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Revenue from overdraft fees drops to 2008 levels

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LAKE BLUFF, Ill. (9/16/10)--Overdraft fee revenue for financial institutions bottomed out during the first half of the year but is recovering, according to a new study. By the end of the year, the banking industry expects to earn $35.4 billion in overdraft fee revenue. That figure is down from the $37.1 billion financial institutions received in 2009, but it is on par with the fees collected during 2008, according to Moebs $ervices, a firm that tracks pricing in financial institutions. The Lake Bluff, Ill.-area firm analyzed fee revenue for the first six months of 2010 at 2,284 financial institutions and more than 15,000 depositories. With the regulation requiring opt-in for debit cards and ATMs coming during the third quarter, revenue likely will drop again, the study predicted. "But this will recover by the same amount in the fourth quarter," said Michael Moebs, economist and CEO of the firm. He estimated that overdraft revenue will increase next year to $38 billion--"the highest ever for the industry." Roughly $2 billion in revenue from overdraft fees was lost during fourth quarter 2009 when financial institutions started to implement their own floors and ceilings on overdrafts in response to congressional and consumer complaints, said the study. The institutions lost another $2.3 billion during first quarter 2010 after the opt-in regulation was introduced by the Federal Reserve and depositories made changes. It cost banks and credit unions about $2 billion in operational costs and training to implement the opt-in regulation and their own changes to overdraft services. "When you add the lost revenue and the additional cost of the new overdraft regulations, it amounts to about $6.3 billion erosion into profitability for all banks and credit unions," Moebs said. He noted that 44.3% of banks and credit unions made some type of change to their overdraft program while 55.7% made no changes. About 20.5% increased prices to offset cost increases and loss of revenue. Some--6.5%--decreased their overdraft price, said the study. "We've never seen this many institutions decrease the price of a fee service in almost 30 years of tracking bank and credit union pricing," Moebs said. He added that the data show institutions that decreased the fees "actually maintained or increased their overall revenue in the past year." The decline in industry overdraft fees due to large institutions such as Bank of America and Citibank exiting the overdraft business was more than offset by Main Street institutions that offered overdraft protection for the first time, the study said. "Institutions that got into overdrafts, are doing so to build capital by increasing fee revenue, because interest rates are so low," Moebs said. About 90% of overdraft revenue comes from frequent users, those with 10 or more overdrafts a year. Frequent users almost all opted in for overdraft coverage. For all consumers, opt-in consent varied between 60% and 80% with a median of 75%. The median overdraft price rose to $28 per check in 2010 from $26 in 2009. Nonsufficient funds, where the institution returns the check, rose to $27 per check from $25 in 2009. "Even with the price of overdraft protection going up, it appears from the opt-in numbers that the American consumer is saying they want and need overdrafts," Moebs concluded.

CU System briefs (09/15/2010)

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* YOSEMITE VALLEY, Calif. (9/16/10)--Yosemite CU, a division of
Modesto, Calif.-based Valley First CU, sponsored an exchange of the new Yosemite quarter--the third coin released as part of the America the Beautiful Quarters Program. The ceremony in Yosemite Valley to launch the quarter drew 1,200 people. Credit union staff worked with National Park Rangers to plan and coordinate the sales. Loomis Armored Transport was on site for the event. Five quarters commemorating 56 national parks and other national sites will be released each year through 2020, with coins issued in the order in which the sites were first established as national treasures. According to Hank Barrett, president/CEO of more than $380 million assetValley First CU, the historical event was a "natural fit between our branch located in Yosemite National Park and the U.S. Mint." Yosemite CU became a division of Valley First in fourth quarter 2009. (Photo provided by Yosemite CU, a division of Valley First CU) ... * SALT LAKE CITY (9/16/10)--Mountain America CU has launched a free mobile money service in partnership with Obopay Inc., a pioneer in mobile money solutions. The service, available immediately, provides members with access by leveraging Obopay's Mobile Money for Banks. Using a mobile phone, members can transfer money from their accounts to anyone securely. Recipients do not need to be members or be signed up for the service to receive funds. They can direct the funds into any credit union or bank account either instantly using their debit card numbers or within three business days using their bank account numbers. They also can employ their mobile phones to receive debit card and electronic check payments, send money instantly to family members for emergencies or regularly scheduled payments, and donate funds to charitable organizations via texting ... * MADISON, Wis. (9/16/10)--CUNA Mutual Group is No. 208 on this year's InformationWeek 500, an annual list of the nation's most innovative users of business technology. The new rank marks the eighth year that CUNA Mutual has been named to the list. The 2010 list was announced Tuesday at the InformationWeek 500 Conference in Dana Point, Calif. "This award is a clear example of our strong partnership between IT (information technology) and our business lines to provide product excellence to better serve our credit unions and their members," said Rick Roy, CUNA Mutual senior vice president and chief information officer. The company's application for 2020 featured enhancements to CUNA Mutual's technology that allows credit unions to customize their loan origination system and their members to calculate loan payment options, complete loan requests electronically and receive online decisions and loan documents ... * ONTARIO, Calif. (9/16/10)--The logos of 20 California credit
unions will trek along the tracks on the Credit Union Train around the Fairplex Garden Railroad during this year's Los Angeles County Fair, which runs through Oct. 3. In addition to the credit union logos, logos from three credit union organizations--CO-OP Financial Services in Rancho Cucamonga; CUDL in Ontario: and Turner, Warren Accountancy in Burbank--also will be featured. The train is an annual tradition that helps publicize credit unions and the movement as it runs on an 8,000 foot track during the month-long fair, said Tena Lozano, executive director of the Richard Myles Johnson Foundation, the state foundation for California and Nevada credit unions. The train is a brainchild of Bob Toohey, a volunteer at the Fairplex Garden Railroad and board member of SCE FCU, Irwindale. The 30,000-square-foot Garden Railroad was established in 1935 and is considered the oldest and largest outdoor railroad of its kind. It serves as a fundraiser for the foundation (Photo provided by the California and Nevada Credit Union Leagues) ...

Consumers avoid risk credit card use at all-time low

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SAN FRANCISCO (9/16/10)--Credit card use is declining as more consumers are opting for “pay now” alternatives like cash, checks, debit and prepaid cards, according to a recent study. However, credit card use among credit union members seems steady. Credit card use among consumers dropped 31% between 2007 and 2009. If the rate of decline continues, credit card use will drop below 50%, said Javelin Strategy and Research. It also found that among the 11% of consumers who claim they have an increased ability to put funds into savings, 46% have decreased credit card use, and 51% have cut their spending on goods like entertainment, travel, luxury items and cars. At credit unions, outstanding card balances were $31 billion as of December 2007 and $35.5 billion in December 2009. The most recent data, for June 2010, shows that balances were $35.1 billion at credit unions, according to the Credit Union National Association (CUNA). Credit union credit card outstandings increased annually from 12.2% as of June 2006 to June 2007, and 6% from June 2009 to June 2010. CUNA noted that although there has been a slight decrease in credit cards outstanding at credit unions the past six months, that is typical for the first half of any year. Members tend to pay bank loans and save more during that period. “The recent passage of widespread financial reform targeting payment cards is not just impacting the way consumers behave, but is transforming the entire payments landscape,” said Beth Robertson, director of payments research at Javelin. “The industry now has an imperative to innovate, finding new payment options or structural alternatives that will drive revenue.”

Prepaid cards weathered recession well says study

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MADISON, Wis. (9/16/10)--Despite the recession, about 49% of U.S. consumers purchased a prepaid card in the 12 months ended in May, according to a new report by the Mercator Advisory Group. That percentage is up from 45% who purchased cards in the previous year, said the report, “Consumers Provide Direction With Prepaid Under Scrutiny” ( Sept. 14). An online survey of 1,009 consumers ages 18 and older conducted in May was the basis of the report. “In general, we’re seeing that prepaid has held up pretty well during the recession,” said Ken Paterson, author of the report and Mercator vice president of research operations. “Consumers continue to find new uses and new value in the cards.” However, card issuers and program managers should educate consumers about recent regulatory changes regarding expiration dates and inactivity fees to allay fears about using prepaid cards, Paterson said in the report. That could result in more consumers being at ease with buying prepaid cards, Mercator contends. The leading card types that prepaid buyers purchased are merchant-branded cards (69%) and network-branded gift cards (28%). However, those numbers are down from 76% and 39%, respectively, Mercator said. The majority of consumers are not taking advantage of their reload feature, said Mercator. About 57% of respondents were aware of the reload feature but had never used it, the report said. Also, 31% were unaware of the card’s reload capability--down from 36% who said they were unaware last year.

Alliant CU Foundation donated 200K in first year

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CHICAGO (9/16/10)--Alliant Credit Union Foundation recently completed its first year of operations as a 501c3 not-for-profit organization by donating $200,000 to worthy causes in line with its mission, announced David W. Mooney, president of the foundation and president/CEO of Chicago-based Alliant CU.
Alliant Credit Union Foundation presented Operation HOPE with an oversized check representing a grant supporting financial literacy during the foundation's first year of operating. From left are: Patricia Robles, (former) Operation HOPE Chicago Program manager; John Bryant, HOPE founder and chairman; David Mooney, Alliant CU president/CEO and foundation president; Wayne Rosenwinkel, foundation vice president; and Mona Leung, Alliant CU senior vice president and chief financial officer. (Photo provided by Alliant CU)
The foundation, which began operations during the summer of 2009, was established with a $4 million grant from the credit union. Its first sizable donation was to Operation HOPE, a national organization that promotes financial literacy and economic opportunity primarily in underserved areas. The foundation's purpose, said Mooney, "is to promote economic empowerment and self-sufficiency of people, especially in the communities in which Alliant CU members and employees live and work." Causes eligible for support include:
* Those related to education with an emphasis on financial literacy; * Charities helping those in need of assistance; and * Investments in community development projects and programs, especially in underserved areas.
During the year the foundation also provided assistance to students of Prescott Elementary School in Chicago, providing book bags of school supplies donated by Alliant CU employees and purchasing books for the school's Family Book Program. Financial gifts included funds for holiday gifts for seriously ill children in Chicago, Los Angeles, San Francisco, Denver, and the Washington, D.C. area. Its $10-to-$1 matching donation program helped Alliant CU raise more than $40,000 for the American Red Cross for Haiti relief. It also contributed to the Breast Cancer Network of Strength, Bear Necessities Pediatric Cancer Foundation, March of Dimes, Boys and Girls Club, Orphan Foundation of America, Special Olympics, Juvenile Diabetes Research Foundation and others.

TCUF awards 27750 in grants

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FARMERS BRANCH, Texas (9/16/10)--The Texas Credit Union Foundation (TCUF) announced that it dispersed $27,750 in grants during the third quarter. This is in addition to the $137,240 TCUF awarded for the first quarter and $23,544 in the second. Among the recipients is Tarrant County CU, Fort Worth, with a grant to co-sponsor the “Generation Hope Laptop” program. The after-school enrichment program will provide financial education to about 300 students at six Title 1 schools in the county (LoneStar Leaguer Sept. 7). “Without the funding and support from the foundation, not only would there be no financial education component offered in the program’s core curriculum, there would be no opportunity to expose students to financial education or the benefits of credit union membership,” said Lily Newfarmer, president/CEO of Tarrant County CU. Other grants include:
* One Junior Achievement partnership with credit unions; * Three chapter grants; * One scholarship to send a credit union professional to the National Credit Union Foundation’s Development Educator program;

* A partnership with the Texas Council on Economic Education to deliver financial education training to educators in Texas; * Collaboration with the Catholic Charities of Southeast Texas to sponsor the Asset Building Case Management Program, focusing on financial literacy for low- to moderate income families; * Sponsorship of the RAISE Texas Summit to expand asset-building opportunities in Texas;

* Support of the Farmers Branch Chamber of Commerce’s Junior Ambassador Program, geared toward under-represented, academic middle school students who want to attend college; and * One training and conference grant for credit union staff and volunteers.

Conn. league helps CFA boost awareness on fake checks

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Credit Union League of Connecticut President/CEO Tony Emerson (right) addresses the media at a press conference called by Consumer Federation of America (CFA) on its new Fake Check Scam initiative for credit unions and banks. At left is program host Susan Grant, CFA director of consumer protection, Washington, D.C. At center is Connecticut Banking Commissioner Howard Pitkin, who also spoke. (Photo provided by the Credit Union League of Connecticut)
MERIDEN, Conn. (9/16/10)--The Credit Union League of Connecticut participated in a press conference on Consumer Federation of America’s (CFA) newly inaugurated Fake Check Scam project, a national program that is being rolled out in Connecticut. The project is designed to educate and alert financial services personnel and the public about high-tech fake check scams. Working with the league and Connecticut Departments of Consumer Protection and Banking, CFA initiated its educational program to provide guidance on identifying fraudulent checks and avoiding becoming a victim. Participating credit unions and banks will hand out a CFA brochure, “Don’t Become a Target,” at teller stations when members/customers present a check for $1,000 or more to deposit or cash. “It is important and appropriate for us to participate not only because of the close relationship we have with our member credit unions, but also because of the strong relationship credit unions have with their members,” said Tony Emerson, league president/CEO. Connecticut was chosen as the first state for the project because seniors are especially susceptible to fraud, and the state has “a relatively high proportion of people 65 and older,” said Susan Grant, CFA director of consumer protection. “But I do want to stress that adults of all ages in every state are vulnerable to this type of scam,” she added (Republican Sept. 15). Connecticut is the first of at least 10 states expected to participate, CFA said. CFA also plans to conduct the program in Arizona, Colorado, Florida, Georgia, New York, South Carolina, Tennessee, Virginia and the Los Angeles area in California, Grant told News Now. State credit union leagues/associations will be involved in the program in each of the states, she added. The two-year project will end in December 2011 and is being funded by a grant from an anonymous donor. While only smaller community banks and credit unions have signed on, Grant said she hopes larger regional and national banks also will join the effort.

Texas league honors CUs leaders

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DALLAS (9/16/10)--Three Texas credit union executives have been honored by the Texas Credit Union League for their leadership. The league also presented awards to credit unions for social responsibility, philosophy and youth financial education.
The awards were presented during the league’s leadership conference and expo in San Antonio last week. Winners include:
* Professional of the Year--Wayne Vann, president/CEO, NavyArmy FCU, Corpus Christi; * Small Credit Union Achiever of the Year--Sandra Allm, president, BNSF CU, Amarillo; and * Volunteer of the Year--Ollie B. Harris, Smart Financial CU, Houston.
The league also presented credit unions with its Dora Maxwell Social Responsibility Award, Louise Herring Award for Philosophy in Action and the Desjardins Youth Financial Education Award. First place winners include:
* Dora Maxwell, Neches FCU, Port Neches, and the Austin Chapter of Credit Unions; * Louise Herring, AMOCO FCU, Texas City; and * Desjardins, Education CU, Amarillo, and A+ FCU, Austin.

Illinois league appeals to nation for Haiti drive

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Sister Nellie from the Carmelite Order of the Word holds a tote bag donated by the Illinois Credit Union League for school children in earthquake-devastated Haiti. The league is spearheading the effort to collect bags and school supplies. (Photo provided by the Illinois Credit Union League)
NAPERVILLE, Ill. (9/16/10)--Sept. 20 is the deadline for credit unions and leagues to send tote bags and school supplies to Haiti in a project spearheaded by the Illinois Credit Union League (ICUL). Although it has been almost nine months since a massive 7.0-scale earthquake devastated Haiti, the league, its credit unions and other states have helped out by collecting tote bags and school supplies. The league got involved after a board members, Bob Folgate, discussed a recent mission trip he took to Haiti to help the Carmelite Order of the Word Convent. He had visited Haiti several times, with his last trip occurring during the Jan. 12 earthquake. A conversation about what the league does with tote bags left over from its conferences led to an initiative by ICUL Director of Education Greg Framarin, who gathered the league's tote bags and sent word to education directors at other leagues to see if they could help donate. As a result, school supplies, t-shirts, note pads, stuffed animals and other leftover promo items from several states were shipped to the convent. Most recently, ICUL sent about 200 more bags to aid the effort. Although the bags are for children to hold their school supplies, the desperate situation in Haiti has prompted other uses for the bags, including transporting water and other life necessities. At every major league function, the Illinois league has asked its credit unions if they would donate their bag instead of taking it home. The league said it welcomes other credit unions and leagues to join the effort. The order is accepting donations at any time but will need them by Sept. 20 to include in its fall shipment to Haiti for the current school year. The league said supplies can be sent directly to the Carmelite Community of the Word, 394 Bern Road, Gallitzin, PA 16641.