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April 1, 2015

CU Effect: CU credit counseling helps members 'pull themselves out' of debt

CU System
CHARLOTTE (4/1/15)--A recent Washington Post article outlined a disturbing trend in financial services: Firms that charge exorbitant fees to repair a struggling consumer's credit history when free and low-cost alternatives are available.​

"The industry has capitalized on the aftermath of a financial crash that has left many lower working-class people struggling to pay bills despite the broader economic recovery," the article said.

At the same time, the Federal Trade Commission has pursued more than 160 cases against "credit repair" companies over the past decade--representing only a small fraction of the 2,000 annual complaints the agency receives.

In contrast many credit unions offer free credit counseling programs. One example of the difference these programs make is provided by Charlotte (N.C) Metro CU.

Ironically, Charlotte Metro CU initiated its credit counseling program during the Great Recession, just as many for-profit credit counseling companies did. But Charlotte started its program with the clear intent of moving members to more mainstream credit union services.

"In 2011, the recession was going on and we determined it was hurting our members' ability to even acquire credit union products and services," Susan Coughlin, Charlotte Metro CU credit counselor, told News Now . "Some of them could no longer qualify for a checking account, and a lot of them could no longer qualify for loans."

Charlotte Metro CU employs two credit counselors who were certified through CUNA's Credit Union Financial Counseling Certification Program .

After working with Charlotte Metro CU credit counselors, a member can raise his or her credit score by an average of 40 points and many raised it by as much as 100 points, Coughlin reports. But the results are more telling than mere numbers, she said.

"Even if all the member has with you is a checking account, they are very loyal when you have helped them through a financial crisis because there is so much stress associated with that," Coughlin said. "I have helped members who would consider me a friend at this point. They are loyal to the credit union because you were there when no one else was."

Free credit counseling programs from credit unions provide structure and practical steps for members improve their credit and financial outlook.
Members are typically referred to credit counseling by the credit union's front-line staff or the collections department. The first counseling session is an intensive cash-flow analysis in which the counselor and the member review all incoming funds and outgoing expenses, including debt payments. The member also estimates what he or she spends on gas, groceries and day-to-day expenses.
For the next two weeks the member tracks expenses. "That figure is almost always different than what we estimated," Coughlin said.

The Charlotte Metro CU credit counselor will often contact the member's creditors to negotiate lower interest rates or more favorable rates. "Creditors are often more willing to negotiate flexible terms with a credit counselor," Coughlin said.

Next comes the process of creating a budget. "We have to determine what the member can spend, allocate for bills and still have a comfortable lifestyle," Coughlin said. "You have to allow some money for entertainment. You have to live a normal lifestyle. It's kind of like a diet:  If it's too restrictive, you're going to blow it. You have to incorporate fun into any cash-flow strategy."

Because most credit problems are created by life-changing events, overcoming the problem is often revelatory.

"When you can get to the root of the problem and talk to people, it gets very personal," Coughlin said. "We've had women who've come out of abusive relationships, people with shopping addictions, people coming out of divorce, and long-term unemployment. They just don't know which step to take next.

"We provide them with structure, analyze their situation and give them practical steps to pull themselves out."

(This story is part of News Now's continuing series, "The CU Effect," which gives readers a fresh and in-depth look at how credit unions make a difference in the world every day. Look for the next installment April 15.)

Improving economy will boost CU earnings: CUNA forecast

CU System
MADISON, Wis. (4/1/15)--Improved economic and credit conditions, leading to higher interest rates in 2015 and 2016, will bolster credit union earnings, asset quality and capital, according to CUNA's recently updated 2015-16 economic forecast.

Click to view larger image Click for larger view
"We do not see an interest-rate hike (by the Federal Open Market Committee) dampening growth," said Perc Pineda, CUNA senior economist.

Credit union loan balances will climb 11% this year after a 10.4% jump last year, as households are expected to release pent-up demand for automobiles, furniture and appliances over the next two years, the forecast said.

New-auto loans, credit card loans and purchase-mortgage loans will see strong gains in growth as well.

After climbing by 4.5% in 2014, savings balances will rise 4% in 2015 and 4% in 2016, according to the new forecast. Further, memberships will expand at 3% in both 2015 and 2016.

The forecast also calls for delinquencies to drop to 0.75% in 2016, for net charge-offs to decline to an average of 0.45% from 0.49% by 2016, and for the return on assets to remain at 0.8% for 2015 and 2016.

Also, capital-to-asset ratios will climb to 11% by the end of 2015.

"Strong earnings will mean that capital growth will outpace asset growth over the next two years, increasing the capital-to-asset ratio," the forecast said. "Credit union capital ratios will reach a record high of 11.2% in 2016, surpassing the previous record high last seen in 2005."

Nationally, CUNA economists believe the economy will grow 3% in 2015 and 3.25% in 2016. Inflation will remain below the Federal Reserve's target rate of 2% through 2016, and the unemployment rate will drop to 5% by the end of 2015 and 4.8% by the end of 2016.

As for the federal funds rate, the forecast calls for the Federal Reserve to begin raising rates in June, and push short-term interest rates up to 1% by the end of 2015 and 2% by the end of 2016.

When the Fed begins pushing rates higher, it will "act in a gradual and measured pace, avoiding a jolt in markets that have already strategized responses to an interest rate hike," the forecast said.

U.S. Supreme Court to decide on 2nd liens in bankruptcy

WASHINGTON (4/1/15)--The U.S. Supreme Court heard arguments last week in a case involving the stripping of a second lien when a borrower declares bankruptcy. CUNA has been monitoring this and other similar cases over the past few years because credit unions often make second mortgage loans.
At the heart of the case, Bank of America v. Caulkett, are two Florida homeowners who had second mortgages voided during Chapter 7 bankruptcy proceedings.
In its opening statement, Bank of America cited a 1992 Supreme Court case that does not allow a lien to be voided based on the current value of the collateral, arguing that outside of bankruptcy, a financial institution would be entitled to have its lien stay with the property until it is paid in full.
CUNA hopes the court will continue to hold the security interests of a second lien; failing to do so could disincentivize credit unions from offering second liens.
The court is expected to release its ruling before the end of June.

MainStreet's 7 reasons millennials are choosing CUs

CU System
NEW YORK (4/1/15)--Between 2013 and 2014, nearly 2 million millennials became credit union members, according to numbers from CUNA, further signaling that young people are ditching banks for their local, cooperatively owned financial institutions.

Personal finance website recently investigated why this generation appears to be making the switch, with an article called the "7 Reasons Millennials Are Turning to Credit Unions Instead of Banks."

The top reason--that credit unions provide customer-friendly service--shouldn't come as a surprise to credit union advocates. But that reputation is beginning to spread, it appears.

Millennials prefer the "simple, straightforward solutions" that credit unions provide, Neil Hartman, director of the business consulting firm West Monroe Partners, told .

Next, millennials also are beginning to learn that credit unions will work with them to secure loans, even if their credit isn't in great shape. Banks tend to turn away millennials with lower credit scores, Hartman said.

The third reason? Questions at credit unions are answered quickly and by real people.  

"They want to know that they can pick up the phone and talk to somebody," said Shawn Gilfedder, president/CEO, McGraw Hill FCU, East Windsor, N.J. "Millennials are really the no-fluff group, and they want it when they want it, and how they want it."

The final four reasons:
  • Mobile banking is the new norm. Millennials are drawn to mobile technology, and the younger generation is learning that credit unions offer these types of services at the same level as banks;
  • Millennials more frequently shop for deals, including for car loans and mortgages. "Millennials are smart consumers and they can quickly identify where the opportunities are," Gilfedder said;
  • Credit union membership is more accessible than in the past; and
  • Millennials prefer the lower and fewer fees credit unions offer, especially when on a tight budget.

New CFPB toolkit helps consumers shop for mortgage, house

WASHINGTON (4/1/15)--A new mortgage-shopping toolkit that includes forms that will be required starting Aug. 1 has been released by the Consumer Financial Protection Bureau (CFPB).

Creditors must provide the toolkit to mortgage applicants as a part of the application process, and the CFPB encourages other industry participants, including real estate professionals, to provide it to potential homebuyers.

The new toolkit is designed to replace an existing one that creditors are currently required to provide to mortgage applicants.

The bureau's new Truth-in-Lending Act-Real Estate Settlement Procedures Act (TILA-RESPA) integrated disclosure rule includes new Loan Estimate and Closing Disclosure forms that lenders must provide starting Aug. 1.
According to the CFPB, the new toolkit provides a step-by-step guide to help consumers understand the nature and costs of real estate settlement services, define what affordable means to them and find their best mortgage.
It consists of interactive worksheets, checklists, conversation starters for discussions between consumers and lenders and research tips to help consumers seek out and find important information.
The toolkit can be printed and filled out, but also includes fillable text fields and interactive check boxes in the electronic version. A Spanish language version will also be made available later in 2015.
The CFPB says the release of the toolkit now is intended to give the mortgage industry time to order and receive or print the new toolkit and integrate electronic versions into their mortgage origination systems.

CUs raise record $10.7M for CU4Kids, CMN Hospitals

CU System
SALT LAKE CITY (4/1/15)--More than 3,000 credit unions raised a record $10.75 million for local Children's Miracle Network (CMN) Hospitals in 2014.

Click to view larger image Jim Nussle, right, CUNA president/CEO, and Felicity Guerin, center, American Association of Credit Union Leagues CU4Kids development manager, present a record-breaking Credit Unions for Kids check to Joe Dearborn, Children's Miracle Network Hospitals senior account director. (Children's Miracle Network Hospitals Photo) 
Fundraising under the " Credit Unions for Kids " brand, the credit union community has donated more than $140 million to member hospitals since 1996.

"I would like to thank the credit union movement for supporting this powerful initiative, which helps millions of children in need and creates tremendous awareness for credit unions nationwide," said Jim Nussle, CUNA president/CEO.

Credit unions, chapters, leagues, associations and business partners provide year-round opportunities to fundraise for local CMN Hospitals.

One of the year's highlights was the introduction of the one-day Shop for Miracles campaign, which engaged 108 credit unions representing 33 states resulting in $450,000 for CMN Hospitals.

Other national campaigns included the Change a Child's Life coin drive, Miracle Jeans Day and the Holiday Icon campaign. Donations stay in the community to provide critical research, equipment, services and charitable care for local kids.

"Our credit union partners have an incredible impact on the children and families in the communities they serve," said John Lauck, CMN Hospitals president/CEO. "We appreciate their commitment to 'Put the Money Where the Miracles Are,' which ensures that kids across the country receive the specialized care they deserve."

Since 2008, CO-OP Financial Services has encouraged credit unions, chapters and leagues to create and participate in CMN Hospitals fundraisers through the Miracle Match program. In 2014, the program matched 190 events for 170 credit unions and helped generate more than $3 million for 110 hospitals in 41 states.

Fla.'s North Dade CDFCU closed by NCUA

ALEXANDRIA, Va. (4/1/15)--The National Credit Union Administration Tuesday liquidated North Dade Community Development FCU, Miami Gardens, Fla., after determining the credit union had violated "various provisions of its charter, bylaws and federal regulations."

In announcing the closure, the NCUA noted that North Dade Community Development FCU served 616 members and had assets of $3 million, according to the credit union's most recent call report. It was chartered in 1997 and served a community field of membership that consisted of residents located in northwest Dade County.

The credit union's officials consented to a cease-and-desist order in 2013, one which required 11 changes to operations.

North Dade Community Development is the second federally insured credit union liquidation in 2015.

Member deposits are federally insured by the National Credit Union Share Insurance Fund. Administered by NCUA, the Share Insurance Fund insures individual accounts up to $250,000, and a member's interest in all joint accounts combined is insured up to $250,000. The Share Insurance Fund separately protects individual and Keogh retirement accounts up to $250,000. The Share Insurance Fund has the backing of the full faith and credit of the United States.

7 former CU employees banned from future FI work

ALEXANDRIA, Va. (4/1/15)--Seven individuals have been prohibited from participating in the affairs of any federally insured financial institution, the National Credit Union Administration announced Tuesday. The individuals have pleaded guilty to crimes such as bank theft, embezzlement and bank fraud or consented to the issuance of an order to avoid the time and expense of administrative litigation.
The individuals are:
  • Vytas Apanavicius, a former bookkeeper of Taupa Lithuanian CU, Cleveland, pleaded guilty to the charge of conspiracy to commit theft or embezzlement. Apanavicius was sentenced to 21 months in prison, three years supervised release and ordered to pay restitution in the amount of $962,689;
  • John Richards, a former employee of Polk County CU, Des Moines, Iowa, pleaded guilty to the charge of bank theft. Richards received one year of probation and was ordered to pay restitution in the amount of $50,795;
  • Michael Rusksenas, a former employee of Taupa Lithuanian CU, pleaded guilty to the charge of conspiracy to commit theft and embezzlement. Rusksenas was sentenced to 17 months in prison, three years supervised release and ordered to pay restitution in the amount of $481,502;
  • Saundra Scales, a former employee of First Legacy Community CU, Charlotte, N.C., consented to the issuance of an order of prohibition to avoid the time and expense of administrative litigation;
  • Alex Spirikaitis, the former CEO of Taupa Lithuanian CU, pleaded guilty to the charge of conspiracy to commit bank fraud. Spirikaitis was sentenced to 130 months in prison, five years supervised release and ordered to pay restitution in the amount of $15 million;
  • Wendy Wall, also known as Wendy Wright, a former employee of Pepsi Cola FCU, Buena Park, Calif., pleaded guilty to the charge of bank fraud. Wall was sentenced to 21 months in prison, four years supervised release and ordered to pay restitution in the amount of $480,273.77; and
  • Brandi Ward, a former employee of Dowell FCU, Tulsa, Okla., pleaded guilty to the charge of embezzlement. Ward was sentenced to five years supervised release and ordered to pay restitution in the amount of $105,839.04.
Violation of a prohibition order is a felony offense punishable by imprisonment and a fine of up to $1 million.
NCUA enforcement orders are available online and for inspection at the agency's Office of General Counsel.

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