect their futures."

Paradise said Maine's credit unions plan to hold the event in multiple locations throughout the state next year. Among those coordinating the event were the Norm Nolette Chapter of CUs, the league, the Maine Council on Economic Education and the college. The event kicked off a month of activities. Gov. John Baldacci has proclaimed April as "Financial Literacy for Youth Month."

Scott Harriman, right, president/CEO of Cumberland County Teachers FCU, provides advice on spending plans to a student at Maine credit unions' Financial Fitness Money Management Experience at Central Maine Community College, Auburn. Harriman was one of 50 volunteers at the pilot event. (Photo provided by the Maine CU League)

WOCCU, Missouri CUs partner with Barbados league

JEFFERSON CITY, Mo. (4/9/04)--The Missouri CU Association (MCUA) and the World Council of CUs Inc. (WOCCU) will provide assistance and leadership to the Barbados CU League with a new partnership announced March 29.

MCUA President/CEO Rosie Holub said, "We were asked by the World Council to explore ways to share our expertise and assist the Barbados league with its operational and technological challenges.

"Our support is expertise and assistance to a credit union system in an underdeveloped country." (CourierNet April 7)

Barbados' 39 credit unions have the third-highest rate of membership penetration worldwide with more than 50% of the nation's citizens as credit union members.

With total deposits increasing 255% in the past four years, Barbados credit unions are having difficulty meeting the technological challenges to better serve their members.

"No credit unions provide debit cards or checking services to members, although they are permitted by law to do so," Holub said. "And only one credit union provides a credit card program that is supported by a local bank."

A Missouri credit union team, coordinated by WOCCU, will visit the Barbados league within the next few months. Barbados representatives then will travel to Missouri.

Resource Links

World Council of CUs Inc.

Missouri’s 180th CU receives charter

JEFFERSON CITY, Mo. (4/9/04)--Table Rock FCU, Missouri's 180th credit union, received its charter from the NCUA April 1.

The community-chartered credit union, located in Shell Knob, will serve Barry and Stone counties in southwest Missouri.

Ninety-year-old founder Howard McIlrath is a former banker who helped start two of Shell Knob's community banks (CourierNet April 7). After his retirement, he was approached by Shell Knob residents who felt they weren't being served by local banks. The solution? Open a credit union.

"This area truly is underserved, and Table Rock Federal is filling that void for members," said Missouri CU Association President/CEO Rosie Holub.

The credit union will be open for business April 19 with an official grand opening scheduled for May.

Market News

MADISON, Wis. (4/9/04)

• Jobless claims fell to a three-year low last week, signaling a long-awaited rebound in the labor market. Initial claims for unemployment insurance declined by 14,000 during the week ending April 3 to 328,000--the lowest level since 320,000 in the week ended Jan. 13, 2001, just before President Bush took office, according to the Labor Department. Jobless claims have averaged 349,700 so far this year--compared with 402,100 for all of 2003. In another hopeful sign, the number of people continuing to collect unemployment benefits declined by 40,000 during the week ending March 27 to 3.01 million--the lowest level since July 2001. The data on jobless claims suggest that last week's employment report wasn't a fluke. The Labor Department said the economy created 308,000 new jobs in March--the largest gain in four years. However, the apparent improvement in the labor market suggests the Federal Reserve may soon reassess its accommodative interest-rate policy (Bloomberg.com and Economy.com April 8) ...

• International Business Machines Corp. (IBM) has agreed to acquire Daksh, the third-largest back-office services firm in India. Indian outsourcing firms such as Daksh offer a business model based on low wages and operating costs. In recent years U.S. firms such as IBM have launched Indian operations to provide outsourced software development and back-office services to their clients. The purchase of Daksh, the largest acquisition on record in India's robust $3.5 billion outsourcing sector, will give IBM access to the firm's 6,000 employees, who provide call center services to such clients as Citibank and Amazon.com. IBM already employs 9,000 people in software, services and back-office work in India. Outsourcing is thriving in India because of its large English-speaking population and its low wages (Reuters and Associated Press April 7). ...

• The Communications Workers of America, the union representing 100,000 employees at SBC Communications, gave the firm a 30-day notice about a possible strike (Reuters via The New York Times April 8). The union said its members will vote on whether to strike, with the results due April 29. The union agreed to the 30-day notice in return for SBC, the nation's second-largest telephone company, agreeing to maintain workers' health benefits if they do strike. Company spokesman Walt Sharp said SBC expects to reach an agreement with the union without a strike but has contingency plans if a work stoppage does occur. The two sides have disagreed about health-care benefits and job security. SBC has said that since 1999 its health-care costs have surged more than 10% annually. SBC is proposing some increases in copayments for its workers but not monthly premiums. In its annual report, the company said it is boosting health-care costs for some of its retirees to lower expenses ...

• Consumers increased their debt loads at a slower pace in February, the Federal Reserve reported Wednesday. Consumer credit outstanding, which excludes mortgage debt, rose by $4.2 billion at a 2.5% annual pace--compared with a $15.8 billion increase at a 9.5% pace in January. The consumer credit increase was much smaller than the $7.4 billion gain Wall Street analysts expected. As in recent months, nonrevolving credit (which includes such items as auto loans and loans for mobile homes, education, vacations, and boats) posted a larger increase than revolving debt (which includes credit card, retail, and bank-card borrowing). Nonrevolving credit rose by $2.6 billion, compared with a $1.6 billion gain for revolving debt. Low auto-loan rates helped buoy growth in nonrevolving credit. The average rate from the finance units of the Big Three U.S. automakers fell to 3% in February from 3.20% in January (Dow Jones Newswires and Reuters April 7) ...

• Most consumers plan to spend their tax refunds this year, according to the Cambridge Consumer Credit Index (Dow Jones Newswires April 7). The survey found that 68% of those receiving a tax refund plan to use the money to purchase everyday items or pay down bills--up from 59% last year. Just 23% expect to put the money in their bank account--down from 27%--while only 4% plan to invest the money in stocks, bonds and mutual funds. "While the results indicate good news for the economy in the short term, they also indicate a more worrisome trend that an increasing number of Americans are relying on their tax refunds for everyday purchases and paying bills" said Jordan Goodman, a spokesperson and financial analyst for the index. Of those owing money to the government, 74% said they expect to pay for it from their checking or savings funds--down from 82%--while 7% plan to take out a bank loan--up from 4% last year ...

• Three former Computer Associates executives are expected to plead guilty in Federal District Court in Brooklyn to charges related to the firm's accounting practices, according to people familiar with the investigation (The New York Times April 8). The charges include obstruction of justice and securities fraud. The three former executives are Ira H. Zar, former chief financial officer; David Rivard, a former vice president of finance; and David Kaplan, a former senior vice president. Federal prosecutors in Brooklyn and the Securities and Exchange Commission launched an investigation in late 2001 into whether the company, which dominates the market for mainframe utility software, used accounting tricks to inflate its sales and earnings during the late 1990s ...

News of the Competition

MADISON, Wis. (4/9/04)

• Bank of Mexico Gov. Guillermo Ortiz has again called for the nation's banking industry--which is dominated by foreign banks--to lower fees and boost lending to stimulate economic growth. He first raised the issue at an annual bankers convention in Acapulco last month. Ortiz repeated the request in testimony to the Mexican Senate last week. Mexican lawmakers have proposed legislation to increase control of foreign-owned banks. Global powers such as New York-based Citigroup, Bank of America, Spain's Santander Central Hispano and the U.K.'s HSBC Holdings control 85% of Mexican local banking assets--the highest ratio of foreign ownership in Latin America. Some public officials say the banks have betrayed the public trust by raking in huge profits while failing to lend to individual borrowers and small businesses (American Banker Online April 8 and The Wall Street Journal Online March 17) ...

• French bank Paribas BNP announced Wednesday that it has fired Edward V. Canale, head of its asset workout unit in New York, after Manhattan District Attorney Robert Morgenthau launched an investigation of possible improper banking practices at the unit (Bloomberg News via The New York Times April 8). The asset workout unit handles securities of distressed and bankrupt companies. In an e-mail statement BNP said, "The bank is a victim of the conduct of what we understand to be two employees whose activities were initially identified through the bank's own internal control process." Last month Paris-based BNP agreed to acquire Fargo, N.D.-based Community First Bankshares. The French banking giant also owns the BancWest Corp. of California ...

• Cincinnati-based Fifth Third Bancorp announced Wednesday that federal and state regulators have ended the special oversight of the firm that began in March 2003 (Associated Press April 7). The oversight began when regulators discovered problems with the bank's internal accounting procedures. The Federal Reserve Bank of Cleveland and the Ohio Department of Commerce required independent third-party reviews and submission of written plans in such areas as internal auditing, account reconciliation, information technology and strategic planning. The end of oversight will give the company more freedom to pursue its business, possibly including another merger. Fifth Third aggressively pursued acquisitions in recent years to expand its territory in Indiana, Illinois, Michigan and Florida ...

• First Data Chairman and CEO Charles T. Fote acknowledged in a telephone interview Wednesday that cleaning up the aftermath of the firm's accidental overcharging of 800,000 credit and debit card transactions at Wal-Mart Stores March 31 was more difficult for debit card issuers than credit card issuers and more painful for some debit banks than others (American Banker Online April 8). He said "the debit transactions are the real irritation," because they are debited quickly, and some banks had to enter charge reversals by hand. Fote said the overcharging errors were a result of both computer and human error. John Postle, manager of Jack Henry's PassPort EFT switch, said the system doesn't automatically process reversals, and that there's no way to spot whether the transactions are duplicates. He said the company is considering a change that would "eliminate the manual effort" by creating a file for financial institutions to review before transactions are posted. Postle said the Wal-Mart glitch affected hundreds of his unit's bank and credit union customers ...

• Goldman Sachs has been named in a purported class-action suit that claims the firm bought 30-year bonds and futures ahead of the Treasury's refunding announcement Oct. 31, 2001, based on nonpublic information, according to the firm's quarterly report to the Securities and Exchange Commission (Dow Jones Newswires April 6). The suit, filed on behalf of holders of short positions in 30-year Treasury futures and options on the morning of Oct. 31, 2001, claims such purchases by Goldman boosted the cost of covering short positions. The suit alleges violations of federal commodities and antitrust laws and Illinois statutory and common law. It also names as defendants a Washington consultant who allegedly was the information source, a former economist at Goldman who allegedly received the information, and another firm and one of its employees who also allegedly received and traded on the information ...

• HomeBanc Mortgage Corp. said the Department of Housing and Urban Development (HUD) is investigating its marketing alliances with real estate brokers and home builders for possible violations of referral-fee bans (American Banker Online April 8). Real estate investment trust HomeBanc Corp., HomeBanc Mortgage's newly formed parent, plans to go public. In its preliminary registration filing with the Securities and Exchange Commission in March, the firm disclosed a March 17 letter from HUD requesting information about the arrangements. HomeBanc said it believes its alliances are in compliance with the Real Estate Settlement Procedures Act. "Our strategic marketing alliance agreements provide flat monthly fees to realtors and homebuilders for the rental of space and the performance of services." ...

Consumer brief

• WASHINGTON (4/9/04)--Should you save in your 401(k) or prepay your mortgage? Experts agree: Your 401(k) wins, hands down. The typical 401(k) plan adds an additional 50 cents to your account for every dollar you contribute, up to around 6% of your salary. You'd be foolish to pass up free money. Also, 100% of the cash you contribute to your 401(k) reduces your taxable income. On the other hand, mortgage prepayments are 100% nondeductible because they apply only to principal. Saving in a 401(k) produces a healthier portfolio because your investments are more diversified (Kiplinger's March 2004)...

DigitalMailer, Cavion Plus launch single sign-on

HERNDON, Va. (4/9/04)--DigitalMailer and Cavion Plus have collaborated to launch a single sign-on interface between DigitalMailer's e-Statement and Cavion Plus Internet Banking.

The first two credit union clients to use this feature are CitizensFirst CU, Oshkosh, Wis., and Standard Register FCU, Dayton, Ohio.

The secure single sign-on interface allows credit union members to access their electronic banking statements through the Cavion Plus Internet Banking application without having to re-enter a user ID and password.

Along with the new feature, credit union members can still access their electronic statements from the credit union's website or from a link in their monthly e-mail notifications.

WOCCU chairman notes growth of China's CUs

MADISON, Wis. (4/9/04)--The CU League of the Republic of China (CULROC) conducted its Annual General Meeting with World Council of CUs Inc. (WOCCU) Chairman L.R. (Bobby) McVeigh addressing the growth of credit unions in China.

Attendees included Charles Yip, president of the Asian Confederation of CUs (ACCU), and Wallis Pelin, president of CULROC.

CULROC consists of 345 credit unions representing more than 188,000 members and assets exceeding US$810 million.

McVeigh noted the important role credit unions play in the Republic of China in promoting financial stability in the region and their ability to ease the burden of growing international tension. He applauded CULROC leaders' cooperative efforts in seeking safe and sound financial services for people without access to these services.

He also thanked Wallis for his initiative in creating a project to strengthen the connection between volunteerism and social commitment to compel the government to recognize their importance to the credit union movement. The league deserves government recognition for its more than 40 years of community ties and volunteerism, McVeigh said.

Credit unions "contribute to the economic and social progress of entire countries," McVeigh said, and "share the human rights of financial empowerment, democracy and equal opportunities." They also "promote democracy, equality and diversity--all underlying cooperative principles essential to the new world."

For a more detailed report, use the resource link.

Resource Links

WOCCU chairman at CU League of China