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State estimates on switching new tools released by CUNA

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WASHINGTON (11/7/11)--State-by-state estimates of member and deposit growth since Sept. 29 were released Friday by the Credit Union National Association (CUNA), whose overall report on national growth had generated much pro-credit union attention in the media last week.

The estimates cover growth at credit unions since Bank of America unveiled its $5 debit card fee, which it rescinded after  a nationwide public outcry that culminated in Bank Transfer Day, a day set aside to switch from big banks to credit unions and community banks.

The statistics are based on estimates collected from credit unions by CUNA's Economics and Statistics Department from Sept. 29 through last Wednesday. They do not include additions from Saturday's Bank Transfer Day.

The 10 states whose credit unions reported the most growth included:

  • California, with 90,100 members and $624 million  deposits into credit unions;
  • Texas, with 47,000 new members and $326 million in deposits;
  • New York, with 39,000 members and $270 million in deposits;
  • Florida, with 32,900 members and $228 million in deposits;
  • Michigan with 27,900 members and $193 million deposited;
  • Virginia, with 26,600 members and $184 million in deposits;
  • North Carolina, with 25,900 members and $270 million in deposits;
  • Pennsylvania, with 25,000 new members and $179 million in deposits;
  • Washington, with 23,300 new members and $161 million in deposits; and
  • Massachusetts, with 19,700 new members and $136 million in deposits.
Nationwide, more than 650,000 consumers opened new accounts and deposited an aggregate of $4.5 billion into credit unions during the period, said CUNA.  More than 80% of the 5,000 credit unions surveyed said they had added members since the end of September.

CUNA also developed some Web-based tools to help consumers make "a smarter choice" and consider credit union membership. Three new videos illustrating "bad choices" and challenging viewers to learn more about making a smarter choice have been uploaded to You Tub channel. The vignettes are designed to remind viewers in a humorous way that nobody's perfect and there's always an opportunity to make a smarter choice. The videos, Painting, Grill, and Dog can be accessed at the link.

Zenith of publicity making history for CUs

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MADISON, Wis. (11/7/11)--Credit unions have "made it" in terms of public awareness. On Friday, credit unions and their growth in membership since the announcement of Bank of America's $5 monthly debit card fee (now-rescinded) were being talked about by USA Today, The New York Times, The Wall Street Journal, Time, Newsweek/The Daily Beast, HeadlineNews, NBC's "The Today Show," and more.

On Friday, the day before Bank Transfer Day, credit union growth was the No. 1 story on Bank Transfer Day's Twitter site, which featured an ABC News story leading off with the statistics from the Credit Union National Association (CUNA)  indicating 650,000 consumers have already switched accounts to credit unions since Sept. 29.  Also, Twitter reported that the Bank Transfer Day page was in the top 10 pages most tweeted.

The growth in membership--650,000 new accounts and $4.5 billion in new deposits since Sept. 29--points out that consumers are seeking alternatives to high bank fees, said The New York Times Dealbook  (Nov. 4). "I think it's a last straw thing," CUNA President/CEO Bill Cheney told the Times. "Even though banks are backing up on some of their fees, there's a sense that if it's not this fee, it's going to be something else."

The Times also talked with David Becker, president of PhilippeBecker, a San Francisco design firm, who had kept his business accounts at a small local bank for years. He found shelter from fees at a small local credit union. "I called my credit union up the other day, and someone answered the phone," he told the Times. "I was like, holy smokes! I'm on a different planet!"

Among the more noteworthy articles:

  • Time's Moneyland blog noted that credit unions' new 650,000 accounts were 50,000 more than the new accounts generated at credit unions in all of 2010. It quoted CUNA's Cheney as saying that the increase is most pronounced at the nation's largest credit unions and noting that many credit unions weree extending their hours or adding staff in preparation for Bank Transfer Day.
  • reported that in just a few weeks, credit unions have witnessed a whopping 1,200% increase in new customers. "We think that traffic is coming right out of Bank of America, based on anecdotal evidence from our member credit unions," CUNA Senior Vice President of Communications and Chief Communications Officer Mark Wolff told the publication, noting that bank customers "are seeing this retreat from banks as too little, too late."
  • USA Today noted that on the eve of "Bank Transfer Day," the grass-roots backlash against higher fees, U.S. credit unions say have added more than 650,000 members and $4.5 billion in new deposits in the past month. That's 50,000 more new accounts than for all of 2010, it said citing CUNA's statistics. Cheney said in the article that many credit unions are making special efforts to tap the surging interest in credit unions.
  • NBC's "The Today Show" featured a segment with personal finance writer Jean Chatzky  on hidden fees in banks and mentioned the statistics as well.
Use the resource links to access the stories. And to get an idea of the scope of coverage, check out the resource link on 81 media sites.

Leagues are reporting increased coverage in their states as well.. New Jersey Credit Union League President Paul Gentile said that the league monitors searches for New Jersey credit unions. "The number in October is almost 10 times what it is in a typical month," he said (The Daily Exchange Nov. 4).

Credit Union Association of New York League President/CEO Bill Mellin is not surprised that Bank Transfer Day has raised awareness of credit unions significantly in the public eye.  "This increased awareness presents a great opportunity not only for credit unions positioned for growth, but for the credit union community in general to focus on the mission and purpose of credit unions, not on fees or the business model of big banks," he said. "After all, it's not the fee structure that makes credit unions different; it's the commitment they have to their members and to helping them build financial independence."

Missouri Credit Union Association Chief Membership Officer Don Cohenour explained the benefits of credit union membership in an interview with NBC Action News in Kansas City. He noted "we have seen a considerable increase [in membership] across the state."

CUs prepared for Bank Transfer Day--and the future

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MADISON, Wis. (11/7/11)--Bank Transfer Day has come and gone, with credit unions well-prepared for the extra business as consumers switch accounts from fee-toting banks. But they know that Saturday is a beginning of a bright future in terms of public awareness of credit unions and the opportunity to deepen new member relationships.

Credit unions last week reported their plans for wooing new members on Saturday, a day designated for consumers to switch to credit unions and community banks in the wake of several big banks' plans to charge debit card fees.  The Pennsylvania Credit Union Association asked its member credit unions, "Is your credit union making preparations to accommodate potential members?"  Seventy responded, with 58.6% of them indicating they were preparing for Bank Transfer Day, 32.9% saying no, and 8.6% saying maybe (Life is a Highway Nov. 3).

Many credit unions offered incentives to entice new members. Members lst FCU, Mechanicsburg, offered members "to earn a little extra money" by referring a friend to join the credit union. It also used Facebook, Twitter and a blog to promote the day.

First American CU, a part of First Community FCU, headquartered in Parchment, Mich., prepared to use Saturday to welcome and educate new members on the business model of credit unions as a not-for-profit financial cooperative.  It also is launching a member give-back program tied to its MasterCard Check Card (debit card). During November, December and January, First American and First Community will pay members up to $5 each month based on their aggregate debit card transactions. The credit union experienced a 60% increase in new members in October over October 2010. Its total membership in all regions of both credit unions experienced a 14% increase in new members and a 15% increase in new member deposits in October. 

Texas Trust CU, Mansfield, Texas, noted that too many North Texans are suffering from F.E.E. (Feeling the Effects of the Economy) Syndrome associated with their banking choices. Its prescription for a cure:  "Change where you bank."  It offered a one-dose treatment of $155 when a new member opens a Free & Flexible checking account. "Banking shouldn't include surprises that give you heartburn, headaches, or a pain in the neck," said Jim Minge, Texas Trust CU president, adding that there are no surprises at the credit union. "Anyone suffering from F.E.E. symptoms should see us for the cure."

University of Illinois Employees CU, Champaign, announced it would offer checking account holders CardCash, a 1% cash-back rewards program on non-PIN debit card purchases. Members could earn up to $250 a year in cash back for their purchases--"a distinct advantage for consumers when many large financial institutions are shutting down their debit card rewards programs and even charging monthly fees for debit cards." The credit union hoped to sign up 500 new members before the offer expired on Bank Transfer Day. It expects the campaign to net about $100,000 over the next 12 months (The Bakersfield Californian Nov. 2).

Click to view larger image Credit Union National Association's Madison, Wis., staff sported anti-banking fees T-shirts Friday in advance of Saturday's Bank Transfer Day. One says "My credit union, FEE-H8TER,  Living in credit union land" and the other says "I did the math: CU > Bank, Credit unions are a smarter choice."  Staff planned to wear the shirts on Saturday also. (CUNA PHOTO)
Many credit unions hit the media trail with special ad campaigns to let potential members know they are an alternative to high bank fees.  Kern Schools FCU, Bakersfield, Calif. budgeted $19,000 for its billboard-newspaper-online ad campaign. The price tag includes the cost of putting up a $5 membership fee for each new direct deposit member, a box of free checks and a $25 checking account deposit.

In Pennsylvania, M-C FCU, Danville, aired a commercial Friday and Saturday with a message from President/CEO Jim Barbarich emphasizing choice. "Where you conduct your financial affairs is a personal choice. Trust, confidence and value are important factors in this decision," he said.

In New York, Buffalo Postal FCU, Buffalo, made EZ Switch Kits available, aired radio ads and donated $5 to a local charity for every person who made the switch. Capital Communications FCU placed welcome banners outside and beefed up its staff Saturday. Mid-Hudson Valley FCU ran print and Web banner ads in its local daily newspapers and promoted it on Facebook and Twitter. Teachers FCU CEO Robert Allen spoke about the credit union difference on local TV and his credit union partnered with Bethpage FCU and NEFCU to launch to show locals that credit unions are a better way to bank.

Novaris FCU in East Hanover, N.J., promoted "Every Day is Bank Transfer Day" using the New Jersey Credit Union League's Banking You Can Trust toolkit. The credit union placed sandwich board posters in front of its offices to attract consumers going to work. It will rotate the messages throughout the month (The Daily Exchange Nov. 4).

One credit union decided to expand its field of membership to make it easier to attract new members. Sb1 FCU, Philadelphia, said its board voted last month to approve an expanded charter, opening up the credit union to anyone who lives, works, worships, or attends school in parts of the city, noting that now more than 638,000 Philadelphians are now free to choose Sb1 as a banking option (Life is a Highway Nov. 4).

Many credit unions already were experiencing a uptick in new member inquiries prior to Saturday. In Stevens Point, Wis., Central City CU reported it had already opened more than 240 new checking accounts during August and September--a 140% increase over the same period a year ago.

North Jersey FCU, Totowa, N.J., said it was already getting phone calls from people wanting to know what they need to bring in to open an account on Saturday. It planned special loan incentives and credit counseling on Saturday and stayed open an hour later (The Record Nov. 3)

Elevations CU in Boulder, Colo., marked the historic day, but also noted, "The credit union model is certainly not new, and Elevations CU has been serving the Front Range for nearly 60 years." Gerry Agnes, president/CEO, added that the credit union  would "welcome consumers and businesses who are seeking a viable alternative to the traditional for-profit banking model."  Agnes also noted that making the switch is easier than many think.

Those examples are the tip of the iceberg. Many credit unions beefed up staff and extended Saturday hours. But most are offering incentives that will last in hopes of cementing new relationships long after the Bank Transfer Day hoopla has died down.

Check fraud is increasing says white paper

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MADISON, Wis. (11/7/11)--A BluePoint Solutions white paper examines the common types of check fraud and related costs to financial institutions--including credit unions--then outlines methods that are effective in fighting fraud.

Even though the volume of checks is declining, checks are the most common payment method criminals use to perpetrate payments fraud against financial institutions, according to the paper, "The Changing Landscape of Payments: Lower Check Losses by Combatting Check Fraud."

Eighty percent of U.S. financial institutions have reported losses caused by check fraud, said BluePoint Solutions. Check fraud is the fastest growing and costliest method of payments fraud. Thirty percent of financial professionals reported a higher incidence of attempted or actual check payments fraud in 2010 than 2009 and a higher rate of growth than credit- and debit card fraud, corporate card fraud, and automated clearinghouse fraud or wire transfer fraud.

Many U.S. financial institutions are fighting the problem of check fraud directly by using a collaborative ap­proach, said the paper. By sharing intelligence that includes up-to-date check and demand deposit account information, these institutions have mutually benefited from pooled information to work together to reduce check fraud. They treat check fraud as an industry problem that is best handled collectively, not competitively, said BluePoint Solutions.

The single, most-critical best practice in stopping check fraud and reducing losses is to effectively push loss avoidance to the point-of-presentment, the paper advised. The earlier the potential fraud is identified, the sooner a financial institution can counteract it. This can include a combination of actions such as notifying depositors at the teller line they are depositing a suspicious check, applying an extended Reg CC hold when receiving the deposit, and adding or modifying a check hold before it is paid or returned by the paying institution.

To view the abstract and download a free copy of the paper, use the link.

Filene CUs share secrets to lending in recession

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MADISON, Wis. (11/7/11)--Twenty-three out of more than 2,200 U.S. credit unions larger than $50 million in assets grew their new- and used-auto loan portfolios by more than 5% each year between 2008 and 2010. Eleven also grew their credit card portfolios by 5%, according to a new Filene Research Institute report. Those who were successful had strengths in common.

"Superior Consumer Lenders during the Great Recession" supported by a grant from CUNA Mutual Group, is Filene's latest examination of credit union lending.

The Great Recession reduced the flow of U.S. consumer lending, and the opportunities that remained required much effort, the report said.

Filene's researchers conducted qualitative interviews with 12 of the 23 credit unions. Each of their stories is published as a case study in the full report. Despite their different regions, some key common strengths emerged:

  • Sales culture--Few credit unions said they felt like they had mastered it, but every successful lender interviewed spent a lot of effort trying to improve the credit union's sales culture.
  • Consistent underwriting--The tumult that started in 2008 pushed scores of lenders to change their underwriting or exit consumer lending altogether. Many successful credit unions held to their standards--or tightened them slightly--and kept lending through the financial crisis.
  • Refinancing-- Dropping interest rates combined with effective data mining and sales processes meant that many of the successful credit unions could capture loan growth even without a new purchase.
  • Market power--A handful of credit unions leveraged strong positions in a local economy or particular product line to make themselves first-choice lenders during the downturn.
  • Symbiotic product lines--Although the report focused mainly on auto and credit card lines, several credit unions attributed their consumer lending success to cross-selling from other, more important products like mortgages or agriculture loans.
  • Direct lending--A strong minority of credit unions interviewed got their loans the traditional way: by relying on existing members, branch traffic and steady cross-selling.
  • Indirect lending--Most credit unions interviewed captured their lending growth primarily from indirect lending. None were indirect "dabblers." Each cultivated strong dealer relationships, invested in technology, and set its own underwriting standards.
Most credit unions interviewed for the report drew strength from two or three of these categories, and focused on doing that particular task well.

The case-study credit unions include:

  • Acadia FCU ($95 million in assets), Fort Kent, Maine;
  • Baton Rouge Telco, ($194 million), Baton Rouge, La.;
  • Columbus Metro FCU, ($203 million), Columbus, Ohio;
  • Daniels-Sheridan FCU, ($54 million), Scobey, Mont.;
  • Education Plus CU, ($71 million), Monroe, Mich.;
  • EECU, ($1.2 billion), Fort Worth, Texas;
  • Fort Worth Community CU, ($723 million) Bedford, Texas;
  • Gesa CU, ($1.1 billion), Richland, Wash.;
  • Hutchinson CU, ($170 million), Hutchinson, Kansas;
  • SAC FCU, ($506 million), Bellevue, Neb.;
  • Scott CU, ($737 million), Collinsville, Ill.; and
  • Security Service FCU, ($6.5 billion), San Antonio, Texas.

Secretary of State meets with MnCUN CUs on MBLs

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ST. PAUL, Minn. (11/7/11)--Highlighting the importance of offering small businesses greater access to credit, several Twin Cities credit unions and members of the Minnesota Credit Union Network (MnCUN) met Tuesday with Minnesota Secretary of State Mark Ritchie to discuss increased member business lending (MBL).

Minnesota Secretary of State Mark Ritchie (center) discussed member business lending Tuesday with Twin Cities credit union representatives and Minnesota Credit Union Network staff at Hiway FCU, St. Paul, Minn. (Photo provided by the Minnesota Credit Union Network)
The group discussed several credit union topics, but emphasized MBL and the Small Business Lending Enhancement Act, which would raise credit unions' cap on MBLs to 27.5% of assets from 12.25%. Ritchie has written letters to members of the congressional delegation asking for their support of the MBL legislation.

If the cap were increased, Minnesota credit unions could inject $181 million into the state's economy and help create nearly 2,000 jobs, MnCUN said.

"By working together with state officials such as Secretary Ritchie, we are able to garner more support for legislation affecting credit unions, like member business lending," said Mara Humphrey, MnCUN vice president-governmental affairs. "These meetings are an important piece in strengthening the relationships with key officials and advancing the credit union movement."

The group also discussed the 2012 International Year of Cooperatives and MnCUN's upcoming publicity efforts. Minnesota is the largest cooperative in the state, and plays a key role in promoting the benefits of cooperatives such as credit unions, MnCUN said.

The Credit Union National Association (CUNA) and credit unions are urging Congress to increase the MBL cap to open up more opportunity to offer MBLs, inject $13 billion in loans into the nation's economy and create as many as 140,000 new jobs, with no cost to taxpayers, CUNA said.

Equifax Consumer debt nears pre-recession level

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ATLANTA (11/7/11)--Total consumer debt is down slightly and almost to pre-recession levels, according to the latest monthly Equifax National Credit Trends Report

The debt totals $11.2 trillion, just above the $11.1 trillion posted before the recession in 2006. That compares with the peak debt of $12.4 trillion in October 2008.

The report looks at new credit, which includes auto loans, bank credit cards, consumer finance loans, home equity lines of credit, retail credit cards and student loans. It does not include first mortgage originations.

Other findings:

  • Roughly $436 billion of total new credit was originated between January and July 2011--the highest amount for the same period in three years. Still, it is well below the $805 billion in new credit originated from January to July 2006.
  • Although outstanding debit is on a downward trend, consumers are beginning to use bank credit cards and retail credit cards more. Both sectors saw balances rises from June to September, after a four month decline from February to May.
  • Loans originated between 2005 and 2007 posed the biggest challenge in ongoing delinquencies for all sectors tracked.  Delinquencies represent 31% of total balances; however, they also represent 65% of past due balances (at least 30 days overdue). This was particularly true for first mortgage and home equity loans originated during the period. About 74% of first mortgage loan delinquencies and 80% of home equity revolving loan delinquencies were originated then.
Michael Koukounas, Equifax senior vice president of special client services, noted that the impact of the 2005-2007 loans "continues to be felt across multiple lending sectors. More than two-thirds of delinquent loans can be sourced to those originated during that time. In contrast, loans originated after 2008 are performing substantially better due to the tighter underwriting guidelines in place since then."

Other findings:

  • Auto lending performance was consistent, with 11.3 million new loans originated between January and July. That is 13% more than in that period for 2010.
  • Lending volumes held steady with loan amounts higher overall than in 2010.
  • Bank card credit grew by $41 billion from February through September, with September bank card delinquencies 35% lower than in September 2010.
  • Home equity balances continued their 12-montyh decline. September home equity installment loan balances were 13% less than in September 2010, while revolving loan balances were 6.l6% lower than in September 2010.
  • For the past three years, new consumer finance loan amounts have remained steady, with $5.2 million originated in July, compared with $5.1 million in July of 2010 and $5.2 million in July 2009.
Equifax' analysis is from data on more than 585 million consumers and 81 million businesses worldwide.