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CUs compete with dealers on auto financing

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BAKERSFIELD, Calif. (4/20/10)--Credit unions “must go toe-to-toe with automobile manufacturers hungry for customers” when offering auto loans to credit union members, according to a California newspaper. However, credit unions can emphasize their member service advantage. The Bakersfield Californian reported Friday that competition is tough for auto financing between credit unions and auto manufacturers. Auto manufacturers can offer financing at 0% interest because they can make money in other ways--while credit unions cannot. It’s hard to compete with zero percent interest, said Doug Kileen, president/CEO of Safe 1 CU, Bakersfield. Steve Renock, president/CEO of Kern Schools FCU, said his credit union hasn’t changed its strategies in auto financing but recognized that there is more competition from manufacturers’ captive finance companies. While competition may be tight, credit unions have an advantage over manufacturers. Credit unions can respond to their members’ needs--like extend the term of a loan beyond what manufacturers offer, said Linda Crosby, senior vice president of financial services at Kern FCU, Bakersfield. Credit unions need to speak out about the potential drawbacks of manufacturers’ low interest deals--which can mean shorter loan terms and bigger monthly payments, added Bill Meyer, communicators for CUDL, an Ontario, Calif.-based indirect auto lender for credit unions. The deals offered by captive finance companies also may only be available to those with good credit, Meyer added.

Missouri CU Assoc. involved with two bills affecting CUs

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JEFFERSON CITY, Mo. (4/20/10)--The Missouri Credit Union Association (MCUA) said it helped kill a “revenue enhancement” bill that would require financial institutions to run a data match for the state to help collect from delinquent taxpayers. The bill was considered in the Missouri state Senate last week. The Senate spent all last week debating appropriations bills that they received from the state House the prior week. The Senate finished debate on April 15, and the bills will now go to conference committee. This has been a serious business with lawmakers who are struggling to make the appropriate cuts to bring the state to a balanced budget without hurting vital state programs, MCUA said (The Missouri difference April 16). Also, MCUA’s Halley Hayden, director of communications, and Doug Macias, field representative, helped out lobbying last week as the association prepared for a bill to come to the floor that would allow highway credit unions to stay in Missouri Department of Transportation (MoDOT) facilities. The Missouri Highways and Transportation Commission approved a staff recommendation Wednesday to sever ties with the 10 credit unions located in MoDOT facilities in the state, according to MCUA (News Now March 12). The credit unions were told Jan. 21 that they would be required to vacate their locations by Sept. 30. They would no longer be able to process payroll and benefits through MoDOT after that date. Credit union employees were on MoDOT's salary and benefits plan but credit unions fully reimbursed MoDOT for those costs, MCUA said. The legislative session ends May 14. In the next few weeks, the House and Senate will dispense with rules regarding time limits on how long amendments must be filed prior to being offered as well as time frames on how bills are reported between the two houses of the General Assembly. When that starts, MCUA said its work at the capitol will begin in earnest.

INY Daily NewsI endorses municipal deposit choice

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NEW YORK (4/20/10)--The New York Daily News Sunday endorsed municipal deposit choice, which would allow New York government agencies to put their money into credit unions and community banks. The state Senate already has passed a budget resolution with support for municipal deposit choice. Currently, the law gives corporate banks a monopoly on municipal deposits. “There’s no earthly reason why the city should be barred from [placing its money in credit unions and community banks],” the paper said. “Allowing the Bloomberg administration to deposit public funds in these credit unions makes all the sense in the world,” the paper added. “But it will require Albany lawmakers to wake up and realize that, in this election year, voters will be keeping close tabs on which pols supported Wall Street over Main Street.” Credit unions offer consumers great deals, the newspaper said. “Small but effective institutions on the lower East Side, in the South Bronx, East Harlem and Central Brooklyn have been helping working-class families save money, send kids to schools and start home-based businesses,” the paper added.

White paper from CUNA Councils focuses on CU mergers

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MADISON, Wis. (4/20/10)--The credit union merger landscape is shifting in ways that are both subtle and dramatic, according to a CUNA Councils white paper. More than one-third of all credit unions operating in 2008, for example, had participated in at least one merger between 1979 and 2008. As a result, a growing number of credit union executives have been through multiple mergers and have developed a merger competency that will likely become part of an essential skill set for CEOs and senior management during the next decade. That’s the finding of a new white paper, “Developing a Merger Competency,” sponsored by the six CUNA Councils. The paper looks at many areas surrounding credit union mergers including the rationale behind many mergers, roles of staff involved and board, effective mergers, mergers to reject, members point of view, and more. Attitudes also are evolving; mergers are no longer considered the last resort for a failing institution--in some cases, they are part of a thoughtful strategy for healthy credit unions. A merger, like most financial decisions, may at first seem to be about operations and numbers, but its success, will hinge on whether the emotions and culture of the two parties involved were respected and treated fairly, the paper noted. Mergers sometimes flounder because they focus on the mechanics--financials, operations, products, services--when merging talent and traditions from both organizations is often the critical element. While integrating two cultures, capable leaders know the importance of symbols and signals in communicating with employees about change. Alan Peppers, CEO of Westerra CU, a $1.2 billion asset, Denver-based credit union, brought four credit unions together through mergers in the last five years. Emphasizing the importance of being proud of one’s past, the organization developed a museum to preserve the history of the four organizations, which includes a “Spirit of Volunteerism” wall honoring past chairmen and historical documents from each credit union. “The most challenging part of any merger is the cultural integration, winning the hearts and minds of employees and members,” Peppers said. Westerra focuses efforts on the integration process by using face-to-face communication in groups of 10 to 15 employees. The credit union follows up by using a third party to facilitate focus groups to ask employees how they did their work, identifying any gaps between the two cultures. By identifying the gaps, it helped redefine the mission, vision and values of the credit union that would become Westerra. This was then followed by ongoing electronic opinion surveys. For more information, use the links.

WOCCU to Basel Promote financial community diversity

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MADISON, Wis. (4/20/10)--The stability provided by smaller, community-based financial institutions is critical in keeping the overall economies of communities and countries upright when the growth schemes of large, complex banks go awry, World Council of Credit Unions (WOCCU) told the Basel Committee on Banking Supervision. That key lesson was learned by many during the 2009 global economic crisis. WOCCU said it would like to make sure new recommendations put forth by the Basel Committee not only recognize this fact, but offer provisions that don’t penalize smaller institutions, especially credit unions. The new guidelines, released for public comment in December and adapted with guidance from the Group of 20 (G-20) nations in response to last year’s global economic crisis, recognize for the first time differences between large for-profit financial corporations and non-joint stock companies, which include mutuals, cooperatives and credit unions. WOCCU sought input from its member organizations worldwide to craft two April 16 response letters that ensure these differences and other factors that favorably affect financial cooperatives appear in the final guidelines. “The presence of community-based, not-for-profit financial institutions has been a redeeming aspect of financial sectors during the great recession, and they have aided many economies in finding solutions to harsh economic problems,” wrote Dave Grace, WOCCU vice president of association services and the letters' author. “It is imperative that the Basel Committee's work not only do no harm to financial cooperatives, but actively promote diversity of the financial sector.” WOCCU has submitted its ideas and suggestions for consideration by the Basel Committee in the past, and had met with committee Chairman Nout Wellink in 2009 to make the case for credit unions. In response, current amendments to the Basel II Accord reflect a greater understanding of the different structure and nature of financial cooperatives. The reform package covers key areas of interest to credit unions:
* Raising the quality, consistency and transparency of the capital base. The new guidelines seek to ensure that financial institutions move to a higher capital standard that promotes long-term stability and sustainable growth, enabling the banking system to better absorb losses on existing banks and banks that have gone out of business. The committee proposes that Tier 1 capital be defined as common shares and retained earnings and tailored accordingly for credit unions’ structure. Tier 2 capital instruments must be better aligned and Tier 3 capital instruments should be eliminated. * Reducing procyclicality and promoting countercyclical buffers. A countercyclical capital framework will help better stabilize the banking system than a procyclical one, dampening rather than amplifying economic and financial shocks. To this end, adequate capital buffers at individual institutions should be established. The committee also is promoting more forward-looking provisioning based on expected losses that captures actual losses more transparently and is less procyclical than the current model.
On April 7, WOCCU held a webinar its members, global financial regulators and Basel Committee staff to discuss the impact of proposed changes to the Basel II Accord. Input from the webinar and from member groups served as the basis for WOCCU's response letters, according to Grace. “With the exception of recognizing that a cooperative's ownership shares qualify as Tier 1 capital, the committee's proposals do little to aid credit union development,” Grace said. “We strongly urge the Basel Committee to more actively enable the development of such institutions and serve as a counter-weight to the too-big-to-fail entities by ensuring credit unions access to deposit insurance systems, central bank liquidity windows, payment/settlement systems and card networks. “We also encourage prudential, but proportional supervision of the sector to help ensure that local community-based financial institutions can support the industry's financial stability,” Grace added. For more information, use the link.

Local biz mag Higher MBL caps could help Idaho

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BOISE, Idaho (4/20/10)--An Idaho business magazine recently noted that raising the caps on member business lending (MBL) at credit unions in the state could help spur Idaho’s economy. U.S. Rep. Mike Simpson (R-Idaho), who is on the committee reviewing the MBL bill, told The Idaho Business Review that businesses in Idaho have shared with him the difficulty they’ve had in securing the loans they need for their businesses. “By raising the cap on credit union member business lending, we can help ensure that they have access to the credit they need to do so,” Simpson told the newspaper. Lifting the caps on member business lending at credit unions--to 25% from 12.25%--could help spur the economy, said Valerie Brooks, director of regulatory and governmental affairs for the Idaho Credit Union League. “If a small business can borrow the capital it needs to expand, it would make sense to help that business to grow, thus being able to hire additional employees,” Brooks told the newspaper. Brooks added that the cap increases are necessary because some credit unions have made loans above $50,000, which means the loans must be reported to federal regulators and applied toward the credit unions’ lending cap. Idaho Advantage CU, Boise, has been offering small business loans since fall 2009. Pat Vaughn, president, said the program is aimed toward “mom-and-pop businesses.” “I think we do a much better job of handling these small business loans than some banks,” he said.

NCUF offers new grants for CU innovations (04/19/2010)

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WASHINGTON (4/20/10)--Credit union organizations are eligible to apply for new Innovation Grants from the National Credit Union Foundation (NCUF) through June 30. Innovation Grants are aligned with NCUF’s signature program, REAL Solutions. While participation in REAL Solutions is not required to apply for a grant, NCUF is seeking grant applications in any of REAL Solutions’ five service areas:
* Financial Education--Innovation Grants assist credit union organizations participating in national financial education programs including Biz Kid$ and the National Endowment for Financial Education (NEFE). Innovation Grants also support other initiatives consistent with the education components of REAL Solutions: financial counseling, product awareness and staff training. * Transaction Services--Innovation Grants support transaction services that help credit unions attract underserved consumers. Examples include check cashing, money orders, prepaid stored value cards, remittances, second chance/fresh start checking, and tax preparation. * Savings--Innovation Grants support programs that help credit union members with low wealth establish and maintain savings. Examples include prize-based savings, safe accounts, savings challenges, and step-up certificates of deposit. * Credit--Innovation Grants support initiatives that help non-prime borrowers build and improve credit through credit unions. Examples include alternative credit reports, citizenship loans, first and last rent loans, flexible loan policies, non-prime used car loans, score builder loans, and thin file loans. * Homeownership--Innovation Grants support responsible programs that help credit union members with lower credit scores qualify as first-time homebuyers. Examples include foreclosure assistance loans, green loans, Home Loan Payment Relief mortgages, Individual Taxpayer ID Number loans, and timely repayment rewards.
Eligible applicants include credit unions, credit union service organizations, state credit union associations, state credit union foundations, and any other organizations owned or controlled by credit unions. How many grant dollars are available depends on how much credit union organizations invest in the Community Investment Fund.

CU System briefs (04/19/2010)

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* MADISON, Wis. (4/20/10)--Representatives from credit unions in North and South Carolina competed in a charity golf event that
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raised more than $67,000 for the Victory Junction Gang Camp, a NASCAR-themed facility for chronically and terminally ill children. The event, the Sixth Annual Carolinas Cup, March 28-30, was hosted by the Carolinas Credit Union Foundation, the North and South Carolina credit union leagues and CUNA Mutual Group. The camp was founded by NASCAR driver Kyle Petty and his wife, Pattie, in memory of their son, Adam, who was killed in a NASCAR racing accident in 2000. Pictured are John Slack, (left) president/CEO, Carolinas Credit Union Foundation, and Mike Defnet, senior vice president of sales, CUNA Mutual Group. (Photo provided by CUNA Mutual Group) ... * MERIDEN, Conn. (4/20/10)--The Credit Union League of Connecticut received a $7,500 grant from REAL Solutions through the National Credit Union Foundation for the development of financial education programs for graduating college students. The grant will allow the league to organize a financial education curriculum on an advanced level. The league will work with three Connecticut universities this year to implement a college program. REAL Solutions is a program of the foundation that works through state credit union leagues to help credit unions offer services that have proven successful for people of modest means ...