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CU System Briefs (02/25/2013)

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  • MADISON, Wis. (2/25/13)--Filene Research Institute has hired Mollie Bell to a new position--chief engagement officer. In that role she will work to grow awareness about Filene, promote the institute's research and innovation findings, develop partnerships and deepen Filene's relationships with credit union professionals and other industry leaders. Bell previously was vice president in the Program Management Office of CUNA Mutual Group. Before joining CUNA Mutual, she held consulting positions with Accenture, a global management consulting and technology services organization. She also has experience in teaching, sales and business ownership …
  • HARRISBURG, Pa. (2/25/13)--Representatives of two Pennsylvania credit unions and the Pennsylvania Credit Union Association met Thursday with new State Rep. Patty Kim (D-Dist. 103) in the State Capitol. Topics discussed included the structure of credit unions, membership base and services. The credit unions shared what services and programs they provide to the City of Harrisburg and Kim's constituents. Kim hopes to help her home city out of its current debt crisis and focus on education and local government issues, said PCUA (Life is a Highway Feb. 22). Shown with Kim are George Nahodil, left, executive vice president, marketing/public relations of Members 1st FCU, Mechanicsburg, and Nate Muniz, public relations manager of PSECU, Harrisburg. Christina Mihalik, PCUA vice president, governmental affairs, also attended the meeting. (Photo provided by the Pennsylvania Credit Union Association) …
  • FRANKFORT, Ky. (2/25/13)--Board and staff of Ashland, Ky.-based Members Choice CU paid a visit with four state lawmakers in Frankfort recently, said the Kentucky Credit Union League  (By The Way Newsletter Feb. 22). Their message: "We just wanted to come by and say thank you for your service and your support of credit unions." The credit union's board and staff make the trip a priority every year. They visited with Rep. Tanya Pullin, Rep. Kevin Sinnett, Sen. Walter Blevins and Rep. Rocky Adkins. Shown in Pullin's office are, from left: Bryan Sparks, loan manager, and Rusty White, board chair of Members Choice; Debbie Painter, league executive vice president; Pullin; Members Choice Directors Gary Darnell and Ken Smith; and Members Choice Board Member Johnny Abbot. (Photo provided by the Kentucky Credit Union League) …
  • LANSING, Mich. (2/25/13)--The Michigan Credit Union League has added generosity and social responsibility initiatives to its educational events. Attendees at the league's recent Lending and Marketing Conference in Grand Rapids were encouraged to bring donations of canned goods, toiletries and pet supplies for Feeding America West Michigan through the West Michigan Food Bank. They collected items from their co-workers, members and chapters before the conference and distributed more than 71 pounds of food and cash donations, which will provide 223 meals for people in need. "We hope to make this sort of 'leave behind' initiative a regular part of our conference and event lineup," said MCUL CEO Dave Adams. (Photo provided by the Michigan Credit Union League) …
  • BISMARCK, N.D. (2/25/13)--The Credit Union Association of the Dakotas has opened a small satellite office in Pierre, S. D., just two blocks from the South Dakota Capitol. It will be used primarily by staff and lobbyists during the legislative session, said CUAD. The office has attention-getting signage clearly visible to the busy street traffic and to legislators who often drive by the location at 112 N. Euclid Ave.  "The board and staff felt that we needed a physical presence in South Dakota to aid in our lobbying efforts and continue to build our relevancy as an advocacy organization in South Dakota," said CUAD President/CEO Robbie Thompson, shown in front of the building (the Memo Feb. 21).  (Photo provided by the Credit Union Association of the Dakotas) …

Seven CUs, Banks Appeal Heartland Breach Lawsuit Dismissal

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NEW ORLEANS (2/25/13)--Seven credit unions and banks have asked a federal appellate court in New Orleans to reverse the dismissal by a lower court of their  lawsuit against Heartland Payment Systems Inc. over losses from a data breach at the payments processor in 2008.

The motion was filed Feb. 8 in the U.S. Court of Appeals for the Fifth Circuit  by four credit unions--Sea Board FCU, Bucksport, Maine; O Bee CU, Tumwater, Wash.; PBC CU, West Palm Beach, Fla., and Pennsylvania State Employees CU, Harrisburg, Pa.--and three banks--Lone Star National Bank, Amalgamated Bank and First Bankers Trust Co.

The lower court, the U.S. District Court for the Southern District of Texas in Houston, had dismissed the case, saying that the financial institutions were not protected as "third-party beneficiaries" in contracts between Heartland and its two acquiring banks; were not protected under the contracts between Heartland and the major card brands, such as Visa, MasterCard and Discover; and were not consumers who could claim misrepresentation or negligence under various state consumer protection laws (News Now Dec. 15, 2011).

The motion to dismiss makes three arguments:

  • Heartland owed the issuing banks a duty to take reasonable measures to avoid the risk of a foreseeable intrusion into its computer network and theft of the confidential payment card data,  and New Jersey law applies to appellants' negligence claim.
  • The complaint satisfies applicable pleading standards by noting specific facts, including: a Visa executive's statement that the breach would not have occurred if Heartland had been vigilant in maintaining its compliance with applicable security standards; a statement by Heartland' s president that it could have done more to prevent the breach; the removal of Heartland from Visa's Payment Card Industry Data Security Standard-compliant entities;  and fines assessed by MasterCard for not taking appropriate security measures.
  • None of the financial institutions are collaterally estopped from pursuing their negligence claims against Heartland because their claim is for Heartland's failure to adequately monitor its own security systems.
Heartland 's data breach--one of the largest ever recorded--compromised roughly 130 million credit and debit card accounts, including thousands of credit union member accounts. More than 560 financial institutions, including at least 178 credit unions, reissued credit and debit cards as a result of the breach.

Both consumers and financial institutions filed lawsuits. Financial institutions' suits were consolidated into a single case while consumers' lawsuits were consolidated into a separate case. Heartland reached several settlements with Visa, MasterCard and Discover, which also had sued on behalf of their financial institution clients.

Postal CU's New Student Branch Features ATM

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OAKDALE, Minn. (2/25/13)--Postal CU, based in Woodbury, Minn., has opened an in-school branch that features an ATM.

Click to view larger image Postal CU President Brian Sherrick helps celebrate the grand opening of the credit union's student-run branch at Tartan High School, in Oakdale, Minn. The branch features an ATM. (Photo provided by the Minnesota Credit Union Network)
The credit union recently celebrated the grand opening of its student-run office at Tartan High School, in Oakdale, Minn. The branch serves the credit union's mission of offering financial education and providing students with tools to prepare them for life after high school.

"We have always been a strong supporter of financial literacy and giving back to the community," said Brian Sherrick, Postal CU president. "Implementing a student-operated credit union is the perfect way to merge those two goals into one product that is representative of what we stand for as a financial institution."

The three students who helped start the branch, and who are responsible for the branch's day-to-day operations, are part of the high school's marketing and business club.

The credit union has developed two products to help students learn about finances and develop good credit. The Savers CD pays an above-market rate of 2% and is available to members ages 12-17. Students get a certificate of deposit for amounts from $25 to $1,000 that mature on their 18th birthday.

The Credit Builder Loan is a personal loan of up to $2,500, which is placed on hold in the student's savings account. Monthly payments are made to help build the student's credit, and when the loan is paid in full, the funds are released to the student.

Survey: Pesky Fees Linked With Lower Loyalty

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CHICAGO (2/25/13)--Pesky fees--the kind that penalize members for inactivity or using paper statements as opposed to fees for bounced checks--have been linked to an erosion of loyalty among consumers of financial institutions.

Fees were the common theme in comments from "detractors" of low performing institutions on the Satmetrix Net Promoter Score (NPS), a program offered credit unions by Chicago-based credit union service organization (CUSO) Member Loyalty Group.  The score examined more than one million survey responses for the CUSO's 2011 relationship survey focusing on overall member relationship versus specific transactions.

The survey defines "pesky fees" as fees such as those charged for inactivity, paper statements or picking one's own personal identification number. Comments expressing frustration over pesky fees were three times more common in bottom-performing institutions when compared with loyalty leaders.

"The irritation members feel when they discover 'pesky fees' can erode member loyalty and even muddle the credit union difference," said Michelle Bloedorn, CEO of the Chicago-based Member Loyalty Group. "Members understand that fees have to be charged when they overdraft their checking account, but fees that are not based on member action or seem to be punitive in nature are extremely frustrating," she added.

NPS found that the actual fee income per member at top NPS performers is nearly identical to that of loyalty laggards. However, the NPS score is significantly higher in credit unions without negative member comments regarding fees. The score is based on the premise that all customers fall into three categories: promoters, passives, and detractors. To get the score, subtract the detractors from the promoters.

Consumers in the 35-54 age range were the group most particularly frustrated by pesky fees. Member comments, especially from older members, also showed they clearly understand the credit union difference and take pride in being a member of an organization that offers high quality service and does not charge as many fees as the big banks, said Member Loyalty Group.

"While other factors are likely at play in both the top and bottom performers, the 'pesky fees' are one common theme that credit unions should be aware of and may be able to avoid," said the CUSO.

The effect of fees on loyalty was a significant factor for credit union growth in 2011, when millions of people fed up with big bank fees switched to credit unions during the months surrounding Bank Transfer Day. That movement was triggered by proposed debit card fees at big banks such as Bank of America. The Credit Union National Association estimates that more than 2.2 million consumers opened accounts at credit unions in the 12 months that ended June 20, 2012.

Foreclosure Process Too Long--Maine CUs

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PORTLAND, Maine (2/25/13)--"The foreclosure process is too long" was the overwhelming consensus from respon­dents to a recent survey by the Maine Credit Union League. The survey asked all credit unions in the state about the Foreclosure Diversion Program, es­tablished in 2009 as part of foreclosure legislation passed, so the league could gauge how well it is working.  

"Anecdotally, we have been hearing that for the past couple of years but what the survey is doing is providing us with real examples and feedback from credit unions," said Quincy Hentzel, league di­rector of governmental affairs (Weekly Update Feb. 22). "While the league and credit unions are supportive of the Foreclosure Diversion Program, there may be an opportunity to explore and propose ways to make it better. The league will evaluate our options to have the feedback and concerns of credit unions about the length of the process addressed."

The survey will help determine the successfulness of the program and whether the league will recommend any changes to increase its effec­tiveness or efficiency.

An Act To Preserve Home Ownership and Stabilize the Economy by Preventing Unnecessary Foreclosures, passed by the Maine Legislature, established the Foreclosure Diversion Program. Its purpose is to assist homeowners and lenders in achieving mu­tually agreeable resolutions to mortgage foreclosure actions through the me­diation process.

The Maine Supreme Judicial Court was required by law to report on the program to the state legislature by Feb. 15.  Based on the court's report and recommendations, the legisla­ture may introduce legislation to amend or enhance the program.

Several states are considering laws to streamline the foreclosure and modification process in the wake of revelations of business practices by some mortgage originators and servicers during the housing crisis.

Financial Columnist: Innovate To Increase Marketshare

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SAN FRANCISCO (2/25/13)--Credit unions must take an innovator's approach to increase their marketshare and disrupt the commercial financial industry with low-cost, high quality alternatives to existing products and services, says a financial technology columnist.

"Credit unions have to popularize great products that banks would never dare to launch for fear of cannibalizing existing revenue streams," wrote Ivan Schneider, a columnist specializing in financial technology for Enterprise Efficiency.

Credit unions rely too much on the concept that they are superior to banks because of their community focus, ethical lending policies and member-owned structure, Schneider said in the column, "Advice to Credit Unions: Innovate or Die." By sending that virtue-based message, credit unions create the expectation that they must only maintain service levels on par with commercial banks, he said.

"And by that thinking, credit unions will stagnate at 6% market share forever," Schneider wrote.

But while credit unions for the most part lack the resources to develop new technology themselves, they are great proving grounds for new technology, Schneider wrote. Financial technology is full of startups and established providers with new approaches to core banking, multichannel management, mobile access, branch reconfiguration, "and other powerful and potentially disruptive technologies," he added.

"If credit unions intend to shift financial power away from big banks, there's no quicker route than for credit unions to discover a better technological formula for serving customers," he wrote.

The main challenge is that credit union leaders remain open to new ideas and pitches from industry vendors, Schneider concluded.

To read the full article, use the link.

Pa Young Pros Plan Networking Organization

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Twelve young Pennsylvania credit union professionals met at Pennsylvania Credit Union Association headquarters in Harrisburg to begin planning a young professionals organization for credit union employees in the state. (Photo provided by the Pennsylvania Credit Union Association) 
HARRISBURG, Pa. (2/25/13)--A group of 12 young professionals from Pennsylvania credit unions met in Harrisburg Wednesday to begin planning a young professionals organization for credit union employees in the state.

The group will focus on three areas--advocacy, education and community service. The group--co-sponsored by the Pennsylvania Credit Union Association and Mid-Atlantic Corporate FCU--aims to help bring a voice to young credit union professionals and to help credit unions attract and retain them (Life is a Highway Feb. 21).

Association President/CEO Jim McCormack stopped by, voiced his support for the group and expressed how important its mission is to the future of the credit union movement.

The organization will be open to employees between the ages of 18 and 35 from affiliated credit unions.

The organization will have two goals--to create an informal network for young professionals to meet and become more involved in the movement, and to develop a certificate program for emerging credit union leaders.

Deposit Growth In CUs, Small Banks Double Big Banks'

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BIRMINGHAM, Ala. (2/25/13)--U.S. credit unions and small community banks saw their deposit growth in the past four years nearly double that of large U.S. banks, according to an annual outlook report issued this month by Bancography, a strategic branch planning firm.

Also, branch closures and consolidations may create opportunities for credit unions, the report indicated. 

Credit unions saw deposit growth of 16.3% during the past four years, compared with 16.9% for community banks, 8.1% for super regional banks (operating in 10-plus states), 7.6% for national banks, 5.7% for super community banks (serving one to three states), and 5.5% for regional banks (operating in four to nine mostly contiguous states within a single U.S. region), Bancography said.

Credit unions' deposit growth between 2011 and 2012 was 3.8%, compared with national banks'  3.9%; community banks, 2.7%; super-regional banks, 1.7%;  super community banks, 1.2%; and regional banks, -0.8%,  the report indicated.

In the report's summary, "Advice for the Year Ahead," Bancography noted a good opportunity for credit unions.

"In long-established markets, branch closures and consolidations may create opportunities for community banks and credit unions to purchase or lease sites at favorable terms," said the report. "But in less-concentrated markets, market leaders continue to add branches, and the costs of keeping pace may prove prohibitive.

"In such markets, smaller institutions may be better served pursuing only specific corridors rather than marketwide branching, or focusing on specific non-retail lines of business such as wealth management or business banking," Bancography added.         

To view the report, use the link.

America Saves, Military Saves Week Kicks Off

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WASHINGTON  (2/25/13)--Credit unions are significant participants of America Saves Week and Military Saves Week,  national educational campaigns that began Sunday and continue through Saturday with the theme "Set a Goal, Make a Plan, Save Automatically."

The Credit Union National Association is among the associations encouraging credit unions to educate families about the importance of saving and of taking steps to build their personal wealth.

"We are proud to support America Saves/Military Saves Week.  Encouraging thrift and wise financial behavior is an essential part of credit unions' makeup," said CUNA President Bill Cheney.

The campaigns unite government, nonprofit and corporate groups in the effort. America Saves lists 87 credit unions as official participants. Official participants also include the National Credit Union Administration and the Defense Credit Union Council. Many other credit unions and organizations are participating in local savings efforts.

For Military Saves, 46 defense-related credit unions are participating, with many having multiple branches involved, according the Military Saves website.  For example, the largest credit union has 231 locations around the world participating.

CUNA has supported the campaign by educating credit unions and the public about the effort. Most recently, CUNA featured Military Saves Week on its weekly Home & Family Finance Radio Show, which aired yesterday.  Sunday's show included a segment with Andia Dinesen, manager of the Department of Defense's Financial Readiness Campaign's Military Saves, Washington, D.C., who discussed using social media to encourage military families to save money automatically every month.

Sunday's program also included segments about living beyond one's means with Grant Cardone,  New York Times best-selling author and host of "Turnaround King," and saving wisely, spending happily, with Sharon Lechter, a certified public accountant and financial literacy spokesperson for the American Institute of CPAs.

Home & Family Finance Radio provides consumers information and advice about money management each week. The show is carried in 63 U.S. markets and is beamed to U.S. military bases worldwide via the American Forces Radio Network.

America Saves Week is coordinated by America Saves and the American Savings Education Council. Military Saves is part of the Defense Department's Financial Readiness Campaign and has been a partner with the department since 2003.