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Prolonged recession could affect debit card spending

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CHICAGO (1/16/09)--Data from major card companies indicate that debit cards have so far held their own through the struggling economy—good news for the 58.9% of credit unions overall who offer debit cards. However, analysts warn that a prolonged recession could affect consumers’ debit spending. According to Synergistics Research Inc., debit card penetration has reached 75% to 80% of U.S. consumers. But the unemployment rate is also deepening. Consumers who don’t have jobs and therefore have no earnings won’t be spending, Synergistics CEO William H. McCracken told ATM&Debit News (Jan. 15). Visa reports debit volume at $280 billion for the three months ending June 30, 2008, an increase from $248 billion for that quarter in 2007. MasterCard’s total volume is also up. For the nine months ended in September total debit volume was $232 billion, up 18.3% from $196 billion a year earlier, said the publication. Although the economy hasn’t impacted debit so far in the U.S., other countries are seeing beginning signs of the economy’s effects. The average debit and credit card transaction processed in December through the United Kingdom’s Barclaycard Payment Acceptance was roughly US$71.20--down 1.3% from the period a year before. That didn’t dent the volume of processed transaction, which rose rose 4.7% during the same period. Visa says that nondiscretionary spending on its debit cards, which represent 53% of its global payments transactions, is less susceptible to economic volatilities than credit cards are. Among credit unions with assets of $50 million or more, debit cards are offered by 96% to 99.6% of credit unions with assets of $50 million or more, according to the Credit Union National Association’s Credit Union Service Profile for December 2007.

CUNA sets holiday inauguration schedule

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WASHINGTON and MADISON, Wis. (1/16/09)--The Credit Union National Association’s Washington, D.C. and Madison, Wis., offices will be closed Monday in observance of Martin Luther King Jr. Day. The Washington office also will be officially closed Tuesday because of the presidential inauguration. CUNA’s Washington office address, 601 Pennsylvania Ave., is on the inaugural parade route and in established security zone. The Secret Service has asked downtown employers to limit operations that day. CUNA’s office will provide a perfect vantage point from which to watch the parade for credit union officials, senior staff and guests. For more detail on credit unions’ inauguration activities, check Tuesday’s edition of News Now. Due to the holiday, News Now will not publish a Monday edition. It will resume regular publication Tuesday.

Fitch acts on U.S. Central rating

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NEW YORK (1/16/09)--Fitch Ratings announced Wednesday its latest action regarding U.S. Central FCU’s investments portfolio, saying that the portfolio “remains of very high quality” while its credit quality has migrated lower in the troubled U.S. economy. “USC’s’s investment book remains of very high quality with the majority of the securities being ‘AAA’ rated,” said Fitch in a press release. The actions reflect Fitch’s expectation that U.S. Central will continue to realize losses in its investment portfolio that are meaningful to capital and earnings capacity. Fitch also noted an erosion in funding and liquidity positions. “While Fitch recognizes that the large unrealized loss position overstates the true risk to USC, and the company has the intent and ability to hold its securities until recovery, USC’s investment book does contain securities for which Fitch believes recovery prospects are limited, specifically portions of its non-prime residential mortgage-backed securities (RMB). Thus there is heightened risk of USC recognizing significant ‘other –than-temporary impairment’ changes,” said Fitch. U.S. Central’s Issuer Default Rating (IDR) was moved to “AA” from “AA+” and Fitch removed the IDR rating from Rating Watch Negative. The Individual Rating is now “D” and is placed on Rating Watch Negative. The Rating Outlook for the long-term and short-term IDR is Stable, Fitch said. The Stable Outlook reflects “the extremely high probability of external support” from the credit union industry. Fitch recognized initiatives by National Credit Union Administration (NCUA) to inject liquidity into the system. Because of that support, U.S. Central continues to carry a high support rating of “1” and a high support floor of “AA,” said Fitch. Fitch also said it “does view favorably the company’s recent conversion of $450 million in membership capital shares to a more permanent form of capital, known as Paid-In-Capital (PIC II). “Further, the entire corporate credit union membership base participated in the PIC II issuance, which highlights the strength of USC’s franchise and its importance to its membership base. From a liquidity standpoint, while the company’s liquidity position has become more stressed, USC still has considerable unused contingent funding available,” said Fitch. It said NCUA’s liquidity/guaranty programs “will help relieve some of the liquidity and funding stress at USC and within the corporate credit union system.”

CUs on the Tube What makes a good CU commercial

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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. To watch some of the credit unions’ commercials, use the link. Kohler’s “Bunny Slippers” introduces a new product at the credit union.

Movement mourns Tom Hughes

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VIENNA, Va. (1/16/09)--Credit unions were mourning the death of Thomas J. Hughes, vice admiral, U.S. Navy (Ret.), and former president/CEO of Navy FCU. Admiral Hughes died Tuesday at Fauquier Hospital in Warrenton, Va., after a short illness. “Admiral Hughes was an admired, respected and highly intelligent leader in the credit union movement,” said Credit Union National Association (CUNA) President/CEO Dan Mica. “His innovative thinking and personal drive helped propel Navy Federal's remarkable growth and success, and his many contributions on the state and national level did the same for the movement at large. He will be long remembered and missed by all of us,” Mica said. During his career over 40 years, Hughes commanded three ships—the destroyer USS John King, the amphibious cargo shp USS Thuban and the oiler USS Chikaskia. He served numerous assignments at the Pentagon, including assistant chief of naval personnel for finance management; director, budget and reports in the Office of the Navy Comptroller; assistant deputy chief of naval operations (manpower, personnel and training); and deputy chief of naval operations (logistics). He became a Navy Federal volunteer official in the early 1970s and served on the board, including several years as chairman. In 1987, he retired from the Navy and became president/CEO of the credit union. He served in that capacity for nearly nine years. Admiral Hughes received the Distinguished Public Service Award from the chief of naval operations recognizing his dedication to men and women in the armed forces. He was passionate about credit union affairs and served with CUNA, as a board member of the National Association of Federal Credit Unions, a member of the Thrift Institutions Advisory Council, a member of the board of the Baltimore branch of the Federal Reserve Bank of Richmond, and advisor to the Visa board. Cutler Dawson, current Navy Federal president/CEO, said, “Tom Hughes’ contributions to Navy Federal as a leader and a visionary built the strong foundation of Navy Federal that members and employees appreciate and enjoy today. He really valued the whole culture of the credit union, and he always had the individual sailor and marine’s best interest at heart. We all miss him.”

CU System briefs (01/15/2009)

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* PHOENIX (1/16/09)--The Federal Bureau of Investigation says one man, dubbed the “Wilson Bandit,” is suspected in three robberies since Oct. 30 of credit unions in Ahwatukee and Tempe, Ariz. The most recent robbery was Monday at Desert Schools FCU’s Ahwatukee’s branch. The other robberies occurred at a Tempe branch of the credit union on Dec. 13 and Oct. 30, 2008. FBI said the man covers part of his face like the character Mr. Wilson on “Home Improvement,” a television show. He hands a teller an envelope with the words “100’s and 50’s only. I have a gun,” written on back of the envelope (The Arizona Republic Jan. 13) … * HARRISBURG, Pa. (1/16/09)--TruMark Financial CU, based in Trevose, Pa., ended 2008 by surpassing the $1 billion asset milestone. TruMark has about $1.1 billion, according to the Pennsylvania Credit Union Association (Life is a Highway Jan. 15). The credit union kicked off its 70th anniversary year on Jan. 13 at its annual employee meeting … * SEATTLE (1/16/09)—A former teller at Watermark CU, based in Seattle, and his wife have been charged with stealing more than $170,000 from an elderly woman in North Seattle (The Seattle Times Jan. 13). Michael Lambard, 32, and Katie Lambard, 29, were charged with six counts of first-degree theft and 27 counts of second-degree theft. Katie Lambard worked as a driver for Margaret Martin, who lives in an assisted-living facility. The two allegedly transferred more than $200,000 from Martin’s accounts to their own account and spent it on vehicles. Auto dealers got suspicious and notified authorities … * LANSING, Mich. (1/16/09)--The Mid Michigan Credit Association, a non-profit organization of creditors and collectors, recently disbanded and donated their liquidated funds to the Michigan Credit Union Foundation, according to the Michigan Credit Union League. The donation totaled $8,792. Sam Frangie, vice president of collection for LAFCU and a founder of the association, said most of its attendees and funds received from seminars were from the credit union community (Michigan Monitor Dec. 22) …

Ukrainian parliament considering CU mortgage bill

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KIEV, Ukraine (1/16/09)--Ukraine’s parliament passed a bill at the end of last year that amended laws regarding mortgage activity at credit unions. Bill No. 2256 involved the possible refinancing by credit unions of their activities on rendering mortgage credits, and allowed credit unions to be either founders or members of mortgage organizations, which have the right to raise mortgage assets (Interfax: Ukrainian General Newswire Dec. 17). The bill would help improve the effectiveness of the state over credit union activities, boost the quality of credit union activities, mitigate the risk of credit cooperation system [credit union] players, and increase citizens’ confidence in credit unions.

Credit scores to be offered via CUs banks

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HARRISBURG, Pa. (1/16/09)--Fair Isaac Corp. announced an agreement Thursday to make its credit scores available for free to about 200,000 members of Pennsylvania State Employees CU (PSECU). The agreement was reported in The Wall Street Journal (Jan. 15). Fair Isaac, the creator of the Financing Corporation (FICO) score, said it is working on finalizing other similar deals with major customers. The PSECU arrangement is an expansion of the “Scores on Statements” program, which Fair Isaac mainly offered to credit card customers at Washington Mutual (WaMu). Through the arrangement, consumers receive their FICO scores, along with the major reasons for the score, how actions they take affect their scores, and ways to improve scores. Consumers already can obtain free detailed credit reports--but not a free credit score-- once every 12 months from each of the three major credit-reporting bureaus at PSECU is a $3.2 billion asset, Harrisburg, Pa.-based credit union.

Mayor CUs embrace what banks are forced to do

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NEWARK, N.J. (1/16/09)--In contrast to banks,“credit unions embrace what banks have been forced to do through the Community Reinvestment Act,” said Newark Mayor Cory Booker when he addressed the January meeting of the New Jersey Credit Union League’s Essex-West Hudson chapter.
From left, Paul Gentile, president/CEO of the New Jersey Credit Union League; Cory Booker, Newark, N.J., mayor; and Calvin Jackson, league board director and president/CEO of St. James AME FCU, posed at the January meeting of the New Jersey Credit Union League’s Essex-West Hudson chapter. (Photo provided by the New Jersey Credit Union League)
Booker praised the credit union movement’s values and noted the critical role credit unions play in helping empower individuals and communities. “Credit unions epitomize the very ideals upon which our nation was founded,” Booker said. He commended the league’s legislative initiative to allow credit unions to become eligible depositories for municipalities as a way for credit unions to further support their communities. Booker also mentioned the need for the type of products and services the league and the New Jersey Credit Union Foundation hope to bring to credit unions through the REAL Solutions program, the program to build wealth among middle and low-incomers. He cited Volunteer Income Tax Assistance centers--one component or REAL Solutions--as the type of community outreach for which credit unions are ideally suited. “Mayor Booker is an impressive figure in New Jersey Politics,” said Paul Gentile, league president/CEO. “Credit unions have a tremendous presence in Newark, and we will assist Booker whenever we can in helping him achieve his goal of revitalizing Newark.” Having lawmakers and government officials such as Booker speak at chapter meetings is one way the league is attempting to enhance the state’s chapter system and raise awareness of credit unions, Gentile noted. “With 216 credit unions, 1.2 million members and $10 billion in assets, New Jersey credit unions need to be recognized as a force in New Jersey,” Gentile said. “We will use the chapter system to raise our profile among government leaders.” Elected mayor in 2006 on his second attempt at the office, Booker has earned one of the highest approval ratings of any elected official in New Jersey and has received attention from the national media. Filmmaker Marshal Curry chronicled Booker’s 2002 unsuccessful mayoral campaign in a documentary, “Street Fight,” which was nominated for the 2005 Academy Award for Best Documentary.

Suspect arrested in attack on Self-Help CEO

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DURHAM, N.C. (1/16/09)--Durham, N.C., police said they arrested a suspect Wednesday in the November beating and robbery of Martin Eakes, co-founder and CEO of Self-Help CU and the Center for Responsible Lending. Harry Wayne Massey Jr. was arrested Wednesday at a Durham apartment, police said in a news release. No one else has been charged in the incident (The News & Observer Jan. 15). Massey was wanted for felony possession of stolen property--a cell phone--which he was accused of having in his possession the day after the Nov. 24 attack on Eakes. Eakes was robbed and severely beaten by four men in a parking garage as he left his office Nov. 24 (News Now Dec. 2). He suffered multiple bruises to the head and face, a gash to his forehead that required 15 stitches and a torn bicep (The Herald-Sun Nov. 30). The incident occurred at about 8 p.m. as he was about to enter the parking garage used by employees of Self-Help. The men delivered between 20 and 30 blows, targeting Eakes’ head and face. They took his wallet and cell phone. Eakes said he did not know the men or if they were waiting for him in particular.