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Two Carolina CUs help members refinance subprime loans

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RALEIGH, N.C. (12/7/07)--Two Raleigh-area credit unions that serve state and local government employees are working to help their members refinance high-interest subprime loans. The $13.957 billion asset State Employees CU (SECU) and the $722 million asset Local Government FCU introduced outreach programs earlier this year. The programs have enabled about 500 homeowners to refinance roughly $69 million in home loans (The News & Observer Dec. 6). In May, SECU--which serves 1.3 million state government employees and their families--sent a mailing to 100,000 members, who the credit union thought might be having problems with subprime loans. The mailing also was sent to those members who obtained mortgages in recent years from another lender, without making a substantial down payment. Information on the type of loans that members took out was obtained through members’ responses to a SECU-commissioned survey. In a letter to selected members, SECU informed them that it had developed two mortgages to help those struggling with subprime loans. One mortgage included an adjustable-rate loan with a 6.75% starting rate that adjusts once every five years. Rates increase a maximum of 4.5% over the term of the loan. Local Government FCU, which serves 158,000 government employees and their families in North Carolina, offers the same two mortgages. The credit union sent a summer mailing to 18,500 members. To date, 432 SECU members and 50 Local Government members who were contacted chose to refinance. An additional 152 SECU members are in the process of refinancing.

CU System brief

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* MANCHESTER, N.H. (12/7/07)--St. Mary’s Bank recently gave a $2,500 grant to the Chaplain Emergency Relief Fund to help New Hampshire Army and Air National Guard members and their families. The money will be used to pay housing costs and other expenses, while guard members are fulfilling their service obligations. The relief fund is a private, non-profit fund administered by volunteer trustees, all of whom are New Hampshire Army or National Guard Chaplains. (From left) Ernest F. Loomis, state chair, New Hampshire Employer Support of the Guard and Reserve; Chaplain William Paige, chaplain of the New Hampshire Army National Guard; and Tom Champagne, director of community outreach, St. Mary's Bank. (Photo provided by St. Mary’s Bank) …

CU employees members directly affected by Wash. floods

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FEDERAL WAY, Wash. (12/7/07)--Jeff Kennedy, senior vice president/CEO for Twin Star CU in Olympia, Wash., hasn’t heard from some of his employees since floodwaters began engulfing parts of the state. “Today is the first day some of them have gotten to work,” he said. The floods, which were caused by rainstorms in the Pacific Northwest, affected operations in four Twin Stars branches. The branches closed intermittently due to power outages. Many of the credit union’s members and employees have been affected by the flooding, and Kennedy said the credit union is working to help them. “We’re trying to get our arms around what we can do to help,” he said. “We’re putting together plans and programs to best meet the needs of people in our communities.” Twin Star is currently identifying members and employees directly affected by the flooding. The credit union is setting up a program for members to contribute money and supplies to the Red Cross, and it also will activate a program to extend loan terms to affected members. The Washington Credit Union League (WCUL) is working to help credit unions affected by the floods, said David Bennett, director of public relations. Aside from Twin Star, Washington State Employees CU (WSECU) reported to the league that it had closed two of its branches this week. The Chehalis branch was closed due to high water levels, and the West Olympia branch, which is located on the second floor of a building, closed because the first floor had flooded. Neither branch sustained damage, “and remarkably, none of their employees were affected directly,” Bennett said. “This has enabled the credit union to turn outward to the community and it is in the process of launching a clothing drive,” he said. The league is waiting to hear from other credit unions affected by the flooding. Bennett said that some of those credit unions are in Aberdeen, which was “completely cut off from the outside world,” Bennett said. The Washington Credit Union Foundation has been very supportive and is standing by to respond to requests for help, Bennett said. The flooding death toll has risen to eight, with damage estimates in the billions (Associated Press Dec. 6).

Shopping for Gen Y employees challenging for CUs

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AUSTIN, Texas (12/7/07)--Generation Y presents the biggest challenge from a marketing perspective, so credit unions should strategize when recruiting its members for employment. Bill Humbert, an employment recruiter and credit union member, spoke about how credit unions can recruit Generation Y members during the Credit Union National Association’s (CUNA) Your Essential Strategies (YES) Summit in Austin Wednesday. “Like any consumer, when you shop for workers, you should set goals according to a prospecting strategy, and evaluate candidates almost as you would comparison shop for a new car,” he said. Generation Y uses different communication media, so YouTube, blogs, Facebook and other social media are more productive to recruit members than traditional newspaper employment ads. Social networking provides prospective employers a unique opportunity to assess prospects’ character, Humbert noted. Members of Generation Y publicize details of their private lives on social networks, and if employers see that, they can toss out the applications of the poorest prospects without wasting interview time, he said. Generation Y also is challenging because many members of this generation have immediate expectations. “In the old days, you started on the line,” Humbert said. “Then you might move up to line supervisor, then line manager. Today, because of technology, those steps don’t exist anymore--18-to-30 year-old employees need to create their own career paths.” Credit unions can assist by hiring Generation Y members for their strengths and then train them to overcome their weaknesses. He cited General Electric, which offers employees six-month rotations in the organization. At the end of two years, based on their job experiences, the employer is able to find the best positions to suit employees’ talents. Humbert offered the following recruiting tips:
* Project the right image as an employer; * Train managers to hire. Humbert estimated that 70% to 80% of managers have never been taught how to interview or select; * Communicate the credit union passion; and * Let hiring managers perform reference checks. They are specialists in extracting applicant information.
Humbert expressed his excitement for Generation Y workers. “The generation before mine went to the moon,” he said. “My generation put a computer on every desk. Gen Y is bringing us immediate information, and I can’t wait to see what they’ll deliver next.”

Recruiting young board members can help CUs attract youth

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AUSTIN, Texas (12/7/07)--Credit unions looking to recruit young members should start at the credit union board level, according to a Generation Y marketing consultant. Justin Ho, a 20-year-old board member at University of Southern California (USC) CU and a marketing consultant with Glatt Consulting, shared the importance of actively bringing youth into credit unions during the Credit Union National Association’s Your Essential Strategies (YES) Summit in Austin Wednesday. “The credit union movement will come to an end within a few generations if credit unions don’t make themselves relevant to this demographic,” Ho said. “The biggest wealth transfer in history is about to occur and credit unions need to take advantage of it.” After joining the Los Angeles-based USC CU board, Ho surveyed other board members to see how they thought the dynamics of the board had changed. His results indicated that young adults can be separated into three groups in regards to financial institutions: reward-seekers, those looking to build relationships, and those that are oblivious. The best place to target Generation Y is during the college years. Seven of every 10 college students keep the banking provider they use in college, Ho said. It’s important to reach out to this generation through the Internet. Generation Y uses the Internet more than any other generation, and online banking is the most popular finance web tool, he noted. To reach Generation Y, USC CU uses social networking through Facebook and offers free money management classes on campus.

Alabama league adopts courtesy pay guidelines

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BIRMINGHAM, Ala. (12/7/07)--The Alabama Credit Union League adopted guidelines for courtesy pay programs and approved four action plans during its year-end meeting Nov. 27 in Savannah, Ga. The league said it supports credit union courtesy pay programs, and recognized that the programs can benefit members, but can be detrimental if abused. "Such programs should be operated with transparency and the benefit of the consumer in mind," the league said. The league also emphasized that the programs are account features, not loans. To protect members, credit unions shouldn't include available overdraft coverage as a part of an account holder's balance. Credit unions also shouldn't manipulate the order in which items are processed to maximize overdrafts, the league said. Accounts should be monitored, with counseling provided to members who abuse the courtesy pay features. The board also approved the 2008 budget, and adopted four action plans:
* Maintain and improve the league’s position of influence through Dec. 31, 2008; * Develop, agree upon and recommend a future funding strategy for the league by Dec. 31, 2008; * Conduct a re-affiliation campaign and report results by April 30, 2009; and * Continue to pursue the implementation of the REAL Solutions program with the National Credit Union Foundation through March 31, 2009.

Kansas lawmakers to take up CU membership limits

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TOPEKA, Kan. (12/7/07)--The possibility of limiting membership in credit unions will be taken up by the Kansas state legislature in its next session, which starts Jan. 14 and will run into May 2008. The state’s Special Committee on Financial Institutions and Insurance voted Tuesday to ask lawmakers to clarify restrictions on where and how credit unions can solicit members. This clarification is necessary to ensure that the state committee is fulfilling statutory requirements to limit credit union membership to individuals who share common bonds, according to State Sen. Ruth Teichman (R-Stafford), the committee’s chairwoman (Harris News Service Dec. 5). However, some members of the panel were opposed to the move, reasoning that decisions have been made consistently by the state Department of Credit Unions, and these decisions have not been contested in court. The Kansas Credit Union League issued the following statement to News Now, concerning the matter: “The committee voted to recommend that the legislature look at possible definitions for terms used in the field of membership statute that may provide more clarity. The committee was unable to reach an agreement concerning the post audit staff’s accusation that the interpretation used by decades of regulators appeared to be out of compliance with the statute. “The credit union movement will be working closely with the financial institutions committees of both the House and Senate during the upcoming session on this issue. The credit union message has been well received by Kansas legislators. We look forward to a positive outcome in the 2008 legislative session.” Credit union membership is supposed to be limited to groups that have a “common bond” of occupation or association, or who reside in the same neighborhood, community or rural district, according to state law. However, the statute has been broadly interpreted, a 2006 state legislative audit found. As a result, several credit unions have expanded their territories over the past several years, which includes five groups that can draw members from anywhere in the state. Limiting membership to the home county of a credit union’s main office branch and the contiguous counties is one proposal brought before the panel. This is similar to a Missouri law passed earlier this year, which was developed to resolve similar disputes in that state. However, Kansas credit unions have opposed this type of legislation.

Research Payday lending would not be missed

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MADISON, Wis. (12/7/07)--A recent report from the University of North Carolina’s Center for Community Capital shows that former and potential payday lending customers in North Carolina, where these high-interest loans have now been effectively banned, have gotten along just fine without payday lending, and are in fact glad it’s gone. “This report helps debunk the myth that payday lending is necessary,” said John Keckhaver, a research analyst at the Wisconsin Council on Children and Families. “We’re all aware of the high costs. We’re now seeing increasingly that those high costs are unnecessary, and that people are able to find other, better ways to deal with their financial needs.” The North Carolina Commission of Banks commissioned this report, which takes a close look at whether payday lending customers miss the payday lending options that no longer exist in their communities. It also explores what people are doing instead of turning to traditional payday lenders. Among their conclusions:
* More than twice as many former payday borrowers reported that the absence of payday lending has had a positive--rather than negative--effect on their households; * Nearly 9 out of 10 surveyed thought payday lending was a bad thing; and * The absence of storefront payday lending has had no significant impact on the availability of credit for households in North Carolina. Households reported using an array of options to manage financial shortfalls, and few are impacted by the absence of a single option--in this case, payday lending.
“The report out of North Carolina shows us, once again, that payday lending has no redeeming qualities. People get by and are better off without it,” Keckhaver said. “Among other options, credit unions have been stepping up to the plate and are offering better alternatives through their Real Solutions program. Those efforts should be expanded and we should finally get rid of predatory payday lending in Wisconsin.” Three bills pertaining to payday lending are currently pending in the Wisconsin Legislature. All currently are in the Assembly Committee on Financial Institutions, chaired by State Rep. Scott Newcomer. They are:
* AB 4--Prohibits payday loan providers from assessing a finance charge on payday loans that exceeds 2% per month; * AB 211--Prohibits payday loan providers from assessing a finance charge on payday loans in excess of 36% per year. It also makes other minor administrative change; and * AB 574--Limits payday loans to $800 or 50 percent of the applicant’s next paycheck, whichever is greater. The bill also limits “rollovers”--defined as the refinancing, renewal, amendment, or extension of a payday loan.

White papers look at microlending and measuring success

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MADISON, Wis. (12/7/07)--The manner in which credit unions are utilizing microlending to reach underserved microenterprises, and how credit unions are measuring success are the subjects of two new white papers from the CUNA Councils. “Microlending and Credit Unions” from the CUNA Lending Council discusses how to reach the estimated 20 million or more microenterprises operating in the U.S.--many of which are underserved in terms of loans and technical assistance. Microlending is defined in this paper as the granting of small loans between $500 and $35,000 to small/micro businesses with five or fewer employees. The paper explores the advantages of microlending, the issues underlining development of a microlending initiative, and factors contributing to the rapid growth of microenterprise and the changing nature of today’s microentrepreneurs. The paper incorporates the case studies of how four credit unions have implemented microlending programs. The measures a credit union chooses in defining success are both a reflection on its current organizational values and an influence on the direction the credit union will take in the future. The second new white paper--“ROI Calculations and Financial Parameters” from the CUNA Marketing and Business Development Council--reviews some of the most common ways that credit unions define and measure success. Compared to stockholder-owned banks, credit unions tend to put less emphasis on profit-oriented financial measures of success. Instead, many choose the “balanced scorecard” approach to measuring success by using a relatively short list of measures that cover all major areas of importance. This paper discusses various success measurements in five broad categories--financial stability, member service and satisfaction, growth, efficiency, and social mission--and how those numbers are used. CUNA Council members are entitled to complimentary copies of these white papers; non-members may purchase the white papers for a price of $50 per copy. For more information, use the link.