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LATEST NEWS
- April 27, 2010
SC credit unions elect smaller League board
COLUMBIA, SC (4/27/10)—South Carolina credit
unions elected seven directors to a new, downsized
South Carolina Credit Union League (SCCUL) Board of
Directors, replacing the fourteen-member group that
existed for decades. Election results were announced
at the Saturday, April 24 business session of the SCCUL & Affiliates
2010 Annual Meeting in Myrtle Beach, SC.
New to the 2010-2011 SCCUL board of directors are
Rick Hammond, president and CEO of S.C. State Credit
Union (Columbia); and Robert Harris, CEO of Health
Facilities Federal Credit Union (Florence). Re-elected
from the 2009 body are: Faye Crocker, CEO of Greater
Abbeville Federal Credit Union (Abbeville); Jerry Miller,
president and CEO of Carolina Trust Federal Credit
Union (Myrtle Beach); Ray Partain, chairman of the
board for Anderson Federal Credit Union (Anderson);
Ed Templeton, president and CEO of SRP Federal Credit
Union (North Augusta); and Linda Weatherford, vice
president at SPC Cooperative CU (Hartsville).
Following the business session, the new board named
its officers: Weatherford, chairman; Templeton, first
vice chairman; Crocker, secretary; and Miller, treasurer.
As former chairman, Scott Woods—president and
CEO of SC Federal Credit Union (N. Charleston)—remains
as an ex officio member of the board, as is SCCUL President
and CEO Steve Fowler.
League-member credit unions had voted on October 28,
2009 to reduce the SCCUL board size in light of changes
in organizational complexity, including spin-off of
some services to a limited-liability corporation and
the slowly diminishing number of in-state credit unions.
Of the seventy-seven member credit unions eligible
to vote for the new directors, fifty-four sent ballots
to independent accounting firm Cantey, Tiller, Pierce, & Green,
LLP of Camden, S.C.
- March 24, 2010
Bankers' MBL attacks fail scrutiny
WASHINGTON (3/24/10)--Credit unions have been attacked
by bankers with eight general claims against raising credit
unions' member business lending (MBL) cap, but those claims
do not stack up under scrutiny, according to an analysis
by the Credit Union National Association (CUNA).
The claims and the facts that poke holes in the bankers'
arguments are the topic of a feature this week in CUNA's
online legislative/regulative news analysis publication,
Credit Union NewsWatch, which is published twice a month.
One of the arguments centers on safety and soundness.
Bankers say that raising the MBL cap to 25% of a credit
union's assets (up from 12.25%) would undermine credit
union safety and soundness.
But data collected by the National Credit Union Administration
(NCUA) and the Federal Deposit Insurance Corp. show that
credit unions have a long history of engaging in safe and
sound business lending, and that business lending is actually
much safer at credit unions than at other institutions,
says CUNA's Research and Policy Analysis.
The data indicate:
Credit union MBL net
charge-off rates have been significantly lower than bank rates year-in and year-out for over a
decade. Since 1997, credit union MBL net charge-off rates
have averaged 0.15%, a figure that is roughly one-sixth
of the 0.82% bank average during the same period.
More recently, with the increased losses at all lenders
from the financial crisis and recession, the
increase in loss rates at credit unions pales in
comparison to
bank results. During 2009, credit unions charged off
business loans at a 0.59% rate--about one-fourth the
2.36% rate reported by banks over the same period. In
2008, credit unions charged off 0.33% compared with banks'
1.01%. and in 2007, the figures were 0.09% for credit
unions and 0.52% for banks.
Compared to other loans at credit unions, business
loan net charge-off rates are lower than net charge-off rates
on credit union consumer loans and essentially identical
to the net charge-off rates in credit union real estate
loan portfolios.
Most credit unions
have excess liquidity today that is
depressing their overall earnings. Moving assets from
low-yielding investments into higher-yielding MBLs, even
after accounting for credit losses on those loans, will
increase earnings, capital contributions and overall
safety and soundness.
If the MBL cap were increased
or eliminated, NCUA has indicated it would
revise its regulation to ensure additional capacity in the credit union system would not result in unintended
safety and soundness concerns.
- January 6, 2010
CUNA: Bankruptcies up, CUs in 'maintenance
phase'
MADISON, Wis. (1/6/10)--Personal bankruptcy filings
hit 1.41 million last year--an increase of 32% over
2008. And
credit unions can expect more chargeoffs during the post-recession,
say Credit Union National Association (CUNA) economists.
CUNA economist Steve Rick pointed out that the numbers
will continue to go up because bankruptcies and chargeoffs
lag behind a recession. "During a recession,
people are existing for a while on their savings, and when that's used up
they begin charging more, getting into debt." They
make it through most of the recession. Then, it catches
up and chargeoffs occur, he noted.
According to the National Bankruptcy Research Center,
which compiles and analyzes bankruptcy data, 2009's bankruptcy
filings are at their highest level since 2005 (The Wall
Street Journal Jan. 5).
More people filed for Chapter 7 bankruptcy, which liquidates
assets to pay off some debts and absolves the filers of
other debts. Chapter 7 filings were up more than 42% as
of November 2009, compared with November 2008. Chapter
13 filings increased by 12% and accounted for less than
one-third of the 2009 filings as of November, the latest
month statistics were available.
"You could see the increase coming with the last
quarter's data," Mike Schenk, CUNA senior economist
and vice president of economics and statistics, told News
Now. "There naturally would be more bankruptcies
after the recession than before."
He noted that consumers rushed to file bankruptcies in 2005 before new bankruptcy
laws took effect that October. The laws make it more difficult to file for
a Chapter 7 bankruptcy. Filers are required to under go a means test to determine
if the filer can pay back at least a portion of the debt after it is restructured.
Rick agreed that credit unions could anticipate the
losses and be prepared for them. "Credit unions
for years have been in the building phase, building
their allowances
for loan losses (ALL) provisions in anticipation for
an increase in chargeoffs. Now they're in the maintenance
phase, where they will see a drop in provisions for
ALL."
For credit unions, chargeoffs are still a small number,
said Schenk. Both delinquencies and net chargeoffs remain
substantially lower than bank norms, according to the U.S.
Credit Union Profile's Third Quarter 2009 results.
In 2005, before the new law, credit unions experienced
four bankruptcies per 1,000 members. That number tapered
off to 1.4 bankruptcies per 1,000 members in 2006, followed
by 1.8 in 2007, then 2.6 in 2008 and 3.7 as of September
2009.
The average number of bankruptcies per credit union has
increased slightly from 39.3 in 2005 to 43 as of in September
2009, according to the profile report. Half of credit unions'
chargeoffs are due to bankruptcies.
- November 10, 2009
President signs 21-day fix to Credit CARD Act
WASHINGTON (11/10/09)—Starting the weekend off
right for credit unions, President Barack
Obama on Friday signed
the CARD Act Technical Corrections Act
(H.R. 3606) into law. He also penned his name to the
bill extending
the
homebuyer tax credit.
The new CARD Act law fixes a situation that has been plaguing
credit unions since the original Credit Card Accountability,
Responsibility and Disclosure (CARD) Act was signed in
May. That bill incorrectly implied that a 21-day late notice
requirement applied to all open-end credit, and the Credit
Union National Association (CUNA) has argued that it had
always been lawmakers' intent to apply the provision only
to credit cards.
The corrections bill states clearly that the late-notice
provision applies only to credit cards.
CUNA has worked closely with lawmakers and their staffs
warning that the drafting mistake would prevent credit
unions from granting biweekly payment plans to their members,
from sending members consolidated billing statements, and
would force them to change payment due dates for members
that had previously chosen due dates based on their specific
financial circumstance.
The situation was particularly problematic for Home Equity
Lines of Credit (HELOC) because the due date of a HELOC
is often a contractual term.
CUNA President/CEO Dan Mica hailed the quick and decisive
work by the House and Senate on the correction bill and
the president's very timely signing of the measure.
"By signing the law, the president gives credit
unions the opportunity to go back to
doing what they do best:
Serving their members with affordable and
needed financial services.
"Credit unions can continue the practices of sending
members consolidated billing statements, changing payment
due dates for members who had previously chosen a due date
based on their specific financial situation, and continuing
bi-weekly payment plans--all essential tools consumers
use to manage their finances in the ways that best suit
their needs," Mica noted.
Mica also noted the efforts of "the leagues and the
many credit unions" who worked with lawmakers to get
the fix into law. "Without their efforts," Mica
said, "credit unions would still be reeling
from the unintended consequences of this law."
The President also signed legislation extending the $8,000
first-time homebuyer tax credit that was set to expire
at the end of the month. That bill also creates a new $6,500
tax credit for current homeowners who purchase a new home
between Dec. 1, 2009 and April 30, 2010.
Matz gets Senate nod, will rejoin NCUA
WASHINGTON (8/7/09)--Deborah Matz on Friday was confirmed to join the National Credit Union Administration (NCUA) by the full Senate and is soon expected to be named chair of the NCUA by President Barack Obama.
Credit Union National Association (CUNA) President/CEO Dan Mica congratulated Matz on her confirmation, saying that CUNA looks forward to working with Matz to ensure the "continued safety and soundness of credit unions" and to foster "a regulatory environment in which credit unions may continue to grow, prosper and effectively serve their members."
Matz was unanimously confirmed by both the full Senate and the Senate Banking Committee, and should soon join the NCUA board for the second time. Matz's nomination was scheduled for Senate approval several times in recent days, but a busy Senate calendar, dominated by such things as okaying $2 billion to extend the "cash for clunkers" program, and approving Sonia Sotomayor as a Supreme Court Justice, pushed back the Matz vote.
Matz last served on the board between 2002 and 2005, and most recently held the position of executive vice president and chief operating officer of Maryland-based, $800 million-in-assets Andrews FCU, an experience which Matz said "sensitized" her "to the need for effective, rather than excessive, regulation."
Matz in 2002 voted against what she has called "overly broad and permissive" NCUA corporate credit union regulations, and she said during recent Senate committee testimony that further work is needed to stabilize the corporate credit union system.
Matz has also promised to revamp some aspects of the NCUA's rules governing corporate credit unions once she takes on her new position at the NCUA, adding that such a rule would combine needed regulatory "flexibility" with the safeguards needed to prevent the current corporate credit union hardships from happening again.
CRMD provides Credit CARD Act 2009 guidance
An important provision of the Credit CARD Act of 2009
requires compliance by August 20, 2009 with the 21day
rule, requiring creditors with open-end loans to provide
consumers notification 21days in advance of their payment
due date. Even though it is titled the "Credit CARD Act"
this specific provision applies to all open-end loans
not
just credit cards. Implementing the statement provision
has been difficult because of the very short time period
the Fed has provided for compliance (by August 20th).
The Carolinas Compliance and Risk Management Department
(CRMD) has put together a list of the most common questions
regarding this provision. Credit unions are reminded
that each credit union situation is unique, and this
information is guidance and should not be construed as
legal advice. You are strongly encouraged to consult
your own legal counsel when determining the most appropriate
course of action for your credit union to achieve compliance.
1. Our members pay weekly- do we have to change payment due dates?
Essentially yes. Members must get their statement 21 days before the payment is due or you can not charge a late charge or consider the member delinquent in any way. That includes reporting to the credit bureau or pursuing collection activity.
2. Our credit union sends out loan statements quarterly- do we have to change to monthly statements?
Again, it looks like yes. Members must get their statement 21 days before the payment is due or you can not charge a late charge or consider the member delinquent in any way. That includes reporting to the credit bureau or collection activity.
3. What do we do if our data processor can not get everything in place by August 20?
The Fed has provided what they term a "short" time
period to move in to compliance. That time period is
undefined by the Fed, but the CRMD estimates possibly
30 days. During that short period while working out logistical
requirements for changing due dates and providing statements,
you can place a message on your statements that notifies
members that "the payment will not be treated
as late if received within 21days after the statement
was mailed." Additionally, as mentioned above your
credit union cannot treat the payment as late until after
21 days from statement mailing.
4. Our credit union allows members to make payments weekly or bi-weekly. How do we comply?
The key is to determine whether your credit union permits weekly/bi-weekly payments or requires them. If you have disclosed to your member via your credit agreement that payments must be made weekly, you will likely need to change members to a monthly due date while continuing to allow them to make weekly or bi-weekly payments. Members can make payments as many times during the month as your credit union will permit, however, you will need to ensure that when changing a member to monthly payment due dates, missing weekly payments will not be technically considered late.
For more information on the Credit CARD Act please contact the Carolinas Compliance and Risk Management Department at compliance@sccul.org.
Corp. CU update: NCUA begins stabilization process
ALEXANDRIA, Va. (6/8/09)--The National Credit Union Administration (NCUA) in its most recent update on the status of the corporate credit union system said that it has begun to use the Temporary Corporate Credit Union Stabilization Fund (TCCUSF) to cover corporate stabilization-related expenses.
In a Tuesday press release, the NCUA said that the implementation of the TCCUSF will allow natural person credit unions to "reflect a fully restored National Credit Union Share Insurance Fund (NCUSIF) deposit on their June 30 call reports."
According to the release, the TCCUSF has relieved the NCUSIF "from any reserve requirements" related to U.S. Central FCU's capital note by paying $1 billion into the NCUSIF.
The TCCUSF will also now oversee the Temporary Corporate Credit Union Share Guarantee Program (TCUSGP) and the Temporary Corporate Credit Union Liquidity Guarantee Program (TCCULGP), the NCUA added. The majority of corporate credit unions have agreed to take part in the TCCULGP, the NCUA said.
The NCUA also updated the status of U.S. Central and Western Corporate Federal Credit Union (WesCorp), reporting that "normal operations" at those two credit unions "continue without interruption."
WesCorp announced that it expects to recognize a 30% reduction in operating costs this year due to a number of cost cutting measures, including "consolidations and staff reductions," the release said.
NCUA working with agencies on Credit CARD Act, UDAP
ALEXANDRIA, Va. (7/2/09)—The National Credit Union Administration (NCUA) said Wednesday it has begun to work with the Federal Reserve to implement the Credit Card Accountability, Responsibility, and Disclosure Act of 2009, portions of which supersede interagency rules addressing unfair and deceptive acts and practices (UDAP).
Portions of the CARD Act will become effective on Aug. 20 of this year, with the remainder of the bill becoming effective on Feb. 22, 2010. UDAP rules that address credit cards currently have an effective date of July 1, 2010.
The CARD Act limits many of the same credit card practices that the NCUA, the Fed, and the Office of Thrift Supervision targeted via UDAP, including card issuers' ability to increase interest rates and the fees that lenders charge for use of subprime credit cards.
The NCUA said it also believes that the Fed will soon "begin issuing implementing regulations" for Regulation Z. The agency said it is "considering whether there is a need" for separate NCUA rules once Regulation Z becomes effective.
While credit unions should not be overly concerned about dealing with dueling regulatory structures, they should recognize that the UDAP rules, the CARD Act, and Regulation Z all contain similar requirements and restrictions regarding credit card practices.
According to the Credit Union National Association (CUNA), the problematic issue for credit unions in the new credit card law is the new requirement to send periodic statements at least 21 days before payment is due. This 21-day requirement has been particularly problematic because, as the law is written, it would apply to all open-ended credit, not just credit cards.
CUNA is working on this issue, discussing these operational problems with the Fed and raising credit union concerns with key staff on Capitol Hill. CUNA also plans to meet early next week with credit union lending experts to gather additional feedback on the operational compliance problems with applying the 21-day requirement to all open-end loans, and these additional concerns will be conveyed to the Fed.
For CUNA's analysis of the new credit card law, click here.
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