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CU System Archive

CU System

Fed law changes prompt educators CU to drop student loans

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SPOKANE, Wash. (4/15/08)--A change in a federal law has been cited by Spokane Teachers CU (STCU) as the key reason it has dropped out of the student loan business. “We are not alone,” STCU President Steve Dahlstrom told News Now. “Hundreds of credit unions and banks nationwide are dropping out of the student loan business." There are two sections in H.R. 2669 that significantly reduce the margin on student loans to the point where continued participation is unfeasible, Dahlstrom explained. Sec. 201, which phases in cuts in the interest rate charged to undergraduate student borrowers under the Federal Family Education Loan (FFEL) and Direct Loan (DL) programs, thereby reducing the rate to 3.4% in July 2011 from 6.8% in July 2006. Sec. 305 changes the formula for calculating special allowance payments (SAPs) made to FFEL lenders, to compensate them for the difference between FFEL interest rates and market rates, by reducing the lender rate: (1) by 0.40 percentage points for loans held by nonprofit lenders; and (2) by 0.55 percentage points for all other lenders. It equalizes the SAP rate for FFEL Stafford and PLUS loans. Sec. 305 also increases the loan fee charged FFEL lenders from 0.5% to 1% of the principal amount of loans first disbursed after September 2007. It also prohibits its collection from borrowers. “In 2007, our total STCU loans disbursed--including all loan types--was $339 million. Of that, student loans accounted for $9.3 million,” Dahlstrom said. “The rates of reimbursement are our gross income, but do not include our cost of funds, or our cost of origination,” he added. “While the intent is to reduce the cost to students and to the government, the result is to limit the supply and create a liquidity crunch, as lenders--such as credit unions--drop out of the program. The government cuts its costs which reduces the interest that credit unions receive.”

First Basin group files to depose officials

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ODESSA, Texas (4/15/08)--On the eve of today's annual meeting of First Basin CU, members of a group formed to oppose an earlier conversion attempt petitioned the courts, seeking depositions from key officials of the credit union. Attorneys for Save First Basin and members Carol Uranga, Letty Ayaly-Moreno and Sylvia Acosta filed the petition Monday in the District Court of Ector County, Texas. It requests authority to take depositions from the Odessa, Texas-based credit union CEO Shem Culpepper and Board Chairman Annette Snowdon. The depositions relate to a potential claim of defamation and breach of fiduciary responsibilities, said the court document. However, it also says "a suit is not actually anticipated at this time." The group announced at a press conference at the Ector County Courthouse that it filed the petition because the $113 million asset credit union had spent roughly $500,000 "of member-owned funds trying to convert" the credit union to a mutual savings bank earlier this year. The group says the credit union will hold elections for the board of directors tonight at the annual meeting, but added the sitting directors have not told members the election will take place. A notice of an annual meeting does not mention a board election. Save First Basin planned to field a slate of candidates but said the credit union has not informed members when the election would be or which directors are up for re-election. Going on the assumption that a vote will be conducted tonight, the group flew an airplane trailing a banner reading "First Basin Votes Tues! SaveFirstBasin.com" over Odessa on Sunday. Monday's legal action comes just over a month after the group reported that management had announced it would sue three members. The credit union has not confirmed that report (News Now March 13). In February, the credit union announced it would suspend the membership vote and special meeting on the proposal to convert to a mutual savings bank. The credit union cited "numerous false statements" being circulated by opponents of the conversion proposal (News Now Feb. 18).

CU chapter op-ed One solution to economy is CUs

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EL PASO, Texas (4/15/08)--There is only one solution to today's economy woes that doesn't involve a single dollar of tax money or rebates: credit unions. So says an opinion/editorial in the El Paso Times. The op-ed item was written by Imelda Loya, president of the El Paso Chapter of Credit Unions (El Paso Times April 13). In it she notes that access to credit is getting tough, especially for small businesses needing capital. She cites the story of Graciela Frescas, whose family operated an in-home daycare that was becoming increasingly popular. When it wanted to build a full-fledged daycare center, the family sought credit and was turned away by more than a dozen banks. West Texas CU, however, came through with a loan. Grammie's Daycare now employs 30 people, takes care of 130 children, and the family is about to open a second location. The article discusses how loans for small businesses has dried up and that credit unions could help, if they weren't capped at 12.25% of assets. It urges Congress to remove the arbitrary business lending cap and let small business lending take off through credit unions. "A stimulus package is one step to help get the nation on track. But to really get our economy off the starting line and back in the running, Congress must release power of not-for-profit credit unions," wrote Loya, adding, "Especially when other lenders are taking a pass on the race."

INY Daily NewsI CU only one whod lend to blind mechanic

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BRONX, N.Y. (4/15/08)--On Monday, when the New York Daily News published a story about Bronx, N.Y.-based Bethex FCU giving a business loan to a blind mechanic when no other would, two people called Bethex wanting to join. “That’s how we found out (about the article),” said Bethex CEO Joy Cousminer. Bethex gave a business loan to mechanic Fitz Octave about one year ago. Octave, who is legally blind, came to the U.S. from his native Caribbean with skills in auto repair. He wanted to open his own business, but the banks he visited turned him down. Octave had a savings account with Bethex, so he went to the credit union for help. “He had a good business plan,” said Bethex Loan Officer Maria Estrella. Bethex gave Octave a $15,000 loan, and his business is doing well, Estrella said. Octave had a $15,000 state grant and $30,000 in savings also, but he needed more. The banks he visited--Bank of America, Washington Mutual, Chase and HSBC--had all turned him away (New York Daily News April 14). Unlike a conventional bank, which gives out loans based on credit scores, Bethex looks at each situation individually. “We’re old-fashioned,” Estrella said. She calls Octave once a month. “We always call him,” she said. “We want to make sure he’s doing okay.” Bethex lends to about 42 small businesses. The credit union also helps market the businesses by sending out a list of the businesses the credit union serves with each member’s statement in the mail. “When people are looking for auto repair, they know where to go,” Estrella said. Aside from being the only credit union in the area that helps start-up businesses, according to Estrella, Bethex also provides free tax preparation for its members and remittances. “We’re the great one,” Estrella said. “There’s no other credit union like Bethex.” Bethex started as a credit union serving mothers on welfare and continued serving only those on welfare for about five years, Cousminer said. Now, members’ incomes are varied, but all borrowers must abide by the same rules. “Some people feel that trust goes along with the amount of income,” she said, but noted that it isn’t always the case. Bethex caters to the “poorest of the poor,” but all of Bethex’s employees are from the community, so they know what members need, Cousminer added. “We do wonderfully,” she said. “We’re a good credit union.”

Florida league signs partnership with Brazil league

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PORTO ALEGRE, Brazil (4/15/08)--The Florida Credit Union League and Confederacao Interesadual das Cooperativas Ligadas ao SICREDI (SICREDI), a trade association for 130 Brazilian credit unions, signed a partnership agreement last week to improve services to member credit unions in both countries.
Click to view larger image The Florida Credit Union League (FCUL) and Confederacao Interesadual das Cooperativas Ligadas ao SICREDI (SICREDI) gathered in Brazil to sign a partnership agreement. From left are: Front row, William DeMare, Bay Gulf CU president/CEO; Orlando Borges Müller, SICREDI Central RS manager; John Hirabayashi, Community First CU president/CEO and FCUL chairman; Alcenor Pagnussatt, SICREDI president; Victor Corro, World Council of Credit Unions (WOCCU) International Partnerships manager; and Ademar Schardong, SICREDI Cooperative Bank president; Back row, Luiz Carlos Wanderer, SICREDI regional manager; David Brock, Community Educators CU president/CEO; Robert Beskovoyne, Martin FCU president; Cassandra Grayson, FCUL senior vice president, administration; Joshua Fetting, WOCCU program specialist; and Enio Meinen, SICREDI vice president and director. (Photo provided by the World Council of Credit Unions)
The World Council of Credit Union (WOCCU) now has 27 international partnerships between the U.S. or Canada and developing countries. The Florida-Brazil partnership will focus on international shared branching, reducing the cost of remittances between the U.S. and Brazilm, and staff exchanges between the two regarding technology, marketing, and efficient management of investment and liquidity at central financial facilities. Florida credit unions also would provide services to Brazilian travelers through shared branching. “It will be interesting to see the interaction of two peers in advancing their respective credit unions to deliver enhanced products and services to their members,” said Victor Miguel Corro, WOCCU International Partnerships Program manager. “We are very happy to now have a direct link with the U.S. through the Florida Credit Union League,” added Alcenor Pagnussatt, SICREDI CEO and a WOCCU director. Five Florida credit union and league representatives traveled to Porto Alegre, Brazil, to meet with SICREDI executives last week to sign the agreement. During the visit, Florida representatives heard presentations on the Brazilian organization’s infrastructure and how it serves members. SICREDI’s business model differs from the U.S. league structure because the association owns a cooperative bank that provides back-office support and services to its 130 member credit unions. SICREDI credit unions also share the same branding, look and feel in each of their service centers.

Kansas governor signs FOM law

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WICHITA, Kan. (4/15/08)--Kansas Gov. Kathleen Sebelius Friday signed a bill that places geographic restrictions on the areas credit unions can serve. With support from the Kansas Credit Union Association (KCUA), the new field-of-membership (FOM) law grandfathers all existing credit union members and their immediate family members, all existing occupational and associational groups, current geographic fields of membership up to one million in population and all current branch counties. It also outlines geographic limitations of up to 500,000 in population using multiple contiguous political jurisdictions for credit unions not headquartered in a metropolitan statistical area (MSA). “Although this new field-of-membership statute of one million in population for MSAs and 500,000 for rural areas may be very restrictive for other states, this could equate geographically to over one-third of the state of Kansas for MSA areas and over one-half for rural credit unions,” KCUA said in a statement released to News Now. Kansas has a population of 2.6 million. Under the grandfathering provisions, a credit union is allowed to include additional territory for branches outside of their geographic area. Credit unions with geographic areas can still serve members outside of their geographic area through multiple common bonds that include associational and occupational groups. “We felt this was a critical element of any new FOM provision,” the league said. The association will hold seminars and regional workshops on the new provisions of the statute to assist credit unions with compliance under the grandfathering provisions by Jan. 1, 2009, and training on the new application and notice requirements under the expansion provisions that go into effect this July 1.

CU System briefs (04/14/2008)

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* NORTHVILLE TOWNSHIP, Mich. (4/15/08)--Sixty-five representatives of credit unions attended a reception organized by the Michigan Credit Union League (MCUL) for Ken Ross, Michigan's new commissioner of the Office of Financial and Insurance Regulation (OFIR). The April 4 event was hosted by Michigan First CU, Lathrup Village (Michigan Monitor April 14). Ross--former vice president of regulatory and legal affairs at MCUL--was appointed by Gov. Jennifer Granholm to head the agency in February. He told the group he appreciates "the value of a financial cooperative where people have control of their own finances. When times are hard, credit unions can play a key role in helping members keep their car so that they can get to work, or kept their homes so that they don't end up on the street." From left are MCUL President/CEO David Adams; Ross; and Michigan First CU President/CEO Mike Poulos. (Photo provided by the Michigan Credit Union League) … * SAN ANTONIO and PLANO, Texas (4/15/08)--Southwest Corporate FCU received a trophy for the Best Network Security Program in 2007 from Digital Defense Inc. (DDI), which provides information security assessment services and Software as a Service (SaaS) security compliance solutions. Each year DDI selects one client to receive the award (Business Wire April 14). Mark Belle, DDI vice president of security and compliance operations, presented the award at the corporate's Plano, Texas, headquarters. "We place a very high priority on information security," said Jerry Delezen, vice president, information technology at Southwest Corporate … * GERMANTOWN, Md. (4/15/08)--Mid-Atlantic FCU (MAFCU) announced the funding of its first small business loan under the Small Business Administration's (SBA) 7(a) Guaranteed Loan Program. MAFCU said it was the first credit union in the Washington Metropolitan Area to receive authorization to originate loans of this type. "We sought SBA authorization in an effort to provide a full range of financing options to business owners in Montgomery County," said Frank Amantia, vice president of commercial and mortgage lending at the $200 million-plus asset credit union … * NORTHVILLE TOWNSHIP, Mich. (4/15/08)--Catherine A. Roberts, CEO of Community Choice CU, Livonia, Mich., will retire June 30 after 32 years as a credit union CEO. Robert Bava, president of Community Choice CU, will succeed her (Michigan Monitor April 14). Upon her retirement, Roberts will become the credit union's president of legislative affairs to devote more time to educating legislators about the value of credit union membership. Roberts also will continue her position as secretary of the World Council of Credit Unions (WOCCU). Since 1976, she has led several credit unions, including Trenton Resins CU; Monsanto Employees FCU; and Research FCU, which merged with Community Choice CU in 2007. She also has served as a Michigan Credit Union League director and alternate director, and as director at the Credit Union National Association and at WOCCU …