Volume 28, Number 14                                                                 July 30, 2008      

HEADLINE NEWS

Delaware CUs Safe and Sound
     Credit unions and state credit union leagues nationwide continue to work with their members and local media to get the word out that their deposits at credit unions are safe in the wake of the IndyMac Bancorp failure.
     While some segments of the financial services industry are experiencing economic difficulties, Delaware credit unions remain safe and sound institutions for more than 220,000 consumers who keep their money there, said a press release prepared by the Delaware Credit Union League.
     There are about 8,500 credit unions nationwide, with more than 90 million consumers as members, holding about $800 billion in assets. In Delaware, 34 credit unions hold over $1.42 billion in assets. More important in light of recent bank failures is the fact that member deposits are federally insured by the National Credit Union Administration (NCUA) through the National Credit Union Share Insurance Fund (NCUSIF).    
     “Consumers who have federally insured funds in credit unions should rest assured that their deposits are safe up to at least $100,000 per account, with additional coverage of up to $250,000 for certain retirement accounts,” according to the press release.
     The NCUSIF is in strong condition, with an equity ratio estimated at 1.24% for June 30, projected by year-end to be 1.28%, according to NCUA. Data from NCUA also show that Delaware credit unions are well-capitalized, with an overall capital-to-asset ratio of 12.44%.
     In addition, data compiled by the Credit Union National Association indicate that consumers, at a time when they are concerned about their economic futures, trust credit unions to be a "safe harbor" for their money. Savings at credit unions nationwide grew by nearly 7% in the 12 months ending March 2008.  
     When it comes to lending, credit unions operate in the best interests of their members and are more conservative, unlike other more traditional financial institutions that exist to build up profits for stockholders, the League’s press release said. As a result, credit unions steered clear of the subprime crisis and other risky lending practices.
     Here is a sampling of how Delaware credit unions responded to members’ concerns. Dover, DPL, Provident and Sussex County FCUs issued talking points for front line staff highlighting the financial strength of each individual credit union. Delaware First and Sussex County FCUs reported placing notices on their websites addressing the issue. EWOD FCU is planning to send the NCUA brochure on the insurance fund to all of its members. New Castle County School Employees FCU reports receiving a good number of calls from members wanting to know if their money was insured and for how much. In all cases, the credit unions assured members that they were well capitalized and had no relationships with the subprime market.
     It may be a good idea to pass share insurance information along to all staff who could encounter questions on coverage or on structuring accounts in such a way as to guarantee all accounts are insured. Other resources that credit unions can access to further allay any member concerns can be found on the League’s website, http://www.dcul.org/creditunions/index.htm.

1. “America’s Credit Unions Secure and Strong” talking points (.pdf file)
2. Two articles for CU newsletters on safety and soundness
3. Credit union safety and soundness: CUNA resources for members
4. Credit union safety and soundness: NCUA resources on the Share Insurance Fund
5. Impact of IndyMac – sample letter that can be sent to members
6. Press release regarding Delaware credit unions’ safety and soundness.

CREDIT UNION SYSTEM NEWS

Mica to Congress: “CUs Are Safest Deposit Institutions”    
     Credit Union National Association (CUNA) President/CEO Dan Mica recently reassured Congress that America’s credit unions “remain healthy, vibrant, and well capitalized.”
     Mica told each member of the House and Senate in a letter that the failure of IndyMac – not surprisingly – has led the media and the public to question the safety of their money in depository institutions.
     Mica’s letter and CUNA fact sheet also were sent to the lawmakers’ legislative directors in Washington, as well as their district directors back home. “Credit unions remain the most tightly regulated and well-capitalized of all depository institutions and provide the same level of deposit insurance as their bank and thrift counterparts,” underscored Mica to the lawmakers.

Note from NCUA
     The National Credit Union Administration (NCUA) has an Insurance Estimator available on its website, as well as a downloadable publication, Your Insured Funds, which explains how to structure accounts to obtain maximum coverage. If you have additional questions, e-mail the Insurance Analysts at NCUA Region II (Region2@ncua.gov ) for an opinion.

NCUA Board Member Discusses Deposit Insurance
     CUNA now has available on its website a video featuring National Credit Union Administration (NCUA) board vice chairman Rodney Hood explaining, in clear and familiar terms, how credit union savings are insured. Hood made the comments last spring during an appearance on “Home and Family Finance Radio,” presented by America’s Credit Unions.  
     To view the presentation, please go to http://www.creditunion.coop/download/video/Hood/ncua_insurance.html.
     CUNA is encouraging federally insured credit unions to make the video available on their websites as an additional confidence builder for members.

NCUA’s New Seal
     The NCUA Board has given provisional approval for a new seal for the agency that is intended to better convey the agency’s connection with the federal government, as well as the strength of the backing of the full faith and credit of the United States government as it applies to federal share insurance.

CUs Warned of Info-Reporting Risks
     Credit unions must guard against possible lawsuits by knowing how to properly report member information to credit bureaus, warns CUNA Mutual Group (CMG) in a recent risk alert. The Fair Credit Reporting Act (FCRA) requires credit unions – as furnishers of information to consumer reporting agencies – to report accurate information, conduct prompt investigations in the event of a dispute, and correct any reporting errors. CMG notes that lawsuits have cropped up in several states. The suits target credit unions for alleged mistakes made in reporting member debts that had been discharged in bankruptcy. They contend that charged-off debt was reflected as still being owed. The resulting negative impact of such a mistake to a member could include lower credit scores and a resulting higher interest rate, higher costs in various other types of consumer transactions, such as insurance, and denied credit, according to CMG.

Minimum Wage Hike Doesn’t Affect Delaware
     A federal minimum wage hike that took effect at the end of July has no impact on Delaware. The federal minimum wage went from $5.85 to $6.55 per hour; however, Delaware’s minimum wage already stands at $7.15.
     The Fair Minimum Wage Act of 2007, which amended the Fair Labor Standards Act (FLSA), provides for phased-in increases ultimately reaching $7.25 per hour effective July 24, 2009. Employers will need to adjust wages accordingly next year.

COMPLIANCE RECAP

Key Compliance Deadlines Outlined
     Two key deadlines are approaching quickly and compliance expert Valerie Moss says credit unions must gear up now for new rules on affiliate marketing and identity theft red flags.
     Moss, director of compliance information for the Credit Union National Association, notes in a July article in Credit Union Magazine that October 1 is the drop-dead date for affiliate marketing rules and November 1 for identity theft red flags.
     On affiliate marketing, Moss explains that, with a few exceptions, if a credit union shares certain consumer information – called eligibility information – with an affiliate, that affiliate cannot use the information for marketing solicitations unless certain conditions are met. Moss lays out those conditions and more in her article.
     Regarding ID red flags, Moss poses the seven questions credit unions should be asking during the few months left before the mandatory compliance date.
     As a little bonus in the article, Moss shares with readers a preliminary look at a brand new risk-based pricing proposal and previews final “furnisher” regulations. The furnisher rules will require credit unions to have policies and procedures in place ensuring the accuracy and integrity of consumer information. And the proposal on risk-based pricing requires additional disclosures to consumers when less favorable credit terms are offered.
     Use this resource link to glean more compliance gems in “FACT Checkup”: http://www.cuna.org/compliance/member/download/comp_mat_2008_07.pdf

New BSA eFiling Requirement
     By the first of next year, the Financial Crimes Enforcement Network (FinCEN) will require any electronic filing of Bank Secrecy Act (BSA) information to be executed through a new BSA Electronic Filing program. As part of its effort to make BSA filing requirements more secure, efficient, and effective, FinCEN announced recently that it will retire its current BSA Magnetic Media Filing Program in favor of the new system. The magnetic media filing has required credit unions and other financial institutions to submit BSA reports using tapes and diskettes. The more secure BSA e-Filing is a web-based system that is user-ID and password protected. Importantly, it does not require storage media.

Upcoming Changes in ACH Rules
     As more transactions migrate to the electronic ACH environment, credit unions need to be aware of the changes impacting payment transactions and act on them. The new ACH regulatory requirements will be in the form of an amendment to the NACHA Operating Rules. They will impact every Receiving Depository Financial Institution (RDFI) and every Originating Depository Financial Institution (ODFI). A brief overview of the ACH changes  appears below.
     Effective March 20, 2009, NACHA rules will require that every ACH payment entering or exiting the United States be identified and formatted as an international ACH item, and each item must be reviewed for OFAC  compliance.
     This new ACH rule applies to all U.S. financial institutions, including credit unions. Even if you currently do not send international ACH payments, you could potentially receive an international ACH payment, so you must be compliant.
     The new international ACH transaction identifier is IAT, effective on March 20, 2009. You must understand how this new ACH rule will impact your financial institution and your ability to comply with this new requirement. This new rule will involve:
•  Changes to your current formatting for the new IAT identifier.
•  Understanding how your systems will link to the OFAC listing for “each” ACH item.
•  Checking with your system provider(s) and any third-party vendor or core data processor to make sure you will be ready for the March 20, 2009, date.
     Financial institutions that are non-compliant with OFAC’s regulations will incur severe penalties. For additional information, contact your ACH processor or ACH regional association. More information is available on these websites:
•  NACHA: http://www.nacha.org/IAT_Industry_Information/
•  Electronic Payments Network: http://www.electronicpayments.org/in.home.php
•  OFAC: http://www.treas.gov/offices/enforcement/ofac/

DELAWARE NOTES

The League-organized Fall Car-SUV-Truck Sale has been set for October 23-25. CUs that want more information or an enrollment packet can contact Susan Fallon at the League office.

Two Delaware CUs recently celebrated milestone anniversaries. DOVER FCU held its 50th anniversary celebration on June 21, with over 380 people in attendance. The CU recognized two outstanding staff members at the event. The Mary Lovisone Award for Outstanding Member Service was awarded to Richard Buckner from the Collections Department. The Albert Schmidt Leadership Award was presented to Denise Breedlove, North DuPont Highway head teller.
     The members and staff of U-DEL FCU celebrated the CU’s 40th anniversary on July 18 by serving cake in the CU lobby. In addition, the 40th member to complete a transaction that day won a prize. The CU was officially chartered on August 13, 1968.

Several Delaware CUs and the League helped to support the Delaware State Police food drive that netted 7,504 pounds of food for the Food Bank of Delaware: DELAWARE ALLIANCE, DELAWARE FIRST, and DELAWARE STATE POLICE. In addition, DEXSTA FCU is hosting a “Summer Food Drive” which will continue until mid-August.

Kudos to DELAWARE ALLIANCE FCU whose members and staff recently contributed $152 to CULAC through a member fair raffle and staff dress-down days.

Two Delaware CUs recently began using the following Mid-Atlantic services: DPL FCU – Home Banking Images Interface and SUSSEX COUNTY FCU – SimpliCD.

Applicant is looking to relocate to Delaware and is seeking a CU position. Has 28 years of banking experience including direct and indirect lending, business development, branch management and strategic planning. For a copy of this resume, call Susan Fallon and ask for resume #07-24-08.

EDUCATIONAL OPPORTUNITIES

August QuickBites Teleconferences
One-hour sessions run from 11 a.m.-noon:
•  8/07  Regulation Z
•  8/12  Increasing Non-Interest Income
•  8/20  Pay Day Lending Seminar
•  8/26  Decedent Accounts: When a Member Dies
The two-hour session runs from 11 a.m.-1 p.m.
•  8/14  HR: Transitioning to Supervisor
The fee for the one-hour sessions is $99; the two-hour session is $169. The deadline to register with Bernadette Hines is one week prior to the session.

Third Party Due Diligence – Wednesday, August 27, from 10 a.m.-noon at the League office. Because CUs provide some sensitive member information and core business processes to third party vendors, NCUA has made “third party relationships” a top regulatory exam topic in 2008. NCUA is interested in how CUs handle relationships related to lending services, auditing and management consulting services, and asset liability management. In an effort to help our CUs comply with this requirement, the League urges you to attend this important session. The session will be presented by NCUA examiner John Morgan. Fee: $65. Register with Jane Bailey by August 20.

Compliance Workshop – Thursday, September 4, from 9 a.m.-4 p.m. at the League office. Topics: Fair Credit Reporting – red flag warnings; mortgage lending; Bank Secrecy Act; NCUA issues; Truth-in-Lending changes; and data security. Speaker: Attorney Bruce Jolly. Fee: $195. Registration deadline: August 21.

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).