NEWS ARCHIVES: 2009
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- November 10, 2009
President signs 21-day fix to Credit CARD Act
WASHINGTON (11/10/09)—Starting the weekend off
right for credit unions, President Barack
Obama on Friday signed
the CARD Act Technical Corrections Act
(H.R. 3606) into law. He also penned his name to the
homebuyer tax credit.
The new CARD Act law fixes a situation that has been plaguing
credit unions since the original Credit Card Accountability,
Responsibility and Disclosure (CARD) Act was signed in
May. That bill incorrectly implied that a 21-day late notice
requirement applied to all open-end credit, and the Credit
Union National Association (CUNA) has argued that it had
always been lawmakers' intent to apply the provision only
to credit cards.
The corrections bill states clearly that the late-notice
provision applies only to credit cards.
CUNA has worked closely with lawmakers and their staffs
warning that the drafting mistake would prevent credit
unions from granting biweekly payment plans to their members,
from sending members consolidated billing statements, and
would force them to change payment due dates for members
that had previously chosen due dates based on their specific
The situation was particularly problematic for Home Equity
Lines of Credit (HELOC) because the due date of a HELOC
is often a contractual term.
CUNA President/CEO Dan Mica hailed the quick and decisive
work by the House and Senate on the correction bill and
the president's very timely signing of the measure.
"By signing the law, the president gives credit
unions the opportunity to go back to
doing what they do best:
Serving their members with affordable and
needed financial services.
"Credit unions can continue the practices of sending
members consolidated billing statements, changing payment
due dates for members who had previously chosen a due date
based on their specific financial situation, and continuing
bi-weekly payment plans--all essential tools consumers
use to manage their finances in the ways that best suit
their needs," Mica noted.
Mica also noted the efforts of "the leagues and the
many credit unions" who worked with lawmakers to get
the fix into law. "Without their efforts," Mica
said, "credit unions would still be reeling
from the unintended consequences of this law."
The President also signed legislation extending the $8,000
first-time homebuyer tax credit that was set to expire
at the end of the month. That bill also creates a new $6,500
tax credit for current homeowners who purchase a new home
between Dec. 1, 2009 and April 30, 2010.
Matz gets Senate nod, will rejoin NCUA
WASHINGTON (8/7/09)--Deborah Matz on Friday was confirmed to join the National Credit Union Administration (NCUA) by the full Senate and is soon expected to be named chair of the NCUA by President Barack Obama.
Credit Union National Association (CUNA) President/CEO Dan Mica congratulated Matz on her confirmation, saying that CUNA looks forward to working with Matz to ensure the "continued safety and soundness of credit unions" and to foster "a regulatory environment in which credit unions may continue to grow, prosper and effectively serve their members."
Matz was unanimously confirmed by both the full Senate and the Senate Banking Committee, and should soon join the NCUA board for the second time. Matz's nomination was scheduled for Senate approval several times in recent days, but a busy Senate calendar, dominated by such things as okaying $2 billion to extend the "cash for clunkers" program, and approving Sonia Sotomayor as a Supreme Court Justice, pushed back the Matz vote.
Matz last served on the board between 2002 and 2005, and most recently held the position of executive vice president and chief operating officer of Maryland-based, $800 million-in-assets Andrews FCU, an experience which Matz said "sensitized" her "to the need for effective, rather than excessive, regulation."
Matz in 2002 voted against what she has called "overly broad and permissive" NCUA corporate credit union regulations, and she said during recent Senate committee testimony that further work is needed to stabilize the corporate credit union system.
Matz has also promised to revamp some aspects of the NCUA's rules governing corporate credit unions once she takes on her new position at the NCUA, adding that such a rule would combine needed regulatory "flexibility" with the safeguards needed to prevent the current corporate credit union hardships from happening again.
CRMD provides Credit CARD Act 2009 guidance
An important provision of the Credit CARD Act of 2009
requires compliance by August 20, 2009 with the 21day
rule, requiring creditors with open-end loans to provide
consumers notification 21days in advance of their payment
due date. Even though it is titled the "Credit CARD Act"
this specific provision applies to all open-end loans
just credit cards. Implementing the statement provision
has been difficult because of the very short time period
the Fed has provided for compliance (by August 20th).
The Carolinas Compliance and Risk Management Department
(CRMD) has put together a list of the most common questions
regarding this provision. Credit unions are reminded
that each credit union situation is unique, and this
information is guidance and should not be construed as
legal advice. You are strongly encouraged to consult
your own legal counsel when determining the most appropriate
course of action for your credit union to achieve compliance.
1. Our members pay weekly- do we have to change payment due dates?
Essentially yes. Members must get their statement 21 days before the payment is due or you can not charge a late charge or consider the member delinquent in any way. That includes reporting to the credit bureau or pursuing collection activity.
2. Our credit union sends out loan statements quarterly- do we have to change to monthly statements?
Again, it looks like yes. Members must get their statement 21 days before the payment is due or you can not charge a late charge or consider the member delinquent in any way. That includes reporting to the credit bureau or collection activity.
3. What do we do if our data processor can not get everything in place by August 20?
The Fed has provided what they term a "short" time
period to move in to compliance. That time period is
undefined by the Fed, but the CRMD estimates possibly
30 days. During that short period while working out logistical
requirements for changing due dates and providing statements,
you can place a message on your statements that notifies
members that "the payment will not be treated
as late if received within 21days after the statement
was mailed." Additionally, as mentioned above your
credit union cannot treat the payment as late until after
21 days from statement mailing.
4. Our credit union allows members to make payments weekly or bi-weekly. How do we comply?
The key is to determine whether your credit union permits weekly/bi-weekly payments or requires them. If you have disclosed to your member via your credit agreement that payments must be made weekly, you will likely need to change members to a monthly due date while continuing to allow them to make weekly or bi-weekly payments. Members can make payments as many times during the month as your credit union will permit, however, you will need to ensure that when changing a member to monthly payment due dates, missing weekly payments will not be technically considered late.
For more information on the Credit CARD Act please contact the Carolinas Compliance and Risk Management Department at firstname.lastname@example.org.
Corp. CU update: NCUA begins stabilization process
ALEXANDRIA, Va. (6/8/09)--The National Credit Union Administration (NCUA) in its most recent update on the status of the corporate credit union system said that it has begun to use the Temporary Corporate Credit Union Stabilization Fund (TCCUSF) to cover corporate stabilization-related expenses.
In a Tuesday press release, the NCUA said that the implementation of the TCCUSF will allow natural person credit unions to "reflect a fully restored National Credit Union Share Insurance Fund (NCUSIF) deposit on their June 30 call reports."
According to the release, the TCCUSF has relieved the NCUSIF "from any reserve requirements" related to U.S. Central FCU's capital note by paying $1 billion into the NCUSIF.
The TCCUSF will also now oversee the Temporary Corporate Credit Union Share Guarantee Program (TCUSGP) and the Temporary Corporate Credit Union Liquidity Guarantee Program (TCCULGP), the NCUA added. The majority of corporate credit unions have agreed to take part in the TCCULGP, the NCUA said.
The NCUA also updated the status of U.S. Central and Western Corporate Federal Credit Union (WesCorp), reporting that "normal operations" at those two credit unions "continue without interruption."
WesCorp announced that it expects to recognize a 30% reduction in operating costs this year due to a number of cost cutting measures, including "consolidations and staff reductions," the release said.
NCUA working with agencies on Credit CARD Act, UDAP
ALEXANDRIA, Va. (7/2/09)—The National Credit Union Administration (NCUA) said Wednesday it has begun to work with the Federal Reserve to implement the Credit Card Accountability, Responsibility, and Disclosure Act of 2009, portions of which supersede interagency rules addressing unfair and deceptive acts and practices (UDAP).
Portions of the CARD Act will become effective on Aug. 20 of this year, with the remainder of the bill becoming effective on Feb. 22, 2010. UDAP rules that address credit cards currently have an effective date of July 1, 2010.
The CARD Act limits many of the same credit card practices that the NCUA, the Fed, and the Office of Thrift Supervision targeted via UDAP, including card issuers' ability to increase interest rates and the fees that lenders charge for use of subprime credit cards.
The NCUA said it also believes that the Fed will soon "begin issuing implementing regulations" for Regulation Z. The agency said it is "considering whether there is a need" for separate NCUA rules once Regulation Z becomes effective.
While credit unions should not be overly concerned about dealing with dueling regulatory structures, they should recognize that the UDAP rules, the CARD Act, and Regulation Z all contain similar requirements and restrictions regarding credit card practices.
According to the Credit Union National Association (CUNA), the problematic issue for credit unions in the new credit card law is the new requirement to send periodic statements at least 21 days before payment is due. This 21-day requirement has been particularly problematic because, as the law is written, it would apply to all open-ended credit, not just credit cards.
CUNA is working on this issue, discussing these operational problems with the Fed and raising credit union concerns with key staff on Capitol Hill. CUNA also plans to meet early next week with credit union lending experts to gather additional feedback on the operational compliance problems with applying the 21-day requirement to all open-end loans, and these additional concerns will be conveyed to the Fed.
For CUNA's analysis of the new credit card law, click here.
New corp stabilization plan implemented by NCUA
ALEXANDRIA, Va. (6/19/09)--The National Credit Union Administration (NCUA) will immediately borrow $1 billion of the total $6 billion offered by the U.S. Treasury to shore up the corporate credit union system after the board at its monthly meeting voted to implement the temporary corporate credit union stabilization fund.
Commending the board for its work, Credit Union National Association (CUNA) President/CEO Dan Mica said that the board's action is "precisely what was needed to inaugurate the use of the Temporary Corporate Credit Union Stabilization Fund."
During the meeting, NCUA officials said that the board should examine the impact that the extra $1 billion in corporate credit union funding has on the system before borrowing further money from the Treasury. Taking the full $6 billion in available funding would limit the availability of future Treasury funding, Office of Examination and Insurance Director Melinda Love said.
The $1 billion in borrowed funds would be used to "secure the re-assignment" of the National Credit Union Share Insurance Fund's (NCUSIF) capital note at U.S. Central Federal Credit Union. This so-called "re-assignment" would increase the NCUSIF's equity by $1 billion, according to an NCUA memorandum.
Under the plan, credit unions will also see their earnings recovered from the NCUSIF returned to them, for a total equal to 0.69 percent of their insured shares at the end of 2008. These earnings will then be used to recapitalize the NCUSIF.
Related accounting issues were also discussed during the meeting, with the NCUA determining that any costs and liabilities related to corporate credit unions stabilization that were previously borne by the share insurance fund will be transferred to the stabilization fund.
Credit unions' one percent deposits in the NCUSIF will no longer be accounted for as impairments under the plan.
CUNA believes that credit unions will not be required to provide restatements of their prior financial statements. Rather, many credit unions will record a gain in the second quarter equal to the impairment charge they recorded in the first quarter, allowing them to reflect no impairment charges on their year-to-date income statements.
The stabilization fund will also allow the NCUA to reduce its share insurance premium, which was expected to be assessed in September of this year, to an estimated 15 basis point charge. The NCUA previously announced that there would be a 30 basis point charge assessed in September.
However, the NCUA said that the exact amount of the premium would depend on a number of factors, including insured share growth and insurance losses at natural person credit unions.
The NCUA will soon provide further details on how these actions will affect credit union financial reporting, with the goal of allowing credit unions to accurately account for the affects on their mid-year call reports, which are due in late July.
The NCUA staff has been working with accounting practitioners on the specifics of how credit unions will account for these changes, and details will be forthcoming from the Agency and accounting professions in the next few weeks.
The NCUA will also give credit unions direct access to NCUA board members during an interactive webinar set for June 24. Credit unions that would like to participate in this webinar may register at the NCUA's Web site starting today.
"Rather than taking a significant hit to earnings and capital this year based on estimates of future losses, credit unions will now be able to pay for those losses on a timetable much more closely aligned to when and if they actually occur," Mica added.
Thirty graduate in CUDE's first class of 2009
DELAVAN, Wis. (6/11/09)--Thirty more credit union professionals—including SCCUL’s Director of Public Relations and Communications Brandon Pugh--are credit union advocates after graduating from Spring 2009 Credit Union Development Education (DE) Training in Delavan, Wis.
During the week-long program, participants were involved in group exercises, encouraged to ask questions of visiting lecturers and required to complete team projects, proposing solutions for credit unions to help alleviate or eliminate challenging situations in a given area.
"Throughout 2009, DE training will incorporate emerging economic discussions while continuing to provide critical lessons in cooperative principles and credit union philosophy," said DE Training Facilitator Tom Decker. Decker is director of social impact management for National Credit Union Foundation (NCUF). "We plan to show this year's trainees how the member-centric business model will enable credit unions to weather the economic storm better than most for-profit institutions."
This year's second scheduled DE training classes will take place Aug. 12-18 at IslandWood located on Bainbridge Island, Wash. IslandWood uses the environment as a classroom. DE training is open to everyone from new employees who need a credit union orientation to seasoned executives who need to recharge.
Scholarships are available through NCUF's DE Fund and through several state credit union foundations and leagues. For more information go to http://www.ncuf.coop/home/programs/developmenteducation/education.aspx.
Job losses slow, unemployment rate up, CUs on track
MADISON, Wis. (6/8/09)--The slowdown in job losses announced Friday is good news that points to an improved economy, but labor weakness suggests a long recovery, according to Mike Schenk, senior economist at the Credit Union National Association (CUNA). Credit union forecasts are on track.
Nonfarm payroll employment declined by 345,000 in May, about half the average monthly decline in the previous six months, the Labor Department reported Friday. However, the unemployment rate jumped to 9.4%, from 8.9% in April and is the highest since 1983 (see chart).
"The easing of employment declines is great news because it's one more important piece of information that strongly suggests the worst of our recent economic turmoil is behind us," Schenk told News Now.
"At the same time, we expect labor markets to continue to weaken--albeit at a lower pace--with the unemployment rate drifting up to 10% by year-end and nearing a cyclical peak of 10.5% in 2010. This continued labor market weakness, combined with high debt loads, weak income growth and depressed net worth (stemming from anemic real estate market activity) suggest that recovery will be a relatively long, slow process," Schenk said.
"For credit unions this suggests our recently-revised baseline forecast is on track: Expect relatively soft loan growth and continued bottom-line pressures related to fast growth in low-yielding investments and deteriorating asset quality (with higher delinquencies and net chargeoffs)," he added.
The number of unemployed people surged by 787,000 to 14.5 million in May. The unemployment rate has increased by 4.5 percentage points since the recession began in December 2007.
The number of long-term unemployed (those jobless for 27 weeks or longer) rose by 268,000 to 3.9 million in May. That number has tripled since the beginning of the recession.
Including laid-off workers who have given up seeking new jobs and those who have settled for part-time work, the unemployment rate would be 16.4% in May--up from 15.8% in April and the highest number on records going back to 1994 (Associated Press June 5). The average work week dropped by 0.1 hour to 33.1 hours in May, the lowest on records going back to 1964.
Manufacturing employment plunged by 156,000 in May. Since its recent peak in February 2000, employment in motor vehicles and parts has declined by 50%. Employment in construction fell by 59,000 in May, down from average monthly job losses of 117,000 during the prior six months.
Job losses in retail trade have moderated during the past two months. The sector lost just 18,000 jobs in May. Financial services employment fell by 30,000, while health-care employment rose by 24,000.
SC CUs could get assistance for NYIB Annual Conference
The South Carolina Credit Union League is finalizing options for helping some youth-minded credit unions attend the 2009 National Youth Involvement Board (NYIB) Annual Conference August 3-6 in Tempe, Arizona (www.nyib.org/conference.php). Decisions on scholarships, which should cover participant fees and some travel, will include an assessment of need.
NYIB is a volunteer-led organization of credit union peers active in financial education and youth services, and a handful of South Carolina credit unions have sent representatives to its conference in recent years. The detailed agenda for 2009 is at www.nyib.org/conference_agenda.php. For more on NYIB and the conference, or to request assistance details once they are available, contact SCCUL’s Brandon Pugh (email@example.com; 800-235-4290, ext. 410 or 803-732-8410).
AACUC Board vacancy
The African-American Credit Union Coalition (AACUC) is seeking interested members to fill vacancies on the Board.
There are three (3) Board positions up for election and two (2) incumbents running for re-election. Each position is a three (3) year term. If you are interested in running for a Board position and a member in good standing, please submit your letter of intent and resume` to the Nominating Committee Chairman, Bob Harvey at firstname.lastname@example.org on or before Friday, May 29, 2009.
Commitment includes monthly telephonic meetings, becoming a member of an AACUC committee, attendance at the AACUC Networking Meeting and Reception in February as part of GAC, attendance at the AACUC annual meeting in August, and attendance at the AACUC planning meeting the 4th quarter of each year. The location of the annual meeting and the planning meeting change each year. Expenses for the planning meeting ONLY are paid by AACUC. Persons interested in running for a Board position may direct questions to any member of the nominating committee or to any AACUC Board member.
First Carolina Corporate signs share guarantee agreement
GREENSBORO, N.C. (5/11/09)--First Carolina Corporate CU's board of directors voted May 4 to participate in the Temporary Corporate Credit Union Share Guarantee Program, based on modifications made by the National Credit Union Administration (NCUA).
The revised program is more flexible and provides corporates the opportunity to receive share guarantee extensions.
Effective immediately, all of First Carolina's uninsured shares--except capital accounts--are covered under the program through at least Sept. 30, 2011, with quarterly extensions available through Dec. 31, 2014. NCUA re-opened the program to all corporate credit unions.
First Carolina's board earlier had decided not to participate in the program because of concerns about protecting member credit unions' capital and protecting the membership's ability to have a voice in determining its corporate's future. At its April 21 meeting, NCUA's Board voted to revise the program to include more precise language and increased flexibility.
"Frankly, the revised Share Guarantee Program is a better deal and addressed many of the issues that we had concerns with in the prior program," said David Brehmer, president/CEO of First Carolina. "We appreciate the time NCUA's staff and board took to take another look and make certain changes, and we support their efforts to stabilize liquidity within the corporate system to minimize future losses to credit unions," he said.
First Carolina's board based its decision on liquidity, the current recapitalization effort, member feedback, the changing landscape in the corporate network and improvements to the overall share guarantee program, said the corporate.
SC credit unions elect League board
COLUMBIA, SC (4/22/09)—Palmetto State credit unions have elected one new director and six incumbents to the South Carolina Credit Union League (SCCUL) Board of Directors. Election results were announced at the April 18 business session of the SCCUL & Affiliates 2009 Annual Meeting in Myrtle Beach, SC.
New to the 2009-2010 SCCUL board of directors is Jim McDaniel, president and CEO of Heritage Trust Federal Credit Union (Summerville). Re-elected incumbents are: Faye Crocker, CEO of Greater Abbeville Federal Credit Union (Abbeville); Isaac Dickson, chairman of the board of Carolina Foothills Federal Credit Union (Spartanburg); Paul Hughes, president of Greenville Federal Credit Union (Greenville); Jerry Miller, president and CEO of Carolina Trust Federal Credit Union (Myrtle Beach); Brad Rustin, president and CEO of Charleston Area Federal Credit Union (Charleston); and Ed Templeton, president and CEO of SRP Federal Credit Union (North Augusta).
Continuing the second year of two-year terms on the board are: Melynda Ciochetti, president and CEO of Santee Cooper CU (Moncks Corner); Scott Conley, CEO of MPCU (Lugoff); William H. “Bill” Love, president and CEO of MTC Federal Credit Union (Greenville); Ray Partain, chairman of the board for Anderson Federal Credit Union (Anderson); Patti Seymore, vice president at SC Telco Federal Credit Union (Greenville); Linda Weatherford, vice president at SPC Cooperative CU (Hartsville); and Scott Woods, president and CEO of SC Federal Credit Union (N. Charleston).
Following the business session, the new board selected its executive committee: Woods, chairman; Templeton, first vice chairman; Rustin, second vice chairman; Weatherford, treasurer; and Seymore, secretary. As former chairman, Love will serve as an ex officio member of the executive committee, as is SCCUL President and CEO Garry L. Parks.
Of eighty-one League-member credit unions, forty-two sent ballots to independent accounting firm Cantey, Tiller, Pierce, & Green, LLP of Camden, S.C.
State of the economy from CU perspective
MADISON, Wis. (4/9/09)--The U.S. economy will remain in the "Great Recession" for the remainder of 2009, but the credit union cooperative model will provide strength in dealing with the credit and housing crisis, says Credit Union National Association senior economist Steve Rick.
Rick discussed the U.S. Economic Outlook and its Impact on Credit Unions Wednesday with CUNA staff in Madison, Wis.
Credit unions' business model has a number of strengths: They have excess capital with a net worth of 11.4% of assets, strong funding growth at 84% of assets, lots of liquidity, and lots of investments, and are originating loans to hold, not to sell. They're lending while banks are tightening standards. They have limited credit risk exposure, and no short-term stockholder pressure.
"Credit unions are running counter to the economic cycle. We are helping the economy," Rick said.
However, the big question is how far will home prices fall. Two vicious cycles of the mortgage crisis will continue to loop in a downward spiral. The government is trying to break these cycles by infusing funds into the economy, said Rick.
The first loop consists of falling home prices, leading to negative equity where homes are worth less that the mortgages, leading to foreclosures, which lead to an increased supply of homes, which again lowers the price of homes.
The other loop begins at foreclosures, which lead to a decline in mortgage payments, which means the value of mortgage-backed securities declines, and banks and credit unions incur losses such as those at U.S. Central and WesCorp, which leads to a decline in bank capital or loanable funds. That, in turn, leads to restrictions on lending, which slows economic activity, which increases unemployment, which leads to more foreclosures.
"This is the U.S. economy," Rick said. "Both loops are touching foreclosures and will continue looping around again and again. They won't self-correct, so the federal government has to stop it." He said home prices will continue falling through 2009.
Normally consumers save during the good times for a rainy day, such as a recession. But consumers instead increased their debt burden too far and the economy is forcing them to hunker down and reduce the burden to get through the recession. "The good news is that Americans have rediscovered saving," he said.
What does this mean for credit unions? Credit unions' saving growth will rise to 12% this year, while loan growth will fall to 6%. Credit quality will deteriorate this year, and credit unions' return on assets will increase marginally to 0.40% during the year. Capital-to-assets ratios will decline to 9.9% as capital contributions lose pace against asset growth.
NCUA reiterates: Flexible stance on impairment accounting
WASHINGTON (4/2/09)—The National Credit Union Administration (NCUA) intends to issue an accounting bulletin stating the agency will be flexible about when a credit union books the cost of the premium being assessed to replenish the National Credit Union Share Insurance Fund (NCUSIF).
In a communication provided to the Credit Union National Association (CUNA) yesterday the NCUA said it will not object if a credit unions works with its accountant and delays booking the impairment of the 1% NCUSIF deposit.
The insurance costs, which include replenishing the 1% NCUSIF deposit and an insurance premium to restore the NCUSIF to 1.3%, pay for the costs to the NCUSIF associated with NCUA's actions involving corporate credit unions.
These actions include placing U.S. Central FCU and Western Corporate FCU into conservatorship March 20, providing deposit guarantees for corporate credit unions and $1 billion in capital to U.S. Central. The bulletin language will state, "The regulatory reporting guidance in Accounting Bulletin 09-2 reflects the actions the NCUA has taken which appropriately should be reported by the March 31, 2009 quarter-end.
"The various proposed legislative alternatives, if granted by Congress and acted upon by the board, could help the credit union industry spread the impact of assessments to reposition the NCUSIF to cover future losses."
The agency announced last week that it has drafted legislation that will allow credit unions to spread out the deposit replenishment costs. There is also pending legislation to allow NCUA to spread out insurance costs for up to five years.
CUNA supports such legislative action and continues to urge that insurance costs be spread out over seven or eight years. CUNA also supports legislation to increase the agency's borrowing authority to help finance the insurance costs.
The bulletin, expected this week, will provide official notice of what a senior NCUA staff member told CUNA last week (News Now March 30).
Atressing the need for congressional action for the bill to become law—and the uncertainty that surrounds that process—the NCUA bulletin will state that if a credit union's licensed practitioner is willing to provide a written opinion that allows for the delay in the recording of the expenses and indicates in their opinion it is in compliance with GAAP, NCUA examiners will not take exception absent a definitive ruling from the accounting profession to the contrary.
Youth Saving Challenge can help tell positive story
MADISON (3/25/09)--Credit unions will have another opportunity to emphasize the credit union difference with the National Youth Saving Challenge during National Credit Union Youth Week April 19-25.
The challenge provides a "good news" story that credit unions can take to their local media. "The Youth Week and Saving Challenge is the perfect opportunity to help credit unions tell a very positive story--one that isn't told by the banks," said Lin Standke, manager of youth programs at the Credit Union National Association (CUNA).
A recent Nielsen study notes that positive stories increase consumers' confidence in their financial institution, she said. Reading positive stories in the press about the institution was cited by 44% of respondents as a factor that would increase their confidence in the safety and soundness of their financial institution. Ads, mail offers, and Internet ads ranged from 25% to 21% as factors increasing confidence.
This year's program has expanded.
"This year, based on credit union feedback, the Credit Union National Saving Challenge runs the entire month of April," said Standke. "That means a credit union can promote the challenge during Youth Week, all of April, or any days it wants."
The theme for National Credit Union Youth Week is The Magic of Saving. Go to http://finlit.cuna.org/saving_challenge.html for information about the free saving challenge and how to promote youth week, or to sign up for the challenge.
NCUA Conserves U.S. Central and Western Corporate Credit Unions
March 20, 2009, Alexandria, Va. -- The National Credit Union Administration Board today placed U.S. Central Federal Credit Union, Lenexa, Kansas, and Western Corporate (WesCorp) Federal Credit Union, San Dimas, California, into conservatorship to stabilize the corporate credit union system and resolve balance sheet issues. These actions are the latest NCUA efforts to assist the corporate credit union network under the Corporate Stabilization Plan.
The two corporate credit unions were placed into conservatorship to protect retail credit union deposits and the interest of the National Credit Union Share Insurance Fund (NCUSIF), as well as to remove any impediments to the Agency’s ability to take appropriate mitigating actions that may be necessary. Service continues uninterrupted at both U.S. Central Corporate Federal Credit Union and WesCorp, and members are free to make deposits and access funds.
The Federal Credit Union Act authorizes the NCUA Board to appoint itself conservator when necessary to conserve the assets of a federally insured credit union, preserve member assets and protect the NCUSIF.
Corporate credit unions do not serve consumers. They are chartered to provide products and services to the credit union system. These products and services will continue uninterrupted and there is no direct impact by NCUA’s actions on the 90 million credit union members nationwide. Credit unions that serve consumers remain very strong, with net worth exceeding 10 percent of assets, healthy growth in assets, membership, and loan portfolios despite the difficult economy.
U.S. Central has approximately $34 billion in assets and 26 retail corporate credit union members. WesCorp has $23 billion in assets and approximately 1,100 retail credit union members. The member accounts of both credit unions are guaranteed under provisions of the previously announced NCUA Share Guarantee Program, through December 31, 2010. The Program extends NCUSIF coverage to all funds held by the two corporate credit unions.
Following initial actions taken by the NCUA Board January 28, 2009 (see NCUA Letter to Credit Union No. 09-CU-02 http://www.ncua.gov/letters/letters.html), NCUA staff completed a detailed analysis and stress test of the mortgage and asset backed securities held by all corporate credit unions, including US Central and WesCorp. Specifically, this review determined that an unacceptably high concentration of risk resided only in the two conserved corporate credit unions. Securities held by US Central and WesCorp deteriorated further since late January 2009, contributing to diminished liquidity and payment system capacities, as well as further loss of confidence by member credit unions and other stakeholders.
Additional mortgage and asset backed security analysis and assessment of the two credit unions by NCUA staff enabled NCUA to refine NCUSIF’s required reserve for potential loss. The findings indicated an overall estimated reserve level, previously announced by NCUA, had increased from $4.7 to $5.9 billion. The specific computation and the impact of the refined reserve level are addressed in NCUA Letter No: 09-CU-06, which NCUA issued and posted online today at http://www.ncua.gov/letters/letters.html.
NCUA is hosting a webcast Monday, March 23 at 2 p.m. to provide the credit union community with an update on the corporate credit union stabilization program.
The central short-term objective of NCUA’s Corporate Stabilization Program has been to increase liquidity in corporate credit unions. Since the NCUA Board first began taking stabilization actions, liquidity has demonstrated marked improvement. The reliance on external borrowing has declined from $11.8 billion to $2.1 billion.
NCUA believes that the actions to conserve the two corporates, in tandem with established plans to enhance liquidity and generally stabilize the corporate network, represent the most cost effective and prudent alternative available to the credit union industry. The final stage in the overall stabilization program involves the Advanced Notice of Proposed Rulemaking initiated by the NCUA Board in January. The credit union industry is expected to provide suggestions on possible future regulatory reforms to the corporate credit union network.
NCUA will continue to take any and all steps necessary to preserve a well-functioning system of corporate credit unions and to protect the assets of natural person credit unions and their members during the ongoing broader financial market dislocation.
The National Credit Union Administration charters and supervises federal credit unions. NCUA, with the backing of the full faith and credit of the U.S. government, operates and manages the National Credit Union Share Insurance Fund, insuring the accounts of nearly 89 million account holders in all federal credit unions and the majority of state-chartered credit unions. NCUA is funded by credit unions, not federal tax dollars.
The South Carolina Credit Union League has provided resources for credit unions in South Carolina at http://www.sccul.org/CUsaresafeandsound.php and http://www.sccul.org/safetyandsoundness.php.
CUNA to testify on three top CU issues
WASHINGTON (3/17/09)—The Credit Union National Association (CUNA) is scheduled to testify three times in the next two weeks on some of the biggest issues facing credit unions and the financial services industry today.
On Thursday afternoon, Terry West, chairman of CUNA's Corporate Credit Union Task Force, is scheduled to testify at the Senate Banking subcommittee on financial institutions' hearing entitled, "Current Issues in Deposit Insurance." West is CEO of Vystar CU, Jacksonville, Fla.
Also on Thursday afternoon, CUNA's positions on bills to address unfair and abusive practices as relating to overdraft protection plans and credit card terms will be presented by Doug Fecher, president/CEO of Wright-Patt CU, Fairborn, Ohio.
Fecher is scheduled to appear before the House Financial Services subcommittee on financial institutions and consumer credit, which is conducting a legislative hearing on H.R. 627, the Credit Cardholders' Bill of Rights Act, and H.R. 1456, the Consumer Overdraft Protection Fair Practices.
Next week, on March 24, CUNA will be part of a panel of financial industry witnesses to testify before the Senate Banking Committee on "Modernizing Bank Supervision and Regulation."
The committee has scheduled a series of hearing on the issues, which kicks off this Thursday with testimony from federal regulators. National Credit Union Administration Chairman Michael Fryzel is slated to be on that witness panel. Also on CUNA's hearing radar for the week"
- On Tuesday, a House Financial Services Committee hearing entitled, "Perspectives on Regulation of Systemic Risk in the Financial Services Industry;"
- On Wednesday, a Senate Banking Committee hearing entitled, "Lessons Learned in Risk Management Oversight at Federal Financial Regulators;"
- On Thursday morning, the House Financial Services Committee subcommittee on capital markets, insurance and government-sponsored enterprises is may hold a session on the administration's program designed to reduce the number of foreclosures by allowing eligible homeowners to refinance or modify the terms of their mortgages;
- Also on Thursday morning, the House Ways and Means Committee subcommittee on oversight has scheduled a hearing entitled, "The Troubled Asset Relief Program: Oversight of Federal Borrowing and the Use of Federal Monies;"
- Another on Thursday morning, the Senate Small Business Committee will hold a hearing entitled, "Perspectives from Main Street on Small Business Lending;" and
- And on Friday, the House Financial Services Committee may conduct a hearing on financial fraud and enforcement.
Copies of CUNA's written testimony will be posted on the CUNA Legislative Affairs Website (http://cuna.org/gov_affairs/index.html) when available.
CUNA seeks transparency on corporate plan
WASHINGTON (3/2/09)—The Credit Union National Association (CUNA) has asked the National Credit Union Administration (NCUA) to provide credit unions with more information on how the federal regulator reached its decisions regarding the Corporate Credit Union Stabilization Program.
In separate letters to each NCUA board member sent Friday, CUNA also asked for greater transparency on future decisions the agency will have to make regarding the program.
Additionally, CUNA President/CEO Dan Mica urged the NCUA to immediately provide to the credit union system upcoming results of a PIMCO report analyzing corporate credit unions' investments and their potential losses. PIMCO is a leading global investment management firm.
Mica noted that that analysis will be significant in determining the agency's next steps on corporates, including a revised estimate of the cost to the National Credit Union Share Insurance Fund of the corporate credit union deposit guarantee.
"In that regard," wrote Mica, "we urge NCUA to provide a summary of PIMCO's findings...immediately following the completion of the report, and be completely transparent about the assumptions and modeling relied upon by PIMCO, including how the estimates in the report were developed."
Regarding information on how the NCUA reached its original decisions on the corporate program, CUNA specifically requested:
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- The data, assumptions, and analysis it relied upon to decide to implement the Corporate Stabilization Program;
- The data, assumptions, and analysis it relied upon to estimate the cost of the corporate deposit guarantee; and
- A summary of the PricewaterhouseCoopers report presented to the Board in January
GAC: Corporate CU session packs the house
WASHINGTON (2/24/09)—A special Monday session on the regulator's corporate credit union stabilization plan drew a packed crowd at an early bird presentation at the Credit Union National Association's (CUNA's) Governmental Affairs Conference (GAC) Monday.
CUNA and its Corporate Credit Union Task Force continue to investigate possible funding alternatives to the federal regulators' corporate stabilization plan. The task force by late last week completed its third brain-storming session to detail reasonable ways to make the plan less of a burden on credit unions.
CUNA President/CEO Mica said Monday that CUNA is well aware of the strong feelings credit unions have about the corporate stabilization plan announced in January by the National Credit Union Administration (NCUA). CUNA also acknowledges, he said, the strong and opposing views credit unions have regarding accepting the U.S. Treasury Department's Troubled Asset Relief Funds (TARP).
CUNA recently executed a survey in which credit unions weighed in on whether or not to seek access to funds from TARP. The poll attracted almost 1,400 responses.
- Sixty-six percent of respondents strongly opposed an infusion of TARP funds into natural person credit unions to bolster their capital.
- Sixty-two percent opposed using TARP to purchase credit unions' troubled assets.
Survey participants were more favorable toward setting aside TARP funds to backstop the NCUA's guarantee of deposits by credit unions in corporate credit unions. Forty-two percent favored this, while 29% came out against it.
Credit unions were more divided about TARP funds injected to help stabilize corporates or to buy their troubled assets. When asked if CUNA should advocate for these approaches, about one-third indicated a high level of agreement, about one-third had neutral views, and the remaining third reported a high level of disagreement.
Mica and Task Force Chairman Terry West urged the GAC gathering to back efforts to open TARP funds to credit unions in case they need them in the uncertain future. West is CEO of Vystar CU in Jacksonville, Fla.
The legislation that set up TARP last year included credit unions as eligible institutions, but as implemented by the Treasury Department to date, credit unions have not been included.
"This is a train leaving the station," Mica has warned.
SCCUL to support Invest in America
The South Carolina Credit Union League Board of Directors on Tuesday approved League support of any credit unions interested in the Invest in America program offered through GM, Chrysler and CUcorp. Through the program, credit unions are able to provide loans to members for automobiles at discounts in excess of rebates and incentives already offered to the public.
Benefits to credit unions include:
- Positive public relations opportunities that position credit unions as strong and able to lend in a tough economy, and willing to help the domestic auto industry succeed. This also has positive implications with Congress as that same message gets conveyed to Congress at a time when the banking industry is less able to extend credit to consumers for auto purchases.
- Exclusive car-buying discounts for credit union members will provide credit unions with another tool for differentiating themselves from other lenders. This program will also provide a possible catalyst for membership growth as non-members try to take advantage of the credit union member discounts.
Full details are at lovemycreditunion.org including an online credit union opt-in form. As we have from the outset, we encourage you to conduct due diligence and fully assess your credit union’s risk exposure prior to signing any agreement.
CUNA audio conference: NCUA must explore options
WASHINGTON (2/5/09)—Credit Union National Association (CUNA) President/CEO Dan Mica told participants on an audio conference call Wednesday that while CUNA recognizes federal regulators had no choice but to take action on behalf of the corporate credit unions, CUNA opposes the means chosen to fund the corporate credit union stabilization.
More than 2,000 tuned in for CUNA's audio conference call on issues surrounding the National Credit union Administration's (NCUA's) corporate credit union aid plan.
Mica told particpants that alternative funding approaches must be explored, and underscored CUNA is doing just that. He noted that all members of the NCUA board have encouraged CUNA to developed feasible and legal alternatives.
Mica added that CUNA's Corporate Credit Union Task Force has been working on alternatives to recommend to NCUA.
The CUNA leader urged credit unions to keep sending their ideas for reasonable alternative to CUNA at Ncuacorp@cuna.com.
He also urged credit unions to respond to NCUA's Advance Notice of Proposed Rulemaking on issues relating to the corporates. Comments are due to NCUA April 6, and CUNA has posted a Regulatory Action Call on its Regulatory Advocacy website. NCUA's Central Liquidity Facility (CLF) President Owen Cole reviewed the actions NCUA has taken leading up to the announcement last week that the agency was providing $1 billion in capital assistance to U.S. Central and establishing a program to guarantee all deposits in all corporates.
NCUA Deputy Director Larry Fazio detailed the agency's stabilization actions and addressed the costs to the NCUSIF. He said there will be a $1 billion immediate cost for the capital provided to U.S. Central and $3.7 billion loss revenue for the deposit guarantee, resulting in a replenishment of the 1% deposit and an insurance premium for all federally insured credit unions, under the current funding mechanism.
He said about 50% of the NCUSIF deposit will be impaired. He also reiterated that the premium has been declared but won't be billed until later in 2009. Both Fazio and Cole supported the development of funding alternatives for the NCUA Board to consider Fazio also announced the issuance of the agency's accounting bulletin to provide guidance to credit unions with less than $10 million in assets on how to reflect their costs in funding the assistance to the corporates. Credit union of that size do not have to follow Generally Accepted Accounting Principals.
Scott Waite, CFO of Patelco CU, San Francisco, and chairman of CUNA's Accounting Task Force, provided details of the accounting treatment for credit unions regarding the insurance costs. He said the accounting guidance from NCUA is "as expected." CUNA SVP of Economics Bill Hampel discussed the costs to credit unions. He said there will be an average ROA reduction of 62 basis points and an average net worth reduction of 56 basis points, although individual results will vary.
Hampel added that final expenses to credit unions will depend on the analysis of corporate credit union bonds, which the agency has requested, the probability of their sale before maturity, and the impact of NCUA's stabilization action efforts on the corporate system.
The CUNA audio conference also included Terry West, president/CEO of VyStar CU and chairman of CUNA's Corporate Credit Union Taskforce, Eric Richard, CUNA General Counsel, and Mary Dunn, CUNA Deputy General Counsel.
Alternatives CUNA has been considering to date include:
- Encourage and enable capital into corpoates from natural person credit unions;
- Greater use of the CLF;
- Expand NCUA's Credit Union System Investment Program;
- Facilitate the purchase of corporate credit unions assets by natural person credit unions;
- Allow corpoates to infuse capital into the NCUSIF through capitalization investments;
- Continue to address accounting issues, including ones relating to securities that are other-than-temporily-impaired (OTTI; and
- Access to TARP funds to backup the NCUSIF as needed.
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Check processing changes, member notification required
Changes Coming to Check Processing – Disclosure Required
There is an important change on the horizon regarding funds availability for checks that your credit union accepts for deposit. On March 21, 2009, the Federal Reserve Bank will transfer the check-processing operations of the Charlotte branch office of the Federal Reserve Bank of Richmond to the head office of the Federal Reserve Bank of Atlanta. Currently credit unions located in North and South Carolina process their checks through the Charlotte branch office of the Federal Reserve Bank. As a result of this change, some checks that currently are nonlocal checks will become local checks subject to faster availability schedules.
Regulation CC - the Funds Availability Act sets forth the rules for disclosures and how long your credit union places holds on checks. The Act requires your credit union to notify members of changes in your Funds Availability Policy. Because the Federal Reserve is changing check processing regions your credit union will need to adjust your policy to reflect the new availability schedule. If your policy changes to provide faster availability you must notify members no later than thirty (30) days after implementation, however if the change provides longer hold times for some checks that were previously considered local checks your credit union must notify members thirty (30) days prior to implementation.
Your league provides access to compliance assistance for all member credit unions. Contact the Compliance and Risk Management Department for assistance with your Regulation CC questions at 1-800-235-4290 option 5 or email@example.com.
Papers address social networking, change management
MADISON, Wis. (1/20/09)--Credit unions can learn how to reach members through social networking and how to effectively lead employees through periods of change with two new white papers sponsored by the CUNA Councils.
"Social Networking as a Marketing Tool," by the CUNA Marketing and Business Development Council, defines social networking and social media and their potential ramifications for the financial services industry (http://buy.cuna.org/detail.php?sku=28052P). The paper outlines features of online search advertising, blogs, Twitter, Wesabe and Mint, product reviews on websites, YouTube, Facebook and MySpace.
It also details how some credit unions employ the products to reach their targeted audience and results they achieved. The paper provides a selection of books and other resources at the end for further review.
The second new white paper, "Leadership and Change Management" by the CUNA CFO Council, examines characteristics of leadership during periods of change (http://buy.cuna.org/detail.php?sku=28053P).
As new national requirements and trends impact and evolve the industry, chief financial officers (CFO) are expected to be role models for change and assist the senior management team and inspire confidence among employees.
CFOs also must translate financial arguments into terms understood by employees outside the accounting department and be aware of how actions and decisions impact the human factor within change-management situations.
The second paper also includes advice from CEOs and chief operating officers about mergers, leadership succession, and other types of major changes. The paper includes additional resources and a recommended reading list.
CUs on the Tube: What makes a good CU commercial?
MADISON, Wis. (1/16/09)--Credit unions are becoming more creative in their advertising, and two credit unions recently shared their experiences targeting potential members through television commercials.
Northern Star CU, Portsmouth, Va., aired a commercial this month to promote its VIP Checking. The product offers ATM fee refunds, interest returns on checking account balances, no minimums and no fees. It's geared primarily toward Generation Y, so the credit union wanted to promote it creatively, Joseph Scharl, marketing director at the credit union, told News Now.
"[Generally] when people think of financial institutions, they don't want something goofy," he said. "They want something serious. But people have become numb to bank ads with CEOs talking--they get lost in it."
"For a traditional product, you use a traditional message. But this product is different," he added.
Northern Star hired a firm to create the commercial. In it, a man is hit with dodgeballs labeled "bank fees" as he undergoes his daily routine--visiting the bank, using the ATM, and going to a restaurant.
The idea for the commercial came from Austin, Texas-based University FCU, which ran a similar ad last year. The firm's creative director had spotted the commercial on YouTube, and created a spin-off.
"I'd love to say we created it from scratch," Scharl said.
The commercial has broadcast only about one week, but people are already talking about it. The $106-million-asset Northern Star will track its success based on how many sign up for VIP Checking. The product's form asks where individuals heard about the product, and "everyone so far has been saying they saw it on TV," Scharl said.
The commercial airs during specific shows--like The Daily Show--and on stations like MTV, FX, and Comedy Central to attract youth, he said.
Advertising on TV can be costly--and the biggest cost is in the creative process. "Shooting the film yourself is the most expensive," Scharl said. If credit unions can afford it, he suggested using an outside company that is not affiliated with a television network. "The quality of the product will be better," he said.
Although the dodgeball commercial has generated interest in Northern Star, TV shouldn't be the only advertising medium. "You have to do a good mix," Scharl said.
Kohler (Wis.) CU has been running commercials for about a year. Its most recent commercial, "Tough Times," which focuses on the struggling economy, aired Jan. 8.
Lance Tischauser, Kohler vice president of sales and marketing, told News Now he received feedback on the commercial the day after it ran. "It was pretty encouraging, right off the bat," he said. "It hit home for people."
Although commercials are a "great way" to market specials, the $226-million-asset Kohler seeks to do more than sell products--it wants to identify with its members, said Tischauser.
"We look at it in real life, what do people want or need, and how do we meet those needs?" he said. "People need to know we're here for them."
Credit unions are often constrained by budgets when doing TV ads. Hiring an outside firm, like Northern Star did, can be costly.
Kohler's marketing team brainstorms ideas and works with a local TV network to create the commercials. Kohler purchased a package with the network that guarantees them a number of prime-time slots, though he said show-specific spots can be cost-prohibitive.
"If you want to be on during 'American Idol,' it's extremely costly," he said.
Media buying is challenging, said Tischauser. Kohler is located in two different counties, which breaks into three cable markets. The credit union can't afford to buy all three, he said.
Tischauser prefers for the credit union's commercials run during the news, because while many people filter out to cable stations like Bravo, The Food Network, and HGTV, most "funnel back to the network news," he said.
If credit unions can't afford to run a commercial at peak time, they should consider running one during an off-peak time. "You will still have a reach," Tischauser said. "It's a smaller audience, but it's worthwhile."
Kohler tries to reach the middle-aged--from 25 to 50 years old--with its commercials. "We try to catch people in their lending years," he said.
But no matter how many commercials run during prime-time slots, the No.1 reason Kohler has been successful is because of its marketing team, Tischauser said.
The team works on the ideas collaboratively--no one person is in charge. "It has to be a building mentality," he said. No matter how far out the ideas are, the team will work with them.
Other Kohler commercials include "Own the Place" and "Bunny Slippers," which introduces a new product at the credit union.
Loans outpace savings, despite recession
MADISON, Wis. (1/5/09)--Credit unions' loan growth for November outpaced their savings growth, an anomaly given the recession, according to a Credit Union National Association (CUNA) economist interpreting CUNA's Monthly Credit Union Estimates.
Loans for the month grew 7.5% over November 2007, while savings grew 6.7% during the same period.
"For a recession, that's unusual," Steve Rick, senior economist at CUNA, told News Now. "Typically people retrench and pay down their debt. This is an aberration, likely caused by banks' tightened lending strategy. The aberration will continue as long as banks don't have an appetite to lend," Rick said.
The loan growth is good news, he said, adding, "Credit unions are still making loans. It's better to put the money in loans than in short-term instruments."
Still, loans in a recession mean more delinquencies.
"Delinquencies jumped 10 basis points (b.p.) from the previous month and 39 b.p. over a year ago," Rick said. The increase "is directly related to job losses. We're losing jobs at an accelerating pace and it will get worse throughout the year."
New-auto loans are still in the tank with the biggest decline in more than 20 years, he said, noting low consumer confidence as a key factor. However, "used-auto loans picked up significantly from last year." Rick said that during the credit crunch, the banking sector is shunning used-auto loans.
Home-equity loans turned around in the last year, up 11% year-to-date, compared with a minus 1.6% for the same period in 2007. "This is unusual because falling home prices are wiping out homeowners' equity, but the interest rates are so low, some homeowners are using home-equity loans to finance their spending. They're down to the very last remnants on their balances and we'll see more people hitting a ceiling in their borrowing limits," Rick said.
These loans are taking business from credit unions' credit card portfolios. "Credit card growth is anemic, with growth at 3.9% year-to-date, a significant turnaround from the 9.3% for the same period last year. People are paying off their credit cards because they're worried about jobs, debt and deleveraging," he said.
Rick noted that credit union borrowing is at $42 billion, a 67% increase from the $25 billion last year. "Credit unions want to keep increasing their liquidity," he said.
As for savings growth, money markets were the fastest growing savings vehicle--up 14%. "Everyone wants their money to be liquid rather than be locked up in certificates of deposit (CDs)," Rick said.
With the falling prices in the stock market, depositors want safety. "In the Safety, Liquity, Yield (SLY) equation, savers want return of their capital, not return on their capital. Right now in the SLY equation, safety and liquidity are dominant," Rick told News Now.
Go to http://advice.cuna.org/ to access the Monthly Credit Union Estimates for November.
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