Volume 26, Number 12                                           June 30, 2006

HEADLINE NEWS

Delaware League Hosts Shared Branching Meeting

League Supplement Wins Award

     The annual Pro and Blockbuster Awards – for excellence in public relations, marketing and advertising – were handed out on June 27 during AACUL's (American Association of Credit Union Leagues) 2006 PR/Communications/GAPS Conference in Washington, D.C. The League’s 2005 “Credit Unions: Get the Difference” newsletter supplement received an award as the “best league piece on the uniqueness of credit unions.”
     Alice Smith, League communications director who coordinated the editorial content of the publication, was on hand to receive the award. Her reaction: “I was thrilled when Delaware’s name was called, since we were the smallest league to win an award.” Jane Bailey and Alice Smith will again be working with The News Journal to produce a supplement this October.

Cancer Claims Bill Mapother, Bankruptcy Expert

     William Mapother, III, renowned bankruptcy expert who taught thousands of CU staff and consumers about compliance issues and the bankruptcy process, died on June 22. An attorney with the Mapother and Mapother law firm in Louisville, Kentucky, Mapother wrote a column on bankruptcy for a number of years in Credit Union Magazine. During his career, he had spoken to Delaware credit unions on at least four occasions.

COMPLIANCE RECAP

Amendments to NCUA’s Chartering and Field of Membership Manual

     By a 2-1 vote, with Vice Chairman Rodney Hood voting against, the NCUA Board approved an Interpretive Ruling and Policy Statement (IRPS) to amend the agency’s Chartering and Field of Membership Manual (Chartering Manual) on the issue of underserved areas for federal credit unions. This item had been on the agenda for the May board meeting but was withdrawn for further consideration in June.
     The changes are effective thirty days after publication and include the following:

·         After the rule takes effect, only multiple group credit unions may include underserved areas outside their fields of membership.

·         The rule is prospective, meaning that single bond or community bond credit unions that currently serve underserved areas will continue to be able to do so. They will also continue to be able to add new members from those existing underserved areas. The prospective application of these provisions was strongly supported by CUNA.

·         Multiple bond credit unions that change their charters after the effective date of the rule will be required to eliminate their underserved areas but may continue serving members of record from such areas that they previously served.  

·         Regarding service facility requirements, once an underserved area has been added, the multiple group credit union must establish and maintain an office or service facility in the underserved area within two years.

·         As under the current policy, an ATM or the credit union’s Internet website would not be considered a service facility. However, an unmanned facility, such as a credit union- owned electronic facility where shares are accepted, loan applications accepted and loans disbursed, will be permitted. 

     The final rule may be viewed in the Board Action Bulletin posted on NCUA's website: www.ncua.gov/NCUABoard/board_reports/board_reports.html

NCUA Adopts Rule on Indirect Loans

     The NCUA Board unanimously adopted a final rule to regulate purchases by federally insured credit unions of indirect vehicle loans serviced by third-parties. NCUA has previously addressed this issue in a number of Letters to Credit Unions, as well as a Risk Alert that was issued in June 2005. The rule will limit the aggregate amount of these loans serviced by any single third-party to 50% of a credit union’s net worth during the first 30 months of a new third-party servicing relationship and to 100% of the credit union’s net worth after the initial 30-month period.
     The rule applies only to indirect vehicle loans serviced by third parties. These limitations will not apply to servicers that are federally insured financial institutions or direct loans. The final rule excludes from the concentration limits loans in which the servicer and its affiliates were not involved in the origination process. Further, the final rule contains an exemption for certain credit union service organization (CUSO) servicers.
     The final rule will be effective 30 days after publication in the Federal Register. An analysis of the final rule will also be available on CUNA’s Regulatory Advocacy website.

Delaware House Passes Security Freeze Bill

     The Delaware House of Representatives passed SB109 creating a security freeze for Delaware on June 22 by a vote of 40-0 (one absentee). According to League governmental affairs committee member George Fitzgerald, “Thanks to the coalition’s letter-writing efforts, we beat back several eviscerating credit bureau amendments which would have stripped the bill of the 15-minute thaw and would have made the security freeze more expensive to use.” The House version contains several minor amendments for clarification. The bill will now go to the State Senate for a confirming vote, where it originally passed 21-0. At that point, it is expected that Governor Minner will sign the bill into law.
     As reported in the last issue of Together, the coalition is made up of 94 organizations and elected officials, including 21 credit unions.

SYSTEM NEWS

Prime Borrower Decline Top of E-Scan List

     As credit union members continue to get older and move past their prime borrowing years, credit unions will be pressed to develop and execute sustainable long-term growth strategies. The decline of prime borrowers tops the list of insights in the recently released Credit Union National Association (CUNA) 2006/2007 Credit Union Environmental Scan (E-Scan).
     The prime borrower decline secured the pinnacle spot on the list of the Top 10 E-Scan Insights, which identifies the key trends and inferences significantly affecting credit unions in the coming years. The top insights, as identified by E-Scan analysts, are:
1.             Developing and executing long-term strategies that spur sustainable growth is the most pressing challenge credit unions face, particularly smaller credit unions.
2.             From an economic standpoint, 2007 could be the most challenging year for credit unions in a generation.
3.             The consumer marketplace is increasingly diverse and growing with substantial lending and fee potential for credit unions that recognize this evolution and respond accordingly.
4.             The banking industry's aggressive campaign to tax credit unions and limit their scope of operations will continue unabated.
5.             The National Credit Union Administration’s pilot program to collect data on how well credit unions are serving low- and moderate-income consumers is a response to a political reality.
6.             A networked world creates both efficiencies and vulnerabilities. Members love the convenience of online banking, but they worry about security.
7.             The financial service industry is increasingly commoditized. Product and price differentials do not determine long-term member loyalty.
8.             The maturation of the Internet enables consumers to exercise their influence on the financial service industry in numerous ways - aside from being able to research, shop, and compare providers or conduct financial transactions.
9.             Plastic card fraud losses at credit unions reached nearly $90 million in 2005.
10.         The evolving adoption by merchants and consumers of contactless "tap-and-go" payment technology will eventually offer significant volume and income streams for credit unions.
     In addition to the top 10 insights, the E-Scan analysis is divided into key issue areas: Disaster Recovery Planning; Payment Systems; Demographics; Marketing; Lending; Technology; Products & Services; Economics; Human Resources; and Legislation & Regulation. Additionally, the E-Scan covers more than 50 important credit union topics and 125 strategic implications for planning.
     Purchasers of the report also receive access to an exclusive E-Scan website that contains additional reports and useful planning worksheets. Periodic subject updates and further research will also be posted on this site, so purchasers can access the most current information and projections.
     The E-Scan is available in three formats – report (#27243, $79); PowerPoint presentation (#27244, $225), and DVD (#27245, $175) - for use in planning, presentations, and discussions. The PowerPoint presentation will be available by early July.  To order, visit http://buy.cuna.org and enter the stock number in the “Product Finder.”

Workplace Spanish for CUs

     The ability to communicate with Spanish-speaking members is becoming important to CUs. The Spanish for Credit Unions eSchool can help tellers, loan officers, member service reps, and others gain valuable language skills to make Spanish-speaking members and co-workers feel welcome in your credit union. The next course will be held from August 9-September 27 (Wednesdays) from 2-3:30 p.m. EDT. The course will be offered again on October 19-December 14.
     Topics to be covered include the alphabet, pronunciations, and greetings; time and numbers; days/months/seasons; time and numbers; member service and credit union terms; check, ID, and loan applications; and developing conversations.
     The registration fee is $695 for the first person, and $295 for each additional person from the same CU. CUNA Council Members will receive a $100 discount. For more program content, call 800-356-0655, ext. 4079. To register online, go to http://training.cuna.org/elearning/eschool/ESC1086_fct.html

DELAWARE NOTES

The Georgetown branch of DELAWARE FCU was closed on June 26-27 due to flooding from the recent heavy rainfalls that have impacted the state. The CU hired a restoration company to remove water and huge amounts of grease left on the tile, baseboards, and carpet from the Chinese restaurant located in the same shopping center, according to CEO Duke Strosser. There was also some damage to supplies, furniture, and computers. Luckily, Seaford FCU and Sussex County FCU, which are located in Seaford where over 13 inches of rain fell, managed to avoid any damage, although some of their staff members were impacted.

DELAWARE FCU also reports that members of the staff and board participated in Central Delaware’s Habitat for Humanity project in Smyrna on May 20, thereby demonstrating the philosophy of “people helping people” in the local community

DOVER FCU has appointed Anne Swierc to serve as vice president of operations. She has been with the CU for over 28 years, most recently as collections manager and administrative manager for operational functions at the CU.

EverythingCUMarketing.com featured Faith Simpers, marketing manager of LOUVIERS FCU, as the “executive member of the day” on its website on June 23. EverythingCUMarketing.com is an online resource for CU marketing professionals. There are 4,336 registered members, and Faith was one of those featured that day.

SUSSEX COUNTY FCU is now using Mid-Atlantic Corporate’s My CU^® Services Electronic Bill Payment.

BauerFinancial, Inc., an independent financial institution rating and research firm, has issued  updated BauerFinancial™ star ratings for CUs based on the most recently released financial data (March 31, 2006). Fourteen Delaware CUs received a five-star (superior) rating: American Spirit, Chestnut Run, Delaware, Delaware Alliance, DEXSTA, Dover, DPL, First State Refinery, Milford Memorial, NCC Delaware Employees, NCC School Employees, Provident, U-Del, and Wilmington Postal.

EDUCATIONAL OPPORTUNITIES

July QuickBites Teleconferences
One-hour sessions – 11 a.m.-noon
•   7/6    Community Marketing
•      7/11  Internal Employee Fraud
•      7/19  What If They Say No? – Cross-selling
•     7/27  Collections

Two-hour session –11 a.m.-1 p.m.
•      7/25  CU 101: An Introduction to Credit Unions

The fees for the one-hour sessions are $99, and the two-hour session is $169. Deadline to register: one week prior to the session. Call Bernadette to enroll.

DCUL Human Resource Council – Tuesday, July 11, from 10 a.m.-noon at the League office. Attorney Robert Nagle will speak on 1) litigating discrimination claims, including age discrimination and affirmative action and 2) recordkeeping requirements. The session is free to registered HR Council members; $75 per person for non-council members. Lunch is provided. Regis. deadline: 7/3.

DCUL Cards Council – Wednesday, July 12, from 10 a.m.-noon at the League office. CUNA Mutual staff member Irene O’Sullivan will speak on minimizing credit card losses. The session is free to registered Cards Council members; $75 per person for non-council members. Lunch is provided. Regis. deadline: 7/7.

CU Member Seminar on Reverse Mortgages. The League is hosting this member education seminar at the League office on Thursday, July 13, from 6:30-8:30 p.m. To be eligible for most reverse mortgages, members must own their own homes and be 62 years of age or older. If you would like to market this seminar to your members, contact Jane Bailey. Space is limited to 30 people.

Robbery Training – Wednesday, August 2, in Room 414 of Del Tech’s Terry Campus Conference Center in Dover. Chetta Hebron-Byrd of CUNA Mutual will again lead this session which will cover types of robberies, security devices, and what to do before, during, and after a robbery. Participants will receive a robbery packet. The session will only be held at the Dover location if we have 15 registrants. Fee: $50, which includes a light meal that will be served at 5 p.m.  Session: 5:30-8:30 p.m. Register early by July 19.

Washington/State Legislative Update
June 2006

     On June 26, the Delaware League and the Credit Union National Association (CUNA) issued an urgent call-to-action – asking credit union supporters to contact legislators on the issue of parity in regulatory relief.
    As you know, two regulatory relief bills (S. 2856/H. 3505) have been wending their way through Congress. This legislation addresses the needs of banks and thrifts, and of credit unions to a lesser degree. Since the House and Senate passed regulatory relief packages with widely differing provisions, the two houses of Congress have been working on a compromise. One of the provisions the House has asked the Senate to include in the compromise legislation would completely eliminate the current limitation of 20% of assets on business lending by thrift institutions. There is no comparable provision offering member business lending relief to credit unions. Member business lending for credit unions is currently capped at a much more restrictive limitation of 12.25% of assets.
     We believe this to be patently unfair! Eliminating the business lending cap on thrifts only widens an already significant regulatory divide between the credit union and thrift charters! This current action to remove ALL restrictions on small business lending by thrift institutions is just another strategy by the bankers to reach their end goal – to contain and convert credit unions.
     CUNA president/CEO Dan Mica said the key points credit unions should deliver include:

• Credit unions will oppose any version of regulatory relief legislation that includes a provision to eliminate a current 20% ceiling on business lending by thrift institutions. That unacceptable provision is currently contained in a House proffer presented to the Senate for consideration.
• It is inappropriate for Congress to consider a substantial expansion in thrift business lending and a significant enhancement of the thrift charter, within the context of Senate legislation that was intentionally drafted to avoid any disruption of the delicate balance between federal charters and regulators.
• When Congress takes up the issue of small business lending, it should do so in a comprehensive way that recognizes the unique role and needs of all lenders and potential borrowers, an effort that certainly should not exclude credit unions.

>> Take a Stand

     Our position is simple: Either include credit union member business lending relief in the regulatory relief proposal or drop the provision that would eliminate the cap on business lending for thrifts. In general, credit unions do not oppose legislative or regulatory requests by the bank and thrift industries, preferring instead to focus on positive change for credit unions. In this case, however, we feel it is important for us to stand up and oppose the thrifts on this issue – one that would increase their advantage and diminish the credit union charter.

>> Take Action

§                  During the first week of July, please e-mail or fax Senator Carper, Senator Biden, and Congressman Castle. We’re trying to get as many communications as possible to lawmakers by July 7. 
§                  CUNA has created a way for credit union supporters to quickly and easily send e-mails to lawmakers. Go to http://capwiz.com/cuna/issues/alert/?alertid=8874221&type=CO in order to email your members in Congress on this issue. §                  In addition, Alice Smith at the League can provide you with sample letters that can be sent by credit union CEOs or individual CU members. Please email or fax Alice a copy of any communication you make (alice@dcul.org; fax 302-322-9354)

     The Credit Union National Association (CUNA) will continue to advocate for key provisions in data security legislation in areas including notification by retailers and reimbursement for the costs connected with breaches, according to Dean Sagar, CUNA vice president for legislative affairs. Sagar said that CUNA welcomed the Senate Banking Committee's introduction of a financial data protection bill this week (The Data Security Act, S. 3568 – co-sponsored by Senator Tom Carper).
      Six committees have jurisdiction over the issue of financial data breaches, and the Senate Banking Committee is the final one to offer its version of fixes for the growing problem of the theft of personal information. There are five other bills regarding data security that have been offered by both houses. Congressman Mike Castle is one of the co-sponsors of The Financial Data Protection Act of 2005 (H.R. 3997), which also requires institutions to notify consumers of breaches of sensitive information. However, with six committees having their own legislation, there is a question as to whether a consensus will be reached by the end of the session.

     The number of House members who have signed up to be co-sponsors of  The Credit Union Regulatory Improvements Act (CURIA, H.R. 2317) is now 121. Two important provisions contained in CURIA involve Prompt Corrective Action (PCA) and member business lending limits.
     The bill would modernize credit union capital requirements by redefining the net worth ratio to include a risk-based asset approach to PCA. CUNA maintains a new measurement would improve the safety and soundness of credit unions. Credit unions historically have had the lowest default and delinquency rates in virtually all categories of loans and have maintained average net worth ratios well in excess of those held by banks.
     CURIA also seeks to increase the current limit on credit union member business loans (MBL) from 12.25% to 20% and permit the National Credit Union Administration (NCUA) to increase the threshold for defining an MBL from $50,000 to $100,000.

TOGETHER is published on the 15th and 30th of each month by the Delaware Credit Union League, 4 Quigley Boulevard, New Castle, DE19720. Information to be published should be sent or phoned into the League no later than the Monday of the week preceding the publication date. Telephone: (302) 322-9341 or (800) 292-7875. This newsletter can also be found on the League website: www.dcul.org. Hard copies of the newsletter will be mailed to each credit union CEO/manager for distribution to those without computer access. Readers can receive a reminder when the newest edition is posted to the Web by emailing susan@dcul.org. Editor: Alice Smith (alice@dcul.org).