CU Members "More Comfortable" in Recession than Bank Customers Posted by AVCU on 9:50 AM

Credit union members are a "bit more comfortable" in the recession than bank customers are, thanks largely to credit unions' superior rates, according to The Street.com (Aug. 22).

Low deposit rates have hit everyone, but "if you look only at credit unions, the numbers tell a different story," said the article, citing the Credit Power Index. The index measures the spread between the cost of borrowing and the benefits of saving by examining the difference between certificates of deposit rates at four terms and four loan product rates at the same terms. The higher the index, the worse things are for the consumers.

At the end of July, credit unions' Credit Power Index figure stood at 17.55--nearly five points lower than the national average and more than 5.5 points better for consumers than the interest rate climate found at banks. "It's no wonder these nonprofit institutions have seen their number swell since the recession as Americans seek out better rates," said The Street.

Credit unions "beat banks on deposit rates across the board," the article said. Banks have better mortgage rates, but on fixed mortgages in December, credit unions and banks were in a "statistical dead heat." However, some said credit unions had the advantage in that they typically charge lower fees as well.

Credit unions also won on these other rates:

• For personal unsecured loans, credit unions charged 10.49%, compared with 12.54% charged at banks;
• On 36-month home equity loans, credit unions charged 5.61% while banks charged 6.75%; and
• On 48-month new auto loans, credit unions charged 3.68% while banks charged 4.72%.

Filene Examines Psychology of Choice Overload Posted by AVCU on 9:30 AM

A recent publication by the Filene Research Institute examines the Psychology of Choice Overload and the implications it has on retail financial services. Credit unions need to know how to handle choice overload in their products and services according to the report's author Alexander Chernev, an associate professor in the Kellogg School of Management at Northwestern University.

"Retail is retail, whether you're selling prom dresses, chocolates, or even checking accounts," says Ben Rogers, Filene research director. "Consumers consider their available options and choose. For retail firms like credit unions, part of your responsibility is to make those choices easier."

Imagine for a moment the difference between shopping at Walmart and shopping a high-end boutique on Rodeo Drive or Fifth Avenue. The sounds are different. The employees are different. The prices are certainly different.

In fact, the retail environments couldn’t be much more different, especially in terms of product selection. Whereas an upscale boutique might sell no more than a few dozen different clothes in a narrow range of sizes, Walmart prides itself on stocking hundreds of options in a wide variety of colors and sizes. Despite the different focuses, planners construct each product set deliberately based on the needs of their anticipated customers.

"Credit unions have made great strides toward becoming full-service financial institutions. But the urge to be all things to all people has a downside," said Rogers. Instead, offer a well-considered assortment of products--big enough so members have choices, but small enough so the options don't overwhelm. Filene members have free access to the report while others may purchase it at Filene's website.

Give Retirement Plan Participants Educational Tools They’ll Actually Use Posted by AVCU on 3:51 PM

By Rob Peters, Senior Marketing Strategist for CUNA Mutual Group.

For more information about retirement plans, including the RetireOnTarget^TM guidance system, contact Rob at 800.356.2644, ext. 7594.

Look closely at the vast array of educational tools designed to help retirement plan participants manage their plans. Websites. Interactive calculators. Brochures. Articles. Webinars. Toll-free call center numbers.

It’s pretty clear these tools rarely leave the shed. For evidence, see the results of the 2011 Retirement Confidence Survey (RCS) from the Employee Benefit Research Institute:

• When asked how workers determined the amount they needed to save for retirement, 42% said they’d guessed rather than using a systematic retirement needs calculation.
• The percentage of workers not at all confident about having enough money for a comfortable retirement grew from 22% in 2010 to 27%, the highest level since the first RCS 21 years ago.
• 56% percent report that the total value of their household’s savings and investments, excluding the value of their primary home and any defined benefit plans, is less than $25,000.
• 74% say they plan to work in retirement (up from 70% in 2010).

Four steps from passive education to pro-active guidance

As our industry continues to shift from defined benefit pension plans to 401(k) plans, we should be shifting how we inform and guide plan participants.

Create a retirement plan guidance system that is:

1. Pro-active and time-free. It’s important to present guidance pro-actively to participants so they do not have to spend time and effort finding resources and plugging information into a system. The more time they must commit to getting guidance, the lower the chances are that they’ll be patient enough to actually get it. It’s how we’re wired.

2. Relevant. How many people really care about the difference between a large-cap growth stock fund and a mid-cap value fund? What most of us really want and need to know is, “Am I on track?” and “If I’m not on track, how can I get there?” Certainly, background information on funds and plan options should still be available for those who want it.

3. Visible. The most relevant information—the answer to “Am I on track?”—should be visible at a glance, every time a participant logs in to the account’s “dashboard.” Account balances, contributions, and investment returns are still necessary information. But devote the most visible real estate on the page to suggesting whether the viewer should act now or hold the course.

4. Consistent. Be consistent over time and across all channels. Say Janice sees at a glance—on printed statements, on her PC, or on her smart phone—that she’s not on track to meet her retirement savings goal. With one click, she sees the percentage she should be contributing to get back on track. The next time Janice finishes paying off a car loan or gets a raise, she might be more likely to think of increasing her contribution.

In a perfect world, we’d all seek qualified financial planning assistance to customize our defined contribution accounts according to our specific lifestyles, financial circumstances, and risk tolerances. In the real world, a small minority of employees will do exactly that. Make sure your retirement plan education program makes it easy for the majority of participants to make smart choices, too.

MasterCard Insight on Interchange for CUs Posted by AVCU on 11:46 AM

CUNA has orchestrated a national teleconference for member credit unions to hear MasterCard’s plans for a two-tiered debit interchange fee rate structure, how it will affect credit unions, and their timetable. Credit unions under $10 billion in assets are technically exempt from interchange limits set by the Fed.

The hour-long members only teleconference is scheduled for tomorrow, August 17th, at 2 p.m. (ET). A Q&A session will follow the prepared portion of the presentation. CUNA Chief Economist Bill Hampel, CUNA Deputy General Counsel Mary Dunn, and MasterCard Global Head of Public Policy Shawn Miles will lead the call.

No registration is necessary. Just use the members-only dial in information.

A similar call with VISA representatives is being planned.

Free Web Broadcast: CU Place in the New Reg Environment Posted by AVCU on 11:33 AM

The Filene Research Institute will explore how credit unions fit into a new heightened regulatory landscape when it interviews banking and regulatory expert Robert Litan this Thursday at 1:00 pm eastern. Litan is vice president for Research and Policy at the Ewing Marion Kauffman Foundation in Kansas City and as a senior fellow at the Brookings Institution in Washington, D.C. He has a deep background in government and is one of the nation’s foremost experts on banking law, the payments industry, and capital markets.

Today’s heightened regulatory environment may be more transitory than it seems as we worry about debit interchange, the Consumer Financial Protection Bureau, and the overall growth of regulatory requirements for credit unions. Sign up to for the free webcast here.

Video Report: NCUA Sues Goldman Sachs Posted by AVCU on 3:06 PM

Although a two day old story, here's a video report by Bloomberg of NCUA's suit against Goldman Sachs.

Texas Bank Calls It Quits Posted by AVCU on 10:02 AM

The Wall Street Journal features an article about a Kingwood, Texas community bank that is giving up its banking charter rather than sell or merge. Main Street Bank lends most of its money to small business and reportedly is profitable. But, as reported by the WSJ, the bank chairman is frustrated with regulators tightening their oversight of financial institutions.

In a rare move, the bank announced that the 27 year old institution will surrender its banking charter and sell its four branches to a nearby bank. It will then set up a new lender charter that will operate beyond the reach of banking regulators and the deposit insurance safety net. The endeavor is backed by Microsoft co-founder Paul Allen’s private investment firm.

WSJ says that regulators came under fire in the financial crisis for lax oversight that allowed financial institutions to dole out too much credit to unworthy borrowers. But now some bankers complain that regulatory agencies have swung to the other extreme, poring over minute details of virtually every loan, including those to small businesses.

Main Street Bank has been at odds with regulators since 2009 because of the bank’s concentration of small-business loans. Nearly all of its $175 million loan portfolio is in loans to dentists, fast-food franchisees and delivery-truck drivers, who use the loans to purchase equipment. The bank's average loan size is $100,000. The bank had a $1 million profit in the second quarter and wrote off 1.25% of its loans as uncollectible. The industry charge-off rate is 1.82% in FDIC data for the first quarter. The bank earned $11 million in the past year.

The post-bank entity won't be regulated and won't be able to offer federal deposit insurance—but doesn't want to attract deposits. Read the full story here.

NCUA Calls for CUSOs to Submit Financials Posted by AVCU on 3:44 PM

NCUA has issued a proposed requirement that credit union service organizations (CUSOs) file their financial statements with the agency.  Subsidiaries of CUSOs would have to do similarly. The financial statements would need to be forwarded to the appropriate state supervisor, as well  if a federally-insured state-chartered credit union (FISCU) has invested in or made loans to the CUSO.  NCUA has the authority to inspect the books and records of some CUSOs but not all. 

The proposal would also require FISCUs to comply with certain requirements regarding CUSOs that federal credit unions (FCUs) must currently meet, such as requiring a CUSO to agree to follow NCUA rules on accounting and allow supervisory access to its books and records, and making FISCUs subject to NCUA‟s CUSO investment limitations for less than adequately capitalized credit unions.

NCUA says the reason for its proposal is the lack of accurate and complete financial information about CUSOs “and their potential impact on the NCUSIF.” NCUA says it is also concerned about undercapitalized credit unions investing in CUSOs.

CUNA issued a comment call and will take comments until September 16.  Credit unions have until September 26, 2011 to submit comments to NCUA.  You can access CUNA’s analysis and comment call here.

The Wearable Wallet? Posted by AVCU on 12:10 PM

The Financial Brand, an industry marketing analysis provider, reports on a new twist in mobile technologies introduced by U.S. Bank.

Everyone is jockeying for position in the new digital payments frontier with variations of chip-and-PIN, mobile payments and P2P.  But, according to Financial Brand, US Bank is going a different route with VITAband, a light-weight and durable wristband that combines contactless payment technology with emergency contact and medical information. Call it a “pay bracelet” or “wearable wallet.”

VITAband allows the wearer to “tap and go” when making purchases at merchants that accept contactless payments on MasterCard’s PayPass platform. Signatures aren’t required for purchases under $50. US Bank’s version contains a Radio Frequency Identification (RFID) payment chip, the technology that enables contactless purchases. Each band also carries a VITAnumber, a unique, 8-digit number that links the user to a customizable Emergency Response Profile, where first responders can find the wearer’s identity and critical medical information in the event of an emergency.

With their online VITAband account, wearers can check balances, re-load their prepaid wristband and customize their emergency medical profile. U.S. Bank’s VITAband has an initial fee of $39.95 which includes a one year subscription to the storage of medical records and emergency contacts. Thereafter, it costs $19.95 per year.

Indirect Lending: New Members or Delivery Channel? Posted by AVCU on 11:59 AM

In a recent blog entry, popular credit union speaker Mark Arnold reports on the success of St. Louis Community Credit Union through the use of indirect lending. St. Louis CEO, Patrick Adams, has been growing his credit union’s membership  at an incredibly rapid rate of 13% to 15%, according to Arnold. The credit union’s return on average assets remains at about 1%.

Arnold goes on to report that the credit union’s loans are 55% used auto, stemming in part from its indirect program. Although many credit unions may see indirect lending as a way to grow new member numbers, St. Louis Community uses it as a delivery channel to both new and existing members. CEO Adams says his members average 5.1 products each and that he gets nets about 700 new members each month on average for the past three years. Yet, he claims those numbers aren’t just from growth by indirect channels. Instead, he uses indirect lending as a way to serve existing and potential new members. Indirect lending is a delivery channel, not a catalyst for growth, says Adams.

Read more from Mark Arnold’s blog.

ICU Day = Credit Unions Building a Better World Posted by AVCU on 11:04 AM

CUNA has announced two components of its 2011 International Credit Union (ICU) Day campaign: a “Credit Unions Build a Better World” statement stuffer and drive-up envelope, designed to help credit unions differentiate themselves from their competitors.

The 2011 ICU Day campaign ties into the United Nations General Assembly declaration of 2012 as the International Year of the Cooperative, which carries the theme “Cooperative Enterprises Build a Better World.”

The ICU day statement stuffer (#30023-PRO) highlights social contributions from credit unions around the nation as well as the cooperative aspect of credit unions. This year’s stuffer also comes in electronic formats (#300223E). For one price, credit unions receive both the digital version, which flips from front to back, and a standard PDF.

The ICU Day drive-up envelope (#30024-PRO) incorporates credit unions’ cooperative aspect by emphasizing that credit unions put people’s needs and goals before anything else to help create a better world.

Customize both products by adding a call to action, a logo, and contact information. The new stuffer and envelope are just two of the many offerings available through CUNA’s ICU Day campaign that can be found here. CUNA’s ICU Day materials feature a full line of supplies, including decorations, print promotions, gifts and apparel for members, staff, and boards. The site also includes links to free ICU Day graphics and coloring pages. Credit unions can order online or call (888) 238-1360. Orders made by September 16 will save up to 10% on all ICU Day materials.

The Onion: “Drunken Bernanke” Spoof Posted by AVCU on 1:58 PM

The satirical newspaper, “The Onion,” for years has consistently pilloried the nation's top central banker. Its shtick, as reported by American Banker, was to treat former Fed chairman Alan Greenspan as if he were a rock star, including articles suggesting he was just going to tour small clubs. One in 2007 that had him returning from retirement to "cut interest rates one last time" in front of a packed audience. In its 1999 "Greenspan, Entourage Demolish Hotel Room," The Onion  falsely reported him as clubbing it up and tearing things apart while "still high off the dollar's late rally against the yen."

Yesterday, The Onion released its latest edition with the leading headline of "Drunken Ben Bernanke Tells Everyone At Neighborhood Bar How Screwed U.S. Economy Really Is." American Banker goes on to describe the parody as painting Bernanke like the town drunk, playing "Money for Nothing" over and over on the jukebox while loudly declaring the imminent death of the national economy. The article finishes with Bernanke refusing to pay in U.S. currency because it's "worthless," before dancing alone.

Read The Onion’s parody on Ben Bernanke here.

Free Credit Union Webinars Posted by AVCU on 8:30 AM

Free learning opportunities abound from the comfort of your office chair. Watch these 60-minute informational sessions. While CUNA Strategic Services providers certainly have useful products and services for credit unions to use, they pride themselves in presenting webinars that are first and foremost educational and enlightening. Click on links of interest for more details.

August, 2011

• Aug 10: Consolidating Fraud Detection and AML
• Aug 11: Protecting Your Members: A Planning & Recovery Guide for Credit Unions
• Aug 16: Crisis Communications: Sending the Right Message
• Aug 17: Identity Theft: 2011 Trends
• Aug 17: Verafin Demo: Combining Fraud Detection and AML Technology
• Aug 18: Preparing to Comply With the New FFIEC Guidelines
• Aug 23: Identifying Risk in Your Mortgage Portfolio: Fannie Mae’s Portfolio Review Service
• Aug 23: Boosting Fee Income Can Lead to Increased Market Share
• Aug 24: A New Generation of Money Laundering
• Aug 25: The Environment is Right to Save on Service Contracts

CFB Director Nominee Hearing Delayed Posted by AVCU on 1:47 PM

American Banker reports that the Senate nomination hearing for Richard Cordray, who's tabbed to become the first director of the Consumer Financial Protection Bureau, has been postponed until Sept. 6. Originally scheduled for this Thursday, but debt ceiling debates combined with the Senate on recess for the rest of the month, the decision to postpone became expected. 


Cordray is a former Ohio attorney general who heads the enforcement division at the nascent CFPB, was nominated for the bureau's top job last month by President Obama, in place of Obama's original nominee, Elizabeth Warren. His nomination hearing is expected to be contentious. Forty-four Senate Republicans, enough to filibuster a nomination, have vowed to block any nominee to head the CFPB unless Democrats agree to make changes to the agency's structure. Ironically, Cordray was hired at the CFPB by Elizabeth Warren, the person who first proposed the idea of a stand-alone consumer financial protection agency, and was charged with getting the agency up and running. After being passed over for the director's job due to anticipated hearing contention in Congress, Warren is returning to Harvard and is considering a run for the U.S. Senate in 2012.

Consider Patronage Refunds to Stand Out From Competition Posted by AVCU on 1:27 PM

Up until the 1980's or so, it was fairly common for credit unions to issue interest refunds to borrowers at year-end. That was the U.S. credit union version of the patronage refunds issued by other types of cooperatives. Such refunds are uniques tools used by credit unions and other cooperatives to manage capital levels, return value to member- shareholders, and tie members more closely to the company. But the practice of interest refunds in U.S. credit unions has been mostly non-existent for a long time now.

In a new Filene Research Institute study, "Credit Union and Cooperative Patronage Refunds" re-instituting patronage refunds is explored as a unique tool for credit unions to single themselves out in the highly competitive financial services arena. The report examines the details of common refund practices outside the credit union system and weighs the pros and cons of increasing the practice among credit unions.

Credit unions, of course, pay member dividends every month in the form of ordinary interest. Very few, however, offer a consistent extraordinary dividend. Standard reasons for not paying one include earnings already being tight, creating an on-going expectation among members, and potential excess already being reflected in the credit union’s attractive savings and loan rates.

These reasons are valid, but are the same reasons any publicly traded firm with excess capital might use. Nevertheless, the boards of those publicly traded companies constantly remind themselves that their shareholders expect real value and can easily take their money elsewhere. Nothing—not good feelings, not good intentions—says “please stay” like cash.

The report is available to Filene members free of charge, and for $125 to non-members.

Proposed Changes to Form 990; CUNA Seeks Leeway for State Charters Posted by AVCU on 11:53 AM

In a letter of comment to an IRS proposal to change Form 990, CUNA urges the IRS to make changes to reduce the compliance burden for state chartered credit unions filing IRS Form 990. Vermont state-chartered credit unions are required to file Form 990 with the IRS annually. Since they're not subject to unrelated business income taxes (UBIT) federal charters aren't required to file.


Among other things, Form 990 calls for the names and compensation of key employees such as directors, their 20 highest compensated non-executive employees, independent contractor, and former high ranking or key employees. The reporting thresholds differ by position. CUNA suggests that the threshold for former directors be increased from $10,000 in compensation to $100,000. CUNA also seeks lowering the number of high-earning, non-director employees covered by Form 990 from 20 down to 5. Reports detailing their compensation should be limited to the last 2 years, rather than the previous 5 currently required. CUNA also seeks a separate Form 990 for 501(c)(3) organizations. Today, all 501(c) organizations use the same Form 990.

CUNA's full comment letter is available here. 

Lending & Protection Webinars On Tap Posted by AVCU on 12:01 PM

Upcoming Free Webinars from CUNA Mutual:

• ACH Fraud Hits a Nerve (CM bond holders only): Transactional procedures can minimize risk – Wednesday, August 17^th, 10:00 a.m. CST. Assaults against small and medium business in the ACH arena have been a wake-up call as fraudsters attack accounts by compromising systems and initiating fraudulent electronic payments. This webinar will focus on specific system controls and transaction procedures to minimize your risk. Register here.
  
• What you Need to Know About Employment Practices Liability (CM bond holders only): How to spot issues, eliminate hurdles, and reduce risk –Wednesday, October 5^th, 10:00 a.m. CST. Employers are facing an escalation of employment practices litigation and are finding that they are vulnerable from the pre-hiring process through the exit interview. Join us as we share practical tips on how to spot issues, remove organizational hurdles, and set clear corporate policies and procedures to reduce the potential impact. Register here.
  
• Credit Card & Personal Loans-Growing Unsecured Loans: August 2^nd, 2:00 p.m. CST. Help your members get out from high interest credit cards or offer your members a great alternative to another credit card.  Register here
  
• Auto Loan Recapture & Next Car Purchase-Grow Loans Even in a Challenging Market: Aug 11^th, 2:00 p.m. CST.  Increase your auto loan portfolio by recapturing lost auto loans in addition to acquiring new loans from members looking to purchase a vehicle.  Register here

Filene CEO: Nothing Matters As Much As Growth Posted by AVCU on 11:48 AM

Mark Meyer, CEO
Filene Research Institute

Filene Institute CEO Mark Meyer posts on his blog today an article touting his belief that nothing is more important to the long-term health of today's credit unions than sustainable membership growth. Not huge growth in members, but a steady 2% to 5% annual growth in members, he argues, will bring in more borrowers, which equates to a healthier credit union. Meyer points out that credit union membership growth trends are definitely in decline. In 2001 credit unions added almost 2 million members. In 2006 it was 1.2 million. In 2011 we’ll be lucky to get 600,000 or 700,000. 


Meyer's Filene organization did a study of the effectiveness of credit union marketing that revealed that words like ‘membership’, ‘join’ and ‘cooperative’ don’t turn many people on. Instead, consumers like simple, individually relevant statements like “save $200 a year.”  Also, people seem to respond well to the age old credit union motto of “For People, Not Profit.”


Meyer also talks about reasons preventing credit unions from sustaining meaningful annual growth in members, including recession fears, costs of maintaining minimal accounts, decline in car sales, the capital accumulation mode of credit unions, and inadequate marketing budgets.


Read Mark's blog entry in entirety.