Volume 29, Number 14                                                           August 15, 2009

HEADLINE NEWS

Local CUs Provide Alternatives to Payday Lending
     Recent articles in USA Today have brought credit union short-term loans, designed to replace costly payday loans, to the attention of consumers. In an article published on August 3, the National Consumer Law Center, a consumer group, says the credit union loans are only marginally cheaper than traditional payday loans. Lois Kitsch, National Program Director for the National Credit Union Foundation’s REAL Solutions program, countered the claim by saying many credit unions offering alternative loan programs encourage savings and allow up to 90 days to repay the loan.
     Credit Union National Association (CUNA) president/CEO Dan Mica also commented on the issue. “Consumers clearly show a need for short-term cash loans they can access quickly. Credit unions are offering reasonable and more consumer-friendly alternatives to the typical payday loan,” said Mica. He noted credit unions are a logical choice – they have a history of providing small loans to help their employer-based memberships get by until payday.
     The Delaware League has identified two credit unions that are offering alternative payday loans. American Spirit FCU in Newark and Eagle One FCU in Claymont offer loans which extend from 30 to 90 days. Both credit unions require the loans to be paid in full before the member is provided another advance. Because the loans are customized to fit their membership’s needs, there are differences in the two programs.
     Maurice Dawkins, American Spirit FCU CEO, commented that his credit union’s “Spirit Advance” loan program was established to help members get out of a cycle of debt. The CU set up its own program after exploring others offered by CUSOs. There is a $25 application fee and the loan rate is 18%. Leads to members who might benefit from the program come from calls received from traditional payday lenders seeking to determine if a member has funds in the credit union.
     The program at Eagle One, whose home office is in Pennsylvania, is administered through the Credit Union Better Choice Program, under a partnership with the Pennsylvania Credit Union Association and the Pennsylvania Treasury Department. Eagle One CEO John King said that the CU had loaned out $27,000 through 94 accounts at the end of June. Eagle One also has a $25 application fee and 18% cap on interest.
     Both credit unions prohibit members from applying for more than one loan at a time and tie their short-term loans to financial education programs to help members out of the debt cycle. American Spirit provides this training through the Consumer Credit Counseling Agency, and Eagle One uses the “Balance” program. Both credit unions also require $25 or $50 of the loan to be placed into a savings account. Eagle One goes a step further by working with members who have trouble overdrawing their savings accounts.
     The motivation of credit unions offering these payday-loan alternatives seems to be the same: To help people with their finances so they can accumulate more wealth.

Volunteer Leadership Conference Information Now Available
     The Delaware Credit Union League and the MD/DC Credit Union Association will host the 13th Annual Volunteer Leadership Conference (VLC) October 23-25 at the Clarion Fontainebleau Hotel in Ocean City, Maryland.
     The VLC offers another exceptional line-up this year with a Friday afternoon appearance by CUNA CEO Dan Mica. Mica will open the VLC with “A Conversation with Dan Mica,” as he provides his unique insight on where credit unions are – and where they are going.
     The League has mailed a brochure to all CEOs and board chairs. Information has also been posted on the League website, www.dcul.org. For more information, call Alice Smith.

COMPLIANCE UPDATE

CARD Act Implementation – August 20 Effective Date Items
     While most of the Credit CARD Act will not go into effect until February 22, 2010, two sections will be effective as of August 20, 2009 – which will be 90 days after the law was originally enacted.
     Section 101 of the new law applies only to credit cards and requires that change-in-term notices be provided at least 45 days in advance before increasing the annual percentage rate (APR) or changing significant terms, rather than the current 15-day notice period.
     Section 106 of the Credit CARD Act, which applies to all open-end credit in addition to credit card accounts, requires that periodic statements be provided at least 21 days before the payment due date (or the end of a grace period) in order for the credit union to charge a late fee, report the account as delinquent to credit bureaus, or impose a penalty rate.

Compliance Challenge: CARD Act 21-Day Provision
     In this month’s Compliance Challenge, CUNA addresses how credit unions can best comply with portions of the recently enacted CARD Act that require 21 days of advance notice for payments to all open-ended credit accounts.
     CUNA cannot suggest any single method of dealing with the 21-day requirement, but its recently published memo does provide several options taken by some credit unions. Those options include changing due dates to establish a uniform payment due date, printing the current and following months' payment due dates on the account user’s periodic statement, and retaining the existing due dates, but providing additional periodic statements.
     However, as CUNA has said in the memo, “every compliance option available to credit unions involves substantial costs and/or disruptions to business practices.”
     While changing due dates to establish a uniform payment due date would mirror how legislators and the Fed envisioned compliance would work for credit card accounts, such a change would require systemic changes for many credit unions and could particularly challenge larger credit unions that send out periodic statements in cycles throughout a given month.
     Printing current and future payment due dates on an account user’s periodic statement would likely be the cheapest and easiest way to meet compliance requirements, but credit union members may need substantial education about these changes to avoid confusion. In addition, the Fed’s staff believes this method may be contrary to the intent of the law and may in the future indicate in a more formal manner that this option is not compliant with the rule. Preserving existing due dates while adding additional periodic statements is another option, but could substantially increase a credit union’s mailing and processing expenses.
     The Fed also has allowed some leeway for credit unions that cannot meet the required compliance deadline of August 20 by providing a “transitional compliance option of including an insert or language” within periodic account statements.
     The League has included a copy of the August Compliance Challenge in the manager/CEO mailing accompanying this newsletter. To see the full Compliance Challenge and to find helpful Q&As on the recent Reg Z changes, use the following resource link: http://www.cuna.org/compliance/member/comp_challenge/comp_challenge.html.  

Truth in Lending Act Changes
     The Federal Reserve Board has announced that it has adjusted the fee-based trigger for additional disclosures under the Truth in Lending Act to $579, effective January 1, 2010. The Fed’s yearly fee adjustment would affect home mortgage loans that bear rates or fees above a certain amount. However, the Fed said that the adjustment does not affect the new rules for “higher-priced mortgage loans” that the board adopted in July 2008. The rules are determined by the use of a different rate-based trigger. To see the entire announcement, go to http://www.federalreserve.gov/newsevents/press/bcreg/20090810a.htm. 

CU SYSTEM NEWS

NCUA Bars Delaware Woman From Further Financial Work
     The National Credit Union Administration (NCUA) announced that it has barred six individuals – including one from Delaware – from participating in the affairs of any federally insured financial institution. Under the order, individuals that have taken part in a range of crimes, from embezzling to tax fraud, would be forced to pay as much as $1 million in fines and face possible imprisonment if this prohibition is violated. Included on the list is Rebecca Andino, who is barred from further involvement with federally insured financial firms due to her activities. Andino, who was formerly employed by Southern Delaware Postal Employees FCU, is serving six months of work release, with a further 12 months of probation and $54,800 in restitution.

New NCUA Board Member
     NCUA Board nominee Deborah Matz has been confirmed by the U.S. Senate to a seat on the three-member NCUA Board. As the NCUA chairman designee, Matz will be replacing Republican Michael E. Fryzel. Deborah Matz’s experience spans many years in the public and private sector. After concluding a three-year stint on the NCUA Board in October 2005, she was executive vice president and CEO of a Maryland credit union. Her 26-year government career includes 10 years on Capitol Hill as an economist with the Joint Economic Committee and eight years as a senior executive at the Department of Agriculture. Deborah Matz’s NCUA Board term will expire April 10, 2015.

Dan Mica Cited as a Top CEO

Discovery Conference Webinar    
     CUNA Mutual’s Discovery Conference has a long history of bringing learning and networking opportunities to credit unions in a face-to-face conference setting. The sagging economy spurred conference organizers to look at new ways to deliver timely and relevant information to credit unions, whose tight budgets have left few options for development. The answer is CUNA Mutual’s first-ever Discovery Webinar – which is being offeredFREE of charge.

10 Reasons Why Credit Unions Are Needed Now, More Than Ever
Tuesday, August 25, from 1-2:30 p.m. EDT

     At this session, Jeff Post, CUNA Mutual Group CEO, will provide a brief update on CUNA Mutual and where it’s headed. Presenter John Lass, senior vice president of strategy and business development, will discuss the financial health of the credit union system and share the top 10 reasons why credit unions are more important than ever to protect the financial and economic health of America. You’ll also walk away with a FREE white paper that outlines key actions to help you strengthen the value your credit union brings to consumers.
     Space is limited. To register, go to www.cunamutual.com and click on the Discovery Webinar ad.

Free ICU Day Tools Online
     To help credit unions prepare for International Credit Union (ICU) Day, the Credit Union National Association (CUNA) is starting to send out ICU Day Updates, a free e-newsletter. It will offer credit unions tools, tips and celebration ideas for ICU day, set for October 15. To subscribe to the newsletter, respondents should send their name, credit union name and state to ICUDay@cuna.coop.
     Also, visit www.cuna.org/ICUDay for a variety of resources:
•      Art – download the poster design, logo, and coloring page.
•     Copy – borrow wording on the history of ICU Day and the press release for your own announcement.
•     Celebration ideas – see how fellow credit unions celebrated in 2008 and share your plans for 2009.
•     Promotional products – find attractive and affordable giveaways to thank your current members and welcome new ones.

DELAWARE NOTES

Two Delaware credit unions were listed as the “Best in Business” in the Sunday News Journal supplement of August 2. DEL-ONE (Delaware Federal Credit Union) was ranked  #6 for companies with 76-240 employees, and DOVER FEDERAL ranked #12. This is the third year that Del-One has made the list.

DEXSTA FCU held a ribbon cutting at their new branch location in Middletown on August 12. Located at 110 Sandhill Drive, the branch features a state-of-the art 4,200 square foot building with four drive thru lanes, including a drive-up ATM, Saturday hours, and a free coin counting machine for members. “We are looking forward to being in the Middletown area, getting to know the community, and offering them the advantages of our many products and services,” says Jerry King, president/CEO. The credit union will hold its official grand opening on Saturday, August 29, with special loan sales and other activities. The CU also plans to hold an Enterprise car sale on September 26 and a shred event on October 17 for the community.

DEXSTA FCU president/CEO Jerry King cuts the ribbon for the credit union’s new branch in Middletown. Helping man the scissors is Middletown branch manager Debbie Hardy. Other participants included DEXSTA staff, board members, and invited guests.

DEL-ONE celebrated its New Castle branch’s anniversary on August 14. The branch is located at 80 Christiana Road near New Castle. Festivities were held from 10 a.m. to 2 p.m. A shred event sponsored by Lifestyle Document Management was held at the same time, along with special loan and deposit specials.

SUSSEX COUNTY FCU has nine Okidata dot matrix printers for sale. The Oki Microline 320 printer is black and white. The ML320 has a variety of speeds. It is 9-pin, 240 dpi x 216 dpi and prints up to 290 characters per second. Price: $50 or best offer. For more information, contact Teresa Shea at 302-629-0100, ext. 128.

EDUCATIONAL OPPORTUNITIES

August/September QuickBites Teleconferences
One-hour sessions run from 11 a.m.-noon:
•    8/19   Building Members From Indirect Borrowers
•    8/27   Preventing Elder Fraud
•    9/01   Fee Income Strategies
•    9/10   Business Interruption Tips
•    9/15   eFraud: Hands Off My Account
•    9/30   Improving Your Collections Department

The two-hour session runs from 11 a.m.-1 p.m.
•    9/24   Account Administration (Early registration: 9/2)

The fee for the one-hour session is $99; the two-hour session fee is $169. The deadline to register with Bernadette Hines: one week before the session.

Cards/Lending Council Session: “A House of Cards…A Look Inside the New Credit Card Law” – Thursday, August 27, from 10 a.m.-noon at the League office. John Kilduff will review the mandates of this new law and discuss how your CU can position your credit card program to continue to generate profits and manage risk. No fee for council members; $100 for non-council members. Registration deadline: August 21.

Recognizing Emerging Fraud Practices – Tuesday, September 22, from 10 a.m.-noon at the League office. Chetta Hebron-Byrd, risk manager for CUNA Mutual Group, will lead the discussion on check frauds, computer-related fraud, identity fraud, wire transfer and inheritance fraud. Fee: $99 for the first person from a credit union; $75 for additional attendees. Registration deadline: September 15.

•    September 30    Marketing Council Meeting
•    October 7          Strategies for Economic Survival in a Mean World
                               (for CUs under $100M in assets)
•    October 15        Golf Outing for Educational Scholarship Funds
•    October 23-25   Volunteer Leadership Conference
•    November 18     IRA Basic Training
•    November 19     IRA Advanced Training

            League Provides Information to Media. A wonderful article about Ed Grebe (currently manager of  Newark, Delaware City EFCU) and his longevity of service to credit unions appeared in the July 20th issue of Credit Union Journal. The reporter, Ray Birch, contacted the League for information and pictures for the article. The League also provided information about Delaware credit unions $20M and under to Callahan for use in one of its directories.
            Credit unions continue to be featured in business reports. The News Journal featured an article on how small business loans are dwindling and referred to Small Business Administration loans that are now being offered by American Spirit and Eagle One FCUs. Credit Union National Association (CUNA) spokesperson Patrick Keefe was interviewed for the article. He made the point that credit unions would do even more business loans if the cap of 12.25% of total assets is either raised or removed.
            As a follow-up to recent articles about credit unions in USA Today, the League distributed talking points to credit unions in order to clear up any misunderstandings that members or local media may have about credit union services. The information included Q&As on payday lending and key points on overdraft protection.

            Delaware League News and Risk Alerts. In July, the League emailed 22 news alerts. The majority dealt with the Credit CARD Act, economic data, NCUA actions, and media attention. There was also one risk alert distributed about new account cautions.

            League Staff Travel. Patrick Mahaney, Jane Bailey, and Alice Smith attended the ribbon cutting for DEXSTA FCU’s new Middletown branch on August 12.

GOVERNMENTAL AFFAIRS

            Card Act. The Delaware League and CUNA continue to closely follow the issues surrounding the implementation of the Credit Card Accountability, Responsibility and Disclosure Act (CARD Act), especially with respect to a provision affecting open-end lending products (Section 106 of the CARD Act). CUNA’s compliance and regulatory advocacy staff have been in contact with staff at the Federal Reserve to express credit union concerns. CUNA legislative affairs staff have been in contact with sponsors of the credit card bill to get additional guidance regarding the Congressional intent of the provisions. Recently, the League emailed a memo prepared by Kathy Thompson and Jeff Bloch regarding some of these issues and the proposed rule as it now stands.
            There is, however, room for education so that all our credit unions understand the relevant parts of the law and how they will impact their card programs. The League has arranged for John Kilduff, vice president of credit union services for the Pennsylvania Credit Union Association, to present a session on this new law. This Cards Council session will be held on August 27 at the league office.

            Delaware Credit Unions’ Political Advocacy. Delaware Alliance and Sussex County FCU reported sending letters to Representatives Paul Kanjorski (D-PA) and Ed Royce (R-CA), thanking them for introducing  H.R. 3380, the Promoting Lending to America’s Small Businesses Act. This legislation would increase the credit union member business lending cap and give credit unions the opportunity to help small businesses. All credit unions are encouraged to write to our members in Congress in support of this legislation. Dover FCU CEO David Clendaniel also sent comments to the Federal Reserve regarding the Regulation Z 21-day notice requirement under the Credit CARD Act. The League thanks all our credit unions that take time to comment on impending credit union-related legislation.

            CULAC Fund-Raising. Thanks to the following credit union staffs who are participating in Dress Down Days this summer in support of the Credit Union Legislative Action Council (CULAC): American Spirit, Chestnut Run, Del-One, Delaware Alliance, and Eagle One. It is not too late for other credit unions to join in for August or for Credit Union Week in October. The League is also organizing another CULAC candy sale to take place in September and October.

LEAGUE SERVICES

            Shared Branching Network Continues to Grow. Delaware State Police FCU is joining the shared branching network in November 2009 as an issuer and an acquirer. The credit union’s offices, located in each of the three counties, will be acquirer locations for other shared branching members to use when performing transactions. This will bring the number of Delaware credit unions to three, including American Spirit and Chestnut Run FCUs; Eagle One FCU also offers this service in its branch in Claymont. Currently, nationwide there are over 1,580 issuer credit unions that are part of the shared branching network. There are over 3,700 locations nationwide where these credit union members can perform transactions on their credit union accounts.

            CUDL Session. Five credit unions attended the League’s session on July 9 to introduce the Credit Union Direct and Indirect Lending (CUDL) programs. Two CUs have booked follow-up meetings with the CUDL representatives. To date, 20 Delaware dealers have signed on to the program and more are interested. Kevin Carroll, general manager of Porter Nissan - Newark, reports that signing up with CUDL was one of the best things his company has ever done.
           
            Invest in America. Forty-five leagues are now participating in the Invest in America program. The Delaware League has been recognized by CUCorp (program coordinator) as one of the top supporting leagues. Nationally, 1,926 credit unions (17 Delaware CUs) are marketing the domestic auto discounts to their members. A total of 132,170 new credit union auto loans were dispersed through June (over 400 in Delaware). For complete details and participating credit unions visit www.lovemycreditunion.org.

EDUCATION

            Volunteer Leadership Conference. The Delaware League and the Maryland/DC Credit Union Association have published the final schedule of speakers for the Volunteer Leadership Conference to be held at the Clarion Hotel in Ocean City, Maryland, on October 23-25. We are pleased to announce that CUNA CEO Dan Mica will open the conference on Friday afternoon. The League has mailed/emailed a full program brochure and hotel/conference registration materials to CEOs and volunteers.
           
            Elder Abuse. League education director Bernadette Hines is attending meetings with the Deputy Attorney General, the Delaware Bankers’ Association and individuals from the security departments of WSFS and Wilmington Trust to discuss a proposed statute that would encourage financial institutions to report elder exploitation without fear of liability. This bill is intended to encourage the reporting of suspected financial exploitation of the elderly and infirm adults by providing immunity from criminal and civil liability for making such reports. Under the bill, anyone who makes a good faith report to law enforcement authorities of such suspected activity is immune from criminal and civil liability for making that report. In addition, any company/organization that adopts a formal written program for reporting suspected financial fraud is immune from civil or criminal liability for any report, act, or omission under that program. Participation in reporting is voluntary.

            Scholarship Program. Seven additional $100 education scholarships were mailed to those small credit unions (under $20 million in assets) that used their initial 2009 scholarships during the first six months of 2009. The additional scholarships assist these credit unions in participating in upcoming fall education sessions for both staff and volunteers.

July Education Sessions

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 Editor Alice Smith (alice@dcul.org).