Hot Topics

Regulatory Relief

Congress continues to recognize that insured financial institutions, including credit unions, are overburdened by antiquated, and sometimes unworkable, regulations. The House Financial Services Committee has begun consideration of legislation to ease that burden. Credit unions remain the most highly regulated and restricted of all insured financial institutions, particularly after the passage of the Credit Union Membership Access Act, which imposed new, severe restrictions on credit unions in several areas. This legislation is consistent with the outcome of CUNA's recently completed Renaissance process, which was a review of legislative and regulatory needs for credit unions and their ability to better serve their members in the 21st Century. Many of the provisions under consideration would help eliminate some of the worst examples of statutory micromanagement that have placed unreasonable constraints on the ability of credit unions and their boards to function efficiently and in the best interests of their members.

CUNA strongly supports efforts to provide financial institutions with relief from unnecessary or unworkable regulations and encourages Congress to enact this important legislation this year.

Deposit Insurance Reform

Congress recently enacted deposit insurance reform legislation which, among other things, provided for a modest increase in deposit insurance coverage, including indexing for future increases, and double the amount of coverage for retirement accounts. The increases were for accounts in both the FDIC fund and the National Credit Union Share Insurance Fund (NCUSIF). Although credit unions have not historically taken a position on the need for an increase in coverage, it was imperative that if there was an increase in the FDIC coverage, there must be an equal increase in NCUSIF coverage to avoid any possibility of a loss of faith in the safety of the credit union fund.

CUNA supported deposit insurance reform legislation for the reasons stated above.

Most credit unions are federally insured by the NCUSIF, which, like the FDIC, is backed by the full faith and credit of the U.S. government. The National Credit Union Administration, which administers the NCUSIF, issued coverage rules in response to the legislation similar to those the FDIC issued for federally insured banks.

Effective April 1, 2006, the interim final rule provided the following:

• Increases share insurance limits to $250,000 for retirement accounts such as Traditional and Roth IRAs (Individual Retirement Accounts) and Keogh accounts;
• Retains the $100,000 insurance limit for all other types of share accounts;
• Requires NCUA and FDIC to jointly determine if an inflation-adjusted increase is appropriate for insured accounts beginning in 2010 and every five years thereafter;
• Includes pass-through coverage on employee benefit plans while limiting acceptance of shares in employee benefit plans to insured credit unions that are well or adequately capitalized; and
• Clarifies coverage for qualified tuition programs, commonly referred to as 529 plans, and share accounts denominated in foreign currencies.

Small business as usual? Don't bank on it

There are 25 million small businesses in America today. These businesses create more than 70% of our nation's new jobs.

But here are two shocking statistics:

1. Credit unions are the primary financial institution for less than 0.1% of small businesses.
2. More than 64% of small businesses complain that they are receiving poor service from their primary financial institution.

The message is clear: Many small businesses are struggling with high-cost, inaccessible service from for-profit firms. Credit unions' not-for-profit, member-focused services are exactly what these businesses need.

Even if your credit union doesn't have a business loan program, you likely have made several business loans. Many small businesses begin with a personal loan, signature loan, or home equity line of credit. Your members may be using these loans to start up some of America's estimated 15-20 million small office / home office businesses.

But small businesses need more than loans. That's why a new CUNA initiative is designed to help credit unions provide the kinds of full-service support that small businesses say they need: payroll services, insurance products, employee benefits, retirement plans and more. CUNA's small business initiative will strive to help credit unions provide these services.

Phase I of the initiative begins this month. A new Web site linked from CUNA's home page (www.cuna.org) contains the first series of resources to help credit unions serve small businesses. The new site includes market research, sample credit union operating forms, and intelligence on competitors offering small business services. It's available to all CUNA-affiliated credit unions free of charge.

More resources will be added to the site, including key elements of a 600-page Business Services Manual that will address board issues, policies and procedures, regulatory issues, operational issues, and marketing issues for credit unions serving small businesses.

Phase II of CUNA's small business initiative is scheduled for release next year. This will include financing a system structure, education and training, lending support, new product delivery and more.

Once credit unions are able to offer these services, small businesses will truly have a choice. Currently, up to 10% of small businesses leave their original financial institution due to poor service.

But to quote one of our slogans from the Credit Union Campaign for Consumer Choice, "A choice between banks is no choice at all."

This is not just rhetoric. It is fact. Among consumers who have a choice between credit unions, banks and thrifts, credit union members have the highest satisfaction rates. This has been proven every year for more than a decade, according to the annual Gallup polls conducted for the American Banker.

In contrast, the latest research compiled by CUNA's Business/SEG Services Committee shows small businesses have dismally low satisfaction rates. Just a few examples:

• 85% had difficulties signing up for a service;
• 81% had difficulties researching a product;
• 90% said responses to their queries were unacceptably slow;
• 81% received inaccurate information in responses;
• Only 36% received help solving problems;
• Only 15% of those seeking help by e-mail, 22% by phone, and 32% using instant messaging said their service was satisfactory.

When CUNA's Business/SEG Services Committee began calling small businesses, they found that while small businesses are paying high fees, many don't even get a visit from their bank representative after they open an account. They say bank call officers seem to be focused on larger accounts.

The bottom line: What for banks may be "business as usual," simply does not work for small businesses. Let's show them the credit union difference.

Serving people of modest means

CUNA has an ongoing commitment to helping credit unions serve the unbanked and people of modest means. Here are a few examples:

To help credit unions better serve the financial needs of the growing Hispanic community, CUNA created a comprehensive Hispanic Resource Center on its Web site. The center - which receives more than 1,000 page views per month - helps credit unions to bring the growing immigrant and international communities into the financial system and give them access to credit, mortgages, and other financial products. CUNA is fostering use of Irnet (International Remittance Network) to provide a lower-cost remittance alternative to Hispanic and other immigrant populations.

CUNA also spearheaded the development of a billion-dollar mortgage lending initiative to help lower-income homebuyers afford their first home. The Home Loan Payment Relief (HLPR, pronounced "helper") program for the nation's credit unions makes below-market-rate mortgage loans available to borrowers with household incomes at or below the median in their markets. Participating credit unions have voluntarily committed more than $1.1 billion in mortgages to the program as part of their commitment to serving people of modest means.

CUNA and its member credit unions are committed to providing a safe and affordable alternative to predatory payday lenders. CUNA supports Congressional provisions that would allow credit unions to offer check cashing services to non-members within their field of membership, which, in turn, would also afford the opportunity to bring the unbanked and underserved communities into a mainstream financial institution, providing access to other services such as savings and lending.

Additional credit union initiatives include, but are not limited to, financial education, shared branches as a convenient vehicle to the underserved, and working with credit union service organizations for more flexibility in offering services to those who need it.

Copyright © 2008 - Credit Union National Association, Inc.