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CURRENT Newsletter | 18 July 2013

Jul 18, 2013 by Lewis Wood

News and Information For and About Virginia's Credit Union System

Headline News

News About Credit Unions

Compliance/Regulatory Affairs News

Financial Services/Marketplace News

News From Credit Unions

Marketing News

Security/Fraud Prevention

Technology News

Headline News

In Letters to Sens. Warner and Kaine, League Asks for Their Leadership on Preserving CU Tax Exemption

Last week, in letters to Sens. Mark Warner and Tim Kaine, your League asked for their leadership in helping preserve the credit union tax exemption. Sen. Max Baucus, who is helping lead the Senate's tax reform effort, has asked all his fellow senators to forward their thoughts by July 26 on which tax exemptions ought to be preserved.

As you know, Senate leaders have said they're taking "a blank piece of paper" approach to the reform debate, noting that all tax exemptions/breaks are essentially gone and they'll be adding back exemptions that make sense from a public policy standpoint. Credit unions argue that our tax exemption out to be preserved, for these reasons: 

  • As not-for-profit financial cooperatives, credit unions continue to fulfill the mission Congress gave them to promote thrift and provide access to credit for provident purposes.
  • The benefit consumers and small businesses receive as a result of the credit union tax exemption far exceeds the cost to the government of providing the exemption.
  • Eliminating the credit union tax exemption would represent a tax increase on America's 96 million credit union members, and would ultimately lead to the elimination of credit unions.

Read the letters (pdf, 831kb) 

Note: Obviously, your League has been following this debate with great interest. We realize that the only way to ensure Sens. Warner and Kaine are willing to approach the leadership on this issue is to have credit union folks step up contacts! Politico has a fascinating article on this process, which basically notes senators aren't rushing in to participate in the reform debate – for a variety of reasons.

The only hope at turning that around with regards to Sens. Warner and Kaine is to have credit union supporters like you urge them on! Visit www.donttaxmycreditunion.org to write Sens. Warner and Kaine today! (via The Advocate Blog)

[related: 'Inside Exchange' Says CUs' Tax Message Hitting Its Mark]
[related: Gentile: 'Don't Tax' Campaign Also Drives Home Value Of Membership]
[related: Cheney Writes Key Administration Officials On CU Tax Status]

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CU Members Across the Nation Continue To Say 'Don’t Tax My Credit Union'

CUNA and the leagues have made more than 336,802 contacts with lawmakers in support of the credit union tax exemption, as of July 12. That includes more than 9,000 contacts for Virginia's congressional delegation.

Credit unions and members are using CUNA's and the leagues' resources and social media sites including the Don't Tax My CU website, Facebook and the micro-video site Vine. Be sure to share the Don't Tax message through Twitter, using the hashtag, #DontTaxMyCU. [read more]

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League President Pillow Wraps Up Week of Events with Key Lawmakers

League President Rick Pillow attended three fundraisers at our external lobbying firm of Hunton & Williams this week for lawmakers key to credit unions. The events supported Senate Minority Leader Dick Saslaw (D-35), and Dels. Jimmie Massie (R-72) and Lynwood Lewis (D-100). Saslaw and Lewis sit on our key Commerce and Labor Committee in their respective chamber.

Lewis also may be a candidate for the Senate should Sen. Ralph Northam (D-6) win his bid for lieutenant governor. Massie is a private equity investor and keenly interested in banking. Pillow reports that conversations at the events were very positive with all the lawmakers. (via The Advocate Blog)

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CUs Overwhelmingly Preferred By Financially Savvy Consumers, Poll Shows...

Financially savvy consumers overwhelmingly choose credit unions as their preferred institutions, says a new GoBankingRates.com poll, and that is no surprise, says Paul Gentile, Credit Union National Association executive vice president of strategic communications and engagement.

"For users of financial services, it's all about trust--and the credit union model, as a cooperative operating on a not-for-profit basis with no shareholders--engenders the trust among consumers and small business customers," he told GoBankingRates.com (July 17). Among those polled on the GoBankingRates site and its partner sites--US News, Boston.com, AL.com and The City Wire-- more than 73.76% of poll respondents choose credit unions as their preferred institutions.

Local community banks distantly followed, being preferred by 14.18%, national banks by 9.93%, and other institutions by 2.13%.

[read more]
[related: Three CUs Among Top 5 FIs for Military in GoBankingRates List]

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But Average Americans Prefer Community Banks, Though We're Working to Change That!

Credit unions may be gaining the attention and membership of Americans at a rapid pace, but according to the newly released results of our American Banking Preference Poll, we’re still a long way from becoming the average person’s primary financial institution. (Apparently, financially savvy consumers love us, however! See above.)

Since 2011, there has been a heightened awareness surrounding banking practices and fees, prompting many consumers to reevaluate their current relationships with financial institutions and often, make the move from a national institution to a community bank or credit union. Unfortunately, community banks are the preference of most consumers looking to make that move. [read more]

> Credit unions obviously are working very hard to change consumer perceptions. Our own research leading up to the launch of the Quit The Hit Campaign showed that an alarming 26% of our survey respondents did not think credit unions were a viable option. Doubtless, the same tired misconceptions we've battled for years related to membership eligibility, services offered, deployed technology, etc. led those consumers to that conclusion.

The good news: The Quit The Hit Campaign made tremendous headway in changing consumer perception. Post-campaign, a much smaller percentage – 16% - said they didn't think credit unions were a viable option to serve as their financial services provider.

[learn more]
[related: ‘Quit The Hit’ Video Promoting Credit Unions in Virginia Tops 1 Million Views]
[related: Virginia League YouTube Video Hits 1.1 Million Views]

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League Seeks Entries for Social Responsibility Awards; Due Aug. 2

Your League, in association with the Credit Union National Association, is seeking entries in our three social responsibility competitions: the Desjardins Youth and Adult Financial Education Awards; the Dora Maxwell Award for Social Responsibility; and the Louise Herring Award for Philosophy in Action. Entries for each competition are due to us at the League no later than Aug. 2. Note: Please read the entry requirements carefully, as changes have been made to this programs!

[Dora Maxwell/Louise Herring Packet]
[Desjardins Packet]

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CUNA: CUs Need Relief Found In PATH Act Draft

Credit unions strongly support the regulatory relief provisions found in a new draft bill on housing policy reform unveiled last week by House Financial Services Committee Chairman Jeb Hensarling (R-Texas), and also back many other positive aspects of the legislation, according to the Credit Union National Association. 

In a statement to be submitted Thursday for a hearing on that bill, called the "Protecting American Taxpayers and Homeowners (PATH) Act of 2013," CUNA President/CEO Bill Cheney wrote that credit unions' strong support includes a provision to delay the mandatory implementation of all Dodd-Frank Act mortgage rules for an additional year.

"The compliance obligations imposed by the mortgage rules are simply overwhelming to many credit unions, especially America's smallest credit unions, and the tight timeframe for compliance puts the availability of mortgage credit--and thus America's nascent housing recovery--at risk," Cheney said. 

[read more]
[related: Capitol Hill Staffers To Be Briefed By CUNA, Others On CU Supp Cap]

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Housing Plan Must Be Clear About Government's Role: Bernanke

Federal Reserve Board Chairman Ben Bernanke told House lawmakers that whatever housing finance reform plan is enacted to replace Fannie Mae and Freddie Mac, policymakers must be clear to private investors about the government's role. In his first of two semiannual hearings this week to update Capitol Hill about the state of the economy, Bernanke was careful not to express preference for any of the competing reform plans circulating around Washington, despite lawmakers' attempts to seek his opinion.

But he did say that if a final plan included a government backstop, it would be wise for policymakers to provide as much detail as possible in advance to the private market about how that backstop would work. (American Banker Online, July 18)

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Senate GSE Bill Has Best Chance for Broad Support, Backers Say

The two authors of a Senate bill aimed at overhauling the mortgage finance system said Wednesday their legislation achieves the kind of balance needed to attract support from both parties. Sens. Bob Corker, R-Tenn., and Mark Warner, D-Va., discussed their proposal to wind down Fannie Mae and Freddie Mac, and replace the two government-sponsored enterprises with private mortgage insurers, at an event sponsored by the Bipartisan Policy Center.

The legislation would create a new agency, called the Federal Mortgage Insurance Corp., to regulate private insurers and provide them with a catastrophic guarantee.

Warner said the bill is a more serious attempt at gaining broad support than a competing plan in the House championed by Financial Services Committee Chairman Jeb Hensarling, R-Texas, and other Republicans. The House plan would fully privatize the mortgage finance market.

Hensarling's bill is "an ideologically pure exercise, which will never have a single Democratic supporter," Warner said. "I give [Hensarling] credit for an exercise that lays out a very coherent approach. I question whether outside of the [Financial Services] committee it will even get a broad base of Republicans. It will completely upend our housing finance system. It would destroy the 30-year fixed mortgage. It would destroy the ability of so many of the purchasers of these securities — both domestic and particularly foreign purchasers — because they need that government backstop."

Corker, meanwhile, defended Hensarling's efforts, noting that he introduced a similar bill in the Senate just two years ago. Yet he acknowledged that the House legislation would be difficult to pass. (American Banker Online, July 18)

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Thank You To Our Early Bird VACUPAC Golf Sponsors 

We’ve had four sponsors step up to the plate after the call first went out seeking support for our Sept. 24 VACUPAC golf tournament in Richmond. A huge thank you to:

  • Virginia Credit Union (tournament sponsor)
  • CU 24 (beverage cart sponsor)
  • Fort Lee FCU and Bronco FCU (hole sponsors)

The 25th Annual VACUPAC Golf Classic is being held in conjunction with our Legislative Leadership Forum, which takes place Sept. 25. The Forum offers a day of information and discussion on how we can take our advocacy efforts to the next level!

Guest speakers include nationally cited political commentator Bob Holsworth, legislative leaders representing Republicans and Democrats, the vice president of political affairs from the Credit Union National Association, and members of our Hunton & Williams lobbying team. 

[Forum registration]
[Golf registration and sponsorship opportunities]
[Download the Forum information flyer to share with peers] (PDF, 1.2MB)

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Cordray Confirmation Solidifies CFPB's Power

The Senate's approval of Richard Cordray's nomination to run the Consumer Financial Protection Bureau likely puts an end to another crucial fight over the bureau's structure and its ability to impose far-reaching regulations on the industry. Republicans' decision to lay down their swords in their prolonged challenge to Cordray -- who has been running the agency under a controversial recess appointment -- undercuts their efforts to force structural changes at the agency.

Although some members vowed to continue pushing for reforms, like subjecting CFPB decisions to a commission instead of a single director, such changes now are highly unlikely with Cordray's confirmation assured. (American Banker Online, July 17)
[related: Senate Confirms Cordray For Five-year Term]

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News About Credit Unions

Credit Unions Becoming ‘Increasingly Important’ to Small Firms: SBA

Over the past few years, credit unions and finance companies have become increasingly important as suppliers of credit to small businesses. That’s one of the findings from the Small Business Lending in the United States, 2012 report from the SBA’s Office of Advocacy. Looking at last year’s trends, the agency said although the banking industry has undergone major consolidation, the market for small business loans tends to be local in nature. [read more]

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CUs Innovate To Reach Out To Communities

Credit unions are innovative in reaching out to their communities and their members with the good they do. But they aren't the type to boast about it. After all, the credit union difference is in their DNA, so what's the big deal? It turns out to be a very big deal. The credit union difference is at the heart of credit unions' structure, their mission and philosophy, and their tax exemption.

And raising awareness of the credit union difference is one of three central components of the Unite For Good campaign initiated by the Credit Union National Association and the state leagues to work toward the strategic vision in which "Americans choose credit unions as their best financial partner." [read more]

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Compliance/Regulatory Affairs News

NCUA Plans For Risk-Based Capital Changes

The National Credit Union Administration will build a "new risk-based capital framework" to protect credit unions and consumers from losses, and replace the "outdated and insufficient" one-size-fits-all capital requirement, NCUA Chairman Debbie Matz told credit unions last week.

The NCUA plan could result in higher capital levels for credit unions with high concentrations of risky assets, she said. The current 7% leverage capital standard, which is required by the Federal Credit Union Act, would remain the floor. However, Matz said, credit unions with assets of $50 million and above could be subject to improved risk-based capital requirements to better correlate required capital levels to risk.

[read more]

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Financial Services/Marketplace News

Dire Predictions for Housing Recovery; Higher Rates at Fault

The housing recovery is in for a major pause due to higher mortgage rates. It is not in the numbers now, and it won't be for a few months, but it is coming, according to one noted analyst. The market has seen rising rates before, but never so far so fast; there is no precedent for a 45 percent spike in just six weeks. The spike is causing a sense of urgency now, a rush to buy before rates go higher, but that will be short term. Home sales and home prices will both come down if rates don't return to their lows, and the expectation is that they will not.

[read more]
[related: Banks May Suffer, but Rising Mortgage Rates Won't Shake Housing]
[related: Regulatory Rumpus: The Battle Over Reinstating Glass-Steagall]
[related: Mortgage rates fall on lessening concerns about Fed's bond buying program] 
[related: Housing recovery leaves Millennials behind]
[related: 3 reasons why the Fed is worried about housing]

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New Mortgages Cushion Refinancing Blow at Banks: Fed Survey

With mortgage rates climbing in recent weeks homeowners have switched from feverishly pursuing refinancing to buying new homes, a Federal Reserve Board report said Wednesday. Among the 12 Federal Reserve districts, bankers from Philadelphia, Cleveland, Atlanta and Chicago, said they saw a shift toward new home purchases and away from refinancing in part because of rising mortgage rates, according to the Fed's quarterly economic survey known as the Beige Book.

Improvements in loan demand in past surveys had been largely driven by mortgage refinancing as homeowners hoped to lock in historically low interest rates caused by the Fed's easy money policies. But rates have been driven up given current discussions by the U.S. central bank on when it should begin tapering its bond purchases, a likely signal that the Fed would start lifting rates soon after. (American Banker Online, July 18)

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US Economy Growing at Modest Pace, Fed Says

The U.S. economy continued to grow at a modest to moderate pace in June and early July, with manufacturing expanding in most areas of the country, the Federal Reserve said on Wednesday. In its Beige Book report of anecdotal information on business activity collected from contacts nationwide, the U.S. central bank said factories in many of the 12 districts reported increases in new orders, shipments or production.

The findings on manufacturing, compiled by the Federal Reserve Bank of St. Louis from data collected on or before July 8, fit in with other surveys and suggest that a slowdown in factory activity earlier in the year had probably run its course. The Fed also struck an upbeat note on the housing market, noting that residential real estate and construction increased at a moderate to strong pace in all districts. That in turn is helping to prop up manufacturing.

[read more]

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Recession Pushed Women to be Financially Savvier

The recession may have derailed many financial lives, but for women especially, it also led to a financial awakening. New data show that while more women overall have indicated an interest in financial planning and become more involved in family finances since the recession, a subset of women have emerged who have become especially informed, taking charge of managing their money and making financial and investment decisions.

The study found that one-in-five women can be considered part of this group. [read more]

[related: Today's Consumer: Optimistic Now, but Concerned About Future]
[related: Retirement's New Reality: It's A 401(k) World Of Woe]

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The Branch Is Dead – Long Live the Branch

Tomorrow's banking winners will be those who find ways to give customers personal touch points the most efficiently, writes Dave Martin in the American Banker. In a technology-driven and commoditized industry, human interaction actually becomes more important than ever in differentiating from the pack. Our branch bankers continue to evolve into the human interface of an online operation.

The same technologies that lessen the need for branch visits will allow banks to provide staffed, fully-functional branches in newly feasible locations. Placing smaller bank branches where people already shop and work will be the new normal. In-store and on-site branches will proliferate, and banks will find their ways into unexplored high-traffic locales.

New brick-and-mortar branches will be a fraction of the size once required. Banks will also become pretty creative in carving out and repurposing existing larger branches in prime locations that they do not wish to exit, but can no longer fully utilize. Mini-business centers with various professional offices will begin dotting the landscape with banks being the anchor tenant of their own buildings.

After a period of net-branch reductions, look for the number of branches to begin ticking up again as larger locations give way to considerably smaller ones. Branch numbers will grow again while the industry's total branch square footage will go down. [read more]

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News From Credit Unions

Karen Lane Selected to Serve as the Executive Director of Chartway FCU's We Promise Foundation

Chartway Federal Credit Union is proud to announce that it has selected Karen Lane to lead its charitable arm – the We Promise Foundation – as its executive director. Lane comes to Chartway’s We Promise Foundation following several years at Gold Key/PHR Hotels and Resorts where she served as the marketing communications manager. [read more]

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Belvoir FCU Helping Members Through Current Sequestration

Since February 2013, Belvoir Federal Credit Union has stood ready to assist members in the event of a sequestration by developing emergency loan products, forming services to support members, and informing employees of our response.

In recent months, Belvoir Federal aided 20 members with financial coaching, 4 members with an emergency loan, 7 members with loan workout options, 6 members with a skip-a-pay, and answered several questions from concerned members.

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URW Community FCU Wins Credit Union of the Year Honor

URW Community Federal Credit Union (Danville) was recently recognized by the National Association of Federal Credit Unions as the 2012 Credit Union of the Year. Winning the award in the $150 million or less asset category, the credit union was recognized for its growth and connection to its community, including recent efforts to reach out to the Hispanic community and for its charitable giving.

[learn more]
[view video from awards presentation

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Marketing News

Three Bankers Who Tackled Social Media with Fun and Flair

"The problem with social media for banks is that they are unsure of what to say," says A. Stewart Rose, president and chief executive of Truebridge, which provides marketing services for financial institutions. "It's another medium that you have to figure out what to put in it. Banks are trying to build a personality with it."

Social media is simply an extension of what many community bankers already do -- chat with customers and get involved in the community, says Chris Lorence, the chief marketing officer at the Independent Community Bankers of America. "We say to banks, 'Don't overthink it,'" Lorence says. "It's just another communication tool that extends beyond the teller line where bankers know their customers by name."

Gallup research shows that consumers who use to social media to find information about a bank product are more likely to become customers. Plus, it's a commonsense measure to post, say, financial educational content on social media sites, Rose says.

[read more] (American Banker, subscription may be required)

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3 Ways To Market To Gen Y So They Don’t Hate You

Credit unions are working as hard as they can to advertise to younger consumers in a way that catches their attention and ultimately leads them to become a member. Sadly, it seems as though marketers are losing their minds in an effort to figure out how to market to Gen Y, writes DeAndre Upshaw for CU Insight, mainly to their detriment.

Here’s a quick set of guidelines that should be helpful in determining how to market to Gen Y so they don’t hate you.

[read more]

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Security/Fraud Prevention

Merchants Must Be Held To Higher Data Breach Standards: CUNA

Merchants must be held to the same high data security standards that are required of credit unions if the nation is to make any progress in the fight to shore up personal financial data, the Credit Union National Association will tell lawmakers today. In a statement submitted for the record of an 11 a.m. (ET) House Energy and Commerce subcommittee hearing entitled "Reporting Data Breaches: Is Federal Legislation Needed to Protect Consumers," CUNA urges lawmakers to make two important statutory changes.

First, CUNA says, the nation's laws must impose higher merchant data security standards. Second, credit unions and other financial institutions must be allowed to disclose the source of data breaches affecting their members or customers.

[read more]

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Technology News

CU Tech Spending Goes To Mobile, Online Banking

More than $2.06 trillion will be invested across software, hardware and information technology (IT)  services by businesses and governments this year, with the U.S. accounting for the most spending and software getting the most funds, said Forrester Research's annual IT spending study.

For credit unions, tech spending will continue to focus on mobile and online banking technology to meet rising consumer demand and further engage members. Credit unions budgeted on average nearly $125,000 toward online and mobile banking this year--a combined expense second only to core processing systems, according to the 2013-2014 CUNA Technology Spending Report, which surveyed credit unions with assets of $50 million or more.

That figure represents about one-fifth of credit unions' average IT budget of $642,797, which doesn't reflect employees' salaries or benefits. That ratio holds true among even credit unions with assets of $500 million or more, which on average budgeted $2,055,287 for IT expenses for 2013, said the CUNA report.

[read more]

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Javelin Study: New Tools Primed to Transform Online, Mobile Payments

Big changes are coming. That is the top-line message in Javelin Strategy + Research’s new report, “ONLINE AND MOBILE RETAIL PAYMENTS AUTHENTICATION: Preventing Fraud in the Age of Data Breaches and Malware.” Passwords increasingly look obsolete. Card not present fraud is exploding through the roof.

The arrival of chip-and-PIN (aka EMV) cards in the 2015-2017 timeframe will change the retail landscape but the magnetic stripe criminals will seek out new frontiers, probably to include online and mobile sales. Add it up and, said Javelin researcher Al Pascual, an era of enormous transformation is beginning to wash over the world of online and mobile transactions.

[read more]

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