Friday, February 27, 2009

Vote on mortgage bankruptcy bill delayed

WASHINGTON (2/27/09)—The U.S. House of Representatives postponed its scheduled consideration of H.R. 1106 Thursday and pushed back substantive debate and a vote until probably next week.

The bill contains a provision strongly opposed by the Credit Union National Association (CUNA) that would allow bankruptcy court judges broad authority to change terms of existing mortgages. That practice is commonly referred to as a mortgage "cramdown."

The bill, however, also carries language that would make permanent the higher federal share and deposit insurance cap of $250,000 enacted on a temporary basis in October as part of the Emergency Economic Stabilization Act.

The favorable insurance provision appears to remain on track, according to CUNA Vice President Ryan Donovan. But, he said, the negative message on cramdowns, delivered while 4,200 credit union representatives were in town for CUNA's 2009 Governmental Affairs Conference (GAC), may have slowed the track for that plan.

"From a credit union perspective," Donovan said Thursday, "getting the House to put the brakes on is a positive development."

Earlier this week, CUNA sent a letter to each member of the House to urge changes to the proposed cramdown authority, which CUNA said is "overly broad in scope, application and duration."

CUNA supports other provisions of H.R. 1106, which includes measures that would help families stay in their homes, including improvements to the Hope for Homeowners programs and a safe harbor for lenders that modify certain types of mortgages.

CUNA encouraged lawmakers to consider amendments that would limit the application of the bill's cramdown proposal to the subprime and nontraditional mortgages that caused the housing crisis and that would provide a firm sunset on the authority conveyed to the bankruptcy courts through this legislation.

The letter also reiterated CUNA's strong support of the permanent extension of the $250,000 deposit insurance limit, as well as language which would allow the National Credit Union Administration (NCUA) as much as five years to replenish the National Credit Union Share Insurance Fund (NCUSIF) when the fund drops below the statutorily required level.

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Payments study: Cash no longer king

DALLAS (2/27/09)--Consumers' use of cash is declining while their use of card-based payment options is increasing, reports a nationwide study.

Roughly 41% of consumers indicated they use cash less often today than they did two years ago, according to the 2008 Student of Consumer Payment Preferences. The study--sponsored by First Data, MasterCard Worldwide, Metavante and PULSE--was conducted by BAI Research and Hitachi Consulting.

"Of those who reduced their cash use, 97% are shifting to credit, debit or gift/prepaid cards instead," said Ajay Nagarkatte, managing director of BAI Research.

For credit cards, consumers carry an average of four cards but use only 2.2 of those to make purchases on any given month, underscoring the competitiveness of the credit card market, said the study. Findings reflected consolidation in the credit card industry, with 75% of consumers' Visa and MasterCard credit cards coming from 10 issuers.

Nearly half (46%) of active cardholders surveyed revolve at least part of their total credit card balance each month, while 54% pay all balances in full.

More than 75% of cardholders report they have rewards attached to at least one card. Overall, 58% of consumers had cards that earned rewards; 51% of those said rewards strongly affect their use of the card.

For debit cards, signature and PIN debit account for a combined 37% of consumers' in-store payments. PIN debit is preferred by 45% of consumers surveyed, while 35% prefer signature and 20% have no preference.

Gift/prepaid cards did less well than expected, accounting for 4% of consumers' in-store purchases--the same as in 2005. However, the market for open-loop gift/prepaid cards is increasing, the study indicated. Retailer-specific cards dominated the gift card space. In 2008, more than twice as many consumers received or gave general purpose gift cards than in 2005.

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Study: CUs more active than banks in reaching teens

CHICAGO (2/27/09)--Credit unions are more active than banks in reaching teens to solicit their business, says a new survey by Mintel Comperemedia.

Mintel, which monitors direct mail, e-mail and print advertising, observed financial products and services targeted at teens and their parents (Business Wire Feb. 25).

A search of Mintel's database for campaigns referencing the teen market from January through October 2008 collected 51 results--two-thirds of which came from credit unions.

The survey also indicated that nearly four out of five teens (79%) surveyed consider themselves knowledgeable about financial matters.

However, the Federal Reserve's 2008 test of high school seniors indicates teens are falling behind in personal finance education. The test revealed an average financial literacy score of 48%--four percentage points lower than the average score of 52% in 2006.

Most teens said they learn about money from their parents (87%), while two-thirds said they learn about finances through school lessons, the survey indicated.

Many credit unions work through the National Endowment for Financial Education to present school classroom financial education.

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CUNA to Obama: More CU biz loans could ease crunch

WASHINGTON (2/26/09)--Following President Barack Obama's speech Tuesday night before the Joint Meeting of Congress, the Credit Union National Association (CUNA) asked the White House to consider credit unions as a key part of the solution to the credit crunch facing America's small businesses.

A letter sent to the president Wednesday said CUNA is "very pleased that your administration is moving swiftly and aggressively to restore confidence and re-start lending."

"We hope you support credit unions as part of the solution by calling on Congress to enact legislation that eliminates the credit union member business lending cap," wrote CUNA President/CEO Dan Mica.

Mica noted that the cap has been in place only 10 years and it was arbitrarily set in response to banking lobbyists who wanted to restrain credit unions. He noted that there is no economic or safety and soundness rationale for the 12.25%-of-assets cap.

Without that ceiling, Mica wrote, "We estimate that credit unions could lend up to $10 billion in new business loans during the first year after the credit union business lending cap was eliminated."

The average credit union business loan is under $200,000, which means that credit union business loans go to the small businesses that need them the most, Mica pointed out.

It is not about lending to build shopping centers or sports arenas; it is about helping businesses make payroll, stay in business, expand their businesses and stimulate the economy, the CUNA letter said.

"Encouraging competition by permitting credit unions to do more small business lending could go a long way to eliminate the credit crunch and restore confidence in the economy. It may even encourage America's community banks to lend more to small businesses," Mica suggested.

Use the resource link to read the complete CUNA letter.

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Frank: CUs will feel like brother of "prodigal son"

WASHINGTON (2/26/09)—Credit unions will likely feel like the brother of a "prodigal son" this year as Congress works to clean up the subprime mortgage mess, Rep. Barney Frank (D-Mass.) told attendees of the Credit Union National Association's (CUNA) Governmental Affairs Conference Wednesday.

Frank, chairman of the House Financial Services Committee, continually complimented credit unions for helping Americans, especially low-income Americans, access affordable financial services. But although credit unions "in no way contributed" to the subprime mortgage meltdown, they will likely feel the effects of it.

Such as in the story of the prodigal son, "well-behaved" credit unions will continue their responsible financial activities as other institutions that "behaved badly" and triggered the credit crisis receive help.

"You're the good son," Frank said. But, "you are the victim of other's mistakes. You've been damaged."

As the "good son," credit unions will not experience a change in tax status. And because credit unions did not contribute to the current financial crisis, there is no reason to impose additional restrictions on them, Frank said.

"If credit unions made all of the mortgage loans, then there would have been no subprime crisis and therefore no economic crisis," he said.

Frank also briefed attendees on the way Congress will have to handle the financial crisis—by first dealing with the crisis, and then finding ways to prevent it from happening again.

Congress' high priority is getting the credit system functioning again. Frank assured credit unions that Congress would work with them to minimize any damage they are experiencing because of others' mistakes.

It's important to remind legislators that credit unions play a significant role in legitimate community-oriented financial activities, he said.

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Survey notes recession's adverse impact on savings

WASHINGTON (2/26/09)--The second annual America Saves Week survey revealed declining percentages of Americans who believe they are saving enough for retirement and expect to pay off their home mortgage before retirement.

However, the survey also found that more Americans are concerned about the impact of the current recession on their personal finances (77%) with over half (53%) being "very concerned."

The survey was commissioned by America Saves and the American Savings Education Council. It was conducted by Opinion Research Corp. Results were announced Monday.

Comparing the data collected by the 2008 and 2009 February surveys reveals some of the impacts of the current recession on consumers:

The proportion of respondents who indicated they are saving enough for retirement declined to 49% from 52%. Those who said they are saving for retirement in workplace programs fell to 51% from 55%;

Mortgage holders who said they expect to pay off their mortgage before retirement fell to 74% from 76%. And the proportion of Americans surveyed who said they own property and either have no mortgage debt or are paying down this debt declined--to 62% from 67%; and

The proportion of respondents who said they do not spend all their income but save the difference fell slightly--to 73% from 74%. Respondents who said they have "sufficient emergency savings to pay for unexpected expenses like car repairs or a doctor visit" rose slightly to 72% from 71%.

"For most Americans, to-date recession-related financial concerns have been greater than financial losses," noted Stephen Brobeck, Consumer Federation of America executive director and a leader in America Saves. "But tens of millions who still have their jobs and have suffered little or no loss of retirement savings worry that a deepening recession will eventually cost them income or even their jobs."

Americans can better prepare for an uncertain future by understanding their financial condition, developing realistic spending and savings plans, and saving automatically, survey analysts concluded. However, only about half the country have taken these prudent financial measures.

The survey also indicated:

Little more than half of respondents (54%) know their net worth, the same percentage as last year.

Three-fifths (60%) have a savings plan with goals, but less than half (47%) have a "spending plan that allows you to save enough money to achieve the goals of your savings plan." These percentages are down a little from last year's 62% and 49%, respectively.

Less than half of respondents (42%) save automatically, outside of work, through regular preauthorized transfers from checking to savings or investments. This percentage of "automatic savers" did not change from last year.

The good news is that more consumers are making an effort to pay down and pay off consumer debt. The proportion who said they are reducing this debt rose to 44% this year from 38% in 2008. And those who said they are now consumer "debt-free" rose slightly to 40% from 39%.

"Research shows that those who plan borrow less and save more," said Brobeck. "And anyone, regardless of income, can develop useful spending and savings plans."

A number of credit unions across the country are active in America Saves Week, which ends Sunday.

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Tuesday, February 24, 2009

Ralph Nader: CUs an island of calm in casino capitalism

WASHINGTON (2/24/09)--Consumer advocate and three-time presidential contender Ralph Nader and Credit Union National Association (CUNA) senior economist Mike Schenk explain how credit unions have avoided the financial crisis caused by banks in an article in Counterpunch (Feb. 23), a political newsletter.

The article, written by Nader, begins: "While the reckless giant banks are shattering like an over-heated glacier day by day, the nation's credit unions are a relative island of calm largely apart from the vortex of casino capitalism."

Credit unions didn't invest in speculative derivatives or offer people "teaser rates to sign on for a home mortgage they could not afford," Nader said, adding that credit unions are well-capitalized because they do not have an incentive to go for high-risk, highly leveraged speculation to increase stock values.

He quotes CUNA's Schenk, who explained credit unions are portfolio lenders, which means they hold on to the portfolios most of the loans they originate. Although the deepening recession means has affected their surplus and deteriorated their asset quality a bit, most credit unions can live with those conditions without suffering dire consequences, Schenk said..

Nader also discusses the difference between natural person credit unions and corporate credit unions and notes that the credit union model can provide "contemporary lessons" such as "being responsive to consumer loan needs and down to earth with their portfolios."

He noted little is being written about how credit unions' regulation, philosophy and behavior have largely escaped the current economic catastrophe. To view the article, use the link.

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New data breach hits another card processor

NEW YORK (2/24/09)--Another payment processor has been hit with a data breach that is affecting credit unions and banks. It is the third major breach of a card processor since December and comes on the heels of what may be the largest data breach in history, the Heartland Payment Systems breach.

Visa and MasterCard began notifying banks and credit unions Feb. 9 about credit and debit card accounts that were exposed in the most recent breach, involving a payment processor that they did not identify by name ( Feb. 23).

The Pennsylvania Credit Union Association and Tuscaloosa (Ala.) VA FCU posted messages on their websites that a breach investigation is under way. Visa informed banks and credit unions that a vulnerability left potentially thousands of credit and debit card numbers exposed between February 2008 through January 2009, according to an alert from Tuscaloosa VA FCU.

The report indicated the breach isn't as serious as the breach announced Jan. 20 by Heartland Payment Systems, but said that malicious software was placed on the processor's platform. There is no evidence so far that accounts were viewed or taken by the hackers, said the Tuscaloosa VA FCU.

Computerworld (Feb. 23) said the notifications from the card companies indicated that as with the Heartland Payment Systems breach, no unencrypted personal identification numbers (PINs), card verification codes or customer Social Security numbers were exposed. It also didn't involve magnetic stripe data on the back of the cards.

Alabama CU, also of Tuscaloosa, said Thursday it had been notified Feb. 17 of a breach at an unknown card processor. "We have been notified by Visa that a lengthy list of Visa ATM/debit card numbers was included as part of a data breach at an unknown vendor's location," said the credit union.

The fraudulent transactions are primarily characterized as purchases of prepaid phone cards, prepaid gift cards, and money orders from Wal-Mart, and usually occur in $100 increments, said the credit union.

As a result, Alabama CU decided to limit purchases on its cards to $99 per day. Replacement cards have been ordered for every card that is blocked. Cardholders will still be able to conduct PIN-based ATM transactions, up to $500 per day or the limit permitted by the ATMs.

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Monday, February 23, 2009

Savings week also encourages responsible spending

ALEXANDRIA, Va. (2/23/09)--Saving money goes hand in hand with responsible spending during tough economic times, and America Saves Week--which ends Sunday--focuses on both.

Consumers came close to saving more money in the last three months of 2008 than in 2005 and 2006 combined. The personal savings rate jumped to 2.9% of disposable personal income as consumers squirreled away $310 billion in the final quarter of 2008 ( Feb. 12).

While the increase in the personal savings rate is a step in the right direction for consumers, experts agree that the savings rate will need to climb to at least 6% to be an adequate amount for people to rely on during tough economic times ( Feb. 15).

So, how can you save and spend responsibly? For the third year in a row, hundreds of local and national organizations promote better savings and spending habits through events, positive press, and the Internet during America Saves Week. Visit to enroll and make your dreams a reality.

In addition to the nformation provided through America Saves, here are a few tips to help you improve your savings habits:

Re-evaluate spending. You may find extra money to sock away into savings. For example, you could skip one pizza a week, downgrade your cable package, or use the library instead of purchasing books.

Look for layaway. Layaway programs provide an alternative to using your credit card. You pay a small fee up front, make regular interest-free payments over a period of time, and take the item home from the store once you've paid the full purchase price. But there are downsides to layaway. Not every retailer offers it, and typically there are cancellation fees and returned-check fees. Make sure that you're able to make the payments over the agreed time, and check the store's layaway policy before you plunk down your cash.

Automatic deductions. Specify an amount to be automatically deducted from each paycheck and deposited directly into your savings account. Before you know it, you'll forget that the amount is being deducted from your paycheck and your savings will continue to accumulate. Ask the credit union or your employer how to set up the automatic transaction.

For more information, read "10 Ways to Spend Smarter," "A Dollar Saved is Two Dollars Earned" and "Living Within Your Limits" in MoneyMix: Launch Your Life.

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CUs participate in America Saves, Military Saves Week

WASHINGTON (2/23/09)--Credit unions and the rest of the nation are celebrating smart savings habits this week. The third annual America Saves Week and Military Saves Week kicked off Sunday and will focus on savings efforts through March 1.

Today at noon EST, America Saves and the American Savings Education Council will release a survey of American's savings habits and progress. It will tell how Americans are responding to the recession, how they are managing everyday, emergency and retirement savings; how savings behavior has changed since last year's survey; progress on debt payments and key savings habits; and attitudes toward various savings practices and the use of tax refunds.

America Saves Week is part of the America Saves campaign managed by the Consumer Federation of America. Last year, more than 75,000 people attended more than 1,800 events promoting savings during the week.

Military Saves is a Department of Defense-level campaign, focusing on encouraging military members and their families to save every month to provide for their immediate and long-term goals. This year, the campaign has expanded to include Military Youth Saves program, geared to youth.

The cornerstone of the Military Saves campaign is the Saver Pledge, a commitment to exercise good financial habits and encourage others to do the same. Savers who enroll online receive electronic newsletters and e-wealth coach advice (U.S. Fed News Feb. 17) . More than 80 defense credit unions and military banks have participated in activities in the past.

Credit unions are participating in the events. For example, Aberdeen Proving Ground FCU, Aberdeen, Md., is a partner in Maryland Saves, a local savings campaign. It runs through March 7 and supports the America Saves and Military Saves national campaigns that encourage individuals and families to build wealth through savings.

In the Maryland Saves campaign, participants will automatically be entered in a drawing to win one of two $250 12-month certificates, the credit union announced.

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Friday, February 20, 2009

Use America Saves Week to jump-start savings habits

WASHINGTON (2/20/09)--America Saves Week, from Sunday to March 1, is the focus of this week's H&FF Radio show, with guests focusing on simple habits that have lifelong benefits.

Home & Family Finance airs Sundays at 3 p.m. EST on the Radio America Network. The show also is carried on American Forces Radio Network. The one-hour program devoted to consumer finance issues is brought to you by America's credit unions and their 90 million members, and is presented by CO-OP Network.

The Credit Union National Association (CUNA) and Radio America are podcasting Home & Family Finance through iTunes, Podcast Alley, Odeo, and other popular podcast library sites, as well as on Radio America and CUNA's websites.

Sunday's show, which you also can hear later via the Internet, features Paul Berry, Washington, D.C., journalist and broadcaster, discussing these topics with special guests:

"America Saves," with Nancy Register, associate director, Consumer Federation of America, Washington, D.C.;

"Lower-Income Household Savings Initiatives: Saver's Bonus Act and AutoSave," with Ray Boshara, vice president and director of Asset Building Program, New America Foundation, Washington, D.C.;

"Never Too Young to Save: Start Young Savers Off On the Right Foot," with Eric Porter, executive vice president, business development and marketing, Co-op Network, Rancho Cucamonga, Calif.; and

"Build an Emergency Savings Fund," with Ethan Ewing, president,, San Mateo, Calif.

Home & Family Finance is a resource center for personal finance information at CUNA. The radio show is sponsored by CO-OP Network, the national credit union ATM network; Cabot Creamery Cooperative, maker of award-winning cheddar; Western Corporate FCU, also known as WesCorp, and its member credit unions; and the Defense Credit Union Council and member credit unions, serving those who serve our country worldwide.

For more information, read "Tough Times Series: Gen X: Ditch Your Debt and Become Smart Savers" in Home & Family Finance Resource Center.

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Boston Globe: CUs paying for others' mistakes

BOSTON (2/20/09)--Credit unions nationwide are paying a price for poor decisions made by others, a Boston Globe columnist wrote Friday.

"Why are credit unions suddenly on the hook for an investment meltdown that could easily cost the entire industry the kind of money it earns in a whole year or even more?" wrote columnist Steven Syre. "The answer isn't about mistakes made by credit unions. Those small institutions are paying a price for decisions made somewhere else by someone else--calls that seemed reasonable at the time but worked out very badly."

Credit unions are being assessed special charges "to help bail out one large institution that serves their industry [U.S. Central] and bolster two dozen more [the other corporate credit unions in the U.S.] like it," Syre wrote.

The declining value of mortgage-backed securities are the main reason for the problem, Syre added.

"Compared with the trillion-dollar rescue packages under negotiation in Washington, the new problems facing credit unions look like a rounding error," Sayre continued. "And the vast majority of credit unions, which tend to maintain high capital cushions, will be able to eat the cost and move on if they must."

However, the corporate stabilization plan will still have repercussions for credit unions by making it harder for them to lend, said Michael Hanson, president of the Massachusetts Share Insurance Corp.--which insures credit union deposits in the state that exceed federal limits.

"Recklessness by financial giants caused most of our problems. Your local credit union is paying a price just the same," Syre concluded.

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CU National Mortgage Co. closes

PINE BROOK, N.J. (2/20/09)--CU National Mortgage Co., based in Pine Brook, N.J., announced last week that it is closing, which will affect some credit unions nationwide (Life is a Highway Feb. 18).

The company is a wholly owned subsidiary of U.S. Mortgage Corp., a mortgage banking organization, established in 1996.

In 1999, CU National Mortgage was developed as a subsidiary of US Mortgage to serve the credit union industry.

A message at the company said it is no longer taking calls.

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