January 13, 2012

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Georgia Capitol State Legislative Session Begins
In a Whirlwind of Activity

The Georgia Legislature launches its 2012 session with a flurry of activity, and several issues under consideration – the foreclosure registry, garnishment and bankruptcy reform – are of particular interest to credit unions.

  Keys to Success: Staying Informed, Getting Involved
To maintain their influence in the legislative process and help shape legislation favorable to the credit union movement, industry leaders must stay informed and get involved. Read on for details on the ever-growing list of ways you can take part in the process.

  Cordray Installed as CFPB Head; Moves the CFPB Ahead
President Obama used a recess appointment to install former Ohio Attorney General Richard Cordray as director of the Consumer Financial Protection Bureau, and Cordray wasted no time in launching a supervision program for nonbank institutions such as payday lenders and check-cashing businesses.

  Congressional Crystal Ball for 2012
The U.S. Congress can be expected to consider a number of issues of importance to credit unions this year. Among them are tax reform and member business lending. Also crucial is who gets elected to Congress in the first place; read on to find out how you can get involved in supporting candidates sympathetic to credit union issues

  Top Five Predictions for CUs in 2012
CUNA's senior economist gives his take on the top five predictions for credit unions in 2012. Consistent with the ongoing economic recovery, it's all good news - loan growth, better loan quality, improved bottom lines and more.

  Small Merchants Feeling Consequences of the Durbin Amendment
The Durbin amendment required the Federal Reserve Board to set the interchange rate that card issuers charge merchants for processing card transactions. One result may be more merchants setting minimum amounts for card transactions.
  Helping People Afford Life: GCUA Annual Convention Planning Is in Full Swing
GCUA's 2012 Annual Convention is scheduled for May 9-12 in Savannah. This year's theme is Helping People Afford Life, and as always the event will offer valuable educational and networking opportunities for credit union professionals and volunteers.

  Georgia Credit Unions Get BIG Payoff from Invest in America
Invest in America, a member rewards program offered through the Michigan Credit Union League, pays out more than $90,000 in incentives to Georgia credit unions whose members participated in the Sprint Member Discount Program in 2011.

  What to Expect in 2012 from Credit Cards
Credit card experts offer their opinions on what consumers can expect from credit card issuers this year. Among the predictions: Credit will be a little easier to get, credit cards offering rewards will remain popular, and debit card rewards programs may be history.

State Legislative Session Begins In a Whirlwind of Activity

Georgia Capitol The 2012 state legislative session has begun with multiple bills of credit union interest being heard during the first week. Legislative issues typically have a hectic pace once the Legislature reaches the mid-point, but 2012 is off to an unusually fast start as many important issues are being addressed as the session begins. Legislative activity of interest to credit unions:
  • Foreclosure Registry Bill (HB 110): On Monday, January 9th the Senate Banking Committee passed the Foreclosure Registry Bill (HB 110) by Rep. Mike Jacobs. Readers of Creating Influence will recall that this bill was addressed throughout the 2011 session, passing the full House and then stalling in the Senate process on the last day. Newly tailored in scope to focus on only foreclosed properties, this bill seeks to set uniform standards on how cities and counties could set up foreclosure registries.

    The bill contains an exemption for financial institutions as an owner through foreclosure from registering and paying any associated registry filing fees, provided they file the deed within 60 days with the required contact information sent to the city and/or county. As this bill passed committee during the first week of the session, it could have been scheduled for a vote this week in the full Senate, but Senate leadership decided more time is needed to secure more support for the measure (click here for The Atlanta Journal-Constitution’s viewpoint on the issue). Timing with legislation is everything. The Government Influence Team continues to educate legislators on the importance of setting uniform standards and working within a coalition of supporters to move this bill forward at the ideal moment.
  • Garnishment Proceedings (HB 683):  On Thursday, January 12th the House Judiciary Committee met to discuss the newly introduced legislation HB 683 by Chairman Wendell Willard. If passed, this bill would benefit credit unions and other businesses as it would allow organizations to answer garnishment notices without going through an attorney, thereby rectifying the current situation that was a result of the state Supreme Court ruling in 2011 that requires companies to utilize a licensed lawyer to answer any garnishment order originating in Georgia.

    The Government Influence Team has been promoting this bill and is part of a business coalition supporting the effort. This issue is not new to credit unions. Our thanks go out to the Hike at Home participants who met with Chairman Willard during the off session to discuss this and other industry issues. The time they shared had a direct positive impact for all credit unions.
  • Bankruptcy Exemption Reform (SB 117): Almost every year, there have been attempts to dramatically change the amounts that could be claimed as exemptions when filing bankruptcy. In the waning days of the 2011 session, the Bankruptcy Exemption Reform bill, SB 117 by Sen. Jesse Stone, was heard in committee but stalled before a vote was cast. If it had passed as written, the bill would have drastically increased several exemptions ranging from personal exemptions, property exemptions, and the wild card exemptions per debtor.

    While Sen. Stone continues to push for an adjustment in the bankruptcy exemptions, he has indicated that he understands the concerns raised by the Government Influence Team and others. He has narrowly focused his proposed change to only increasing the personal property exemption, drastically lower than other attempts. The modified version of the bill passed the Senate Judiciary Committee on Wednesday, January 11th, and will continue to be addressed throughout the session.

The Government Influence Team is working with state legislators on these and other issues of industry interest. To learn more about these bills, along with all of the legislation that is being monitored on behalf of credit unions, please click here for the legislative tracking site.

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Keys to Success: Staying Informed, Getting Involved
From left: Rick Foley, Delta Community CU; Andrea Shorr, LGE Community CU; Mike Culbertson, GCUA; Cindy Connelly, GCUA; Mike Mercer, GCUA; Greg Connor, Associated CU; Dave Preter, Georgia’s Own CU; Tom Rudd, GEMC FCU, and Kim Wall, Georgia United CU

From any industry’s perspective, two basic, yet powerful keys to successfully shaping legislation before it becomes regulation are: 1) staying informed on the issues; and 2) getting involved. Credit union leaders were visibly involved on January 10th at the Georgia Chamber Eggs and Issues breakfast, an early morning gathering packed with U.S. Congressmen, state legislators and business leaders from all across the state. The venue also provides the opportunity to learn what the state leadership has on its agenda in the upcoming year. While at the event, the credit union group spent time with multiple legislators, one of which was U.S. Rep. Rob Woodall (R-7th) who promptly shared his experience with the credit unions via Facebook. Our thanks to the group who represented all credit unions at this early hour (6:30 a.m.!).

Another opportunity to get involved (and also stay informed) is the Grassroots Academy. In its fourth year, this event is the ideal time to get informed about what is happening in the state Legislature, learn how issues could impact credit unions, and be among the first in the state to get the tools credit union advocates can take back to help their organizations. Registration is already at a record high, but if your credit union would like to reserve a place, please contact Becky Sambol today. The more credit union loyalists who are engaged in the process, the better equipped we will be in promoting and protecting our industry.

Twitter logoStaying informed can be quite easy. Credit union advocates have multiple avenues to stay informed on legislative issues. There is this Creating Influence newsletter, the alternating Legislative Update emails while the state Legislature is in session, the legislative tracking system, credit union legislative summaries, legislative surveys, involvement in legislative events and Hikes, and direct communication with the Government Influence Team. New for 2012, credit union advocates can receive a firsthand perspective of activities under the Gold Dome through the Government Influence Team’s Twitter page @GCUAgov.

Staying informed and getting involved couldn’t be easier, but it takes you to make it happen. Make 2012 the year of engaging your credit union in activities that will benefit the 1.8 million credit union members in this state!

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Cordray Installed as CFPB Head; Moves the CFPB Ahead

On January 4th, President Obama installed former Ohio Attorney General Richard Cordray as director of the Consumer Financial Protection Bureau without Senate approval, by using what some legislators claim is a questionable recess appointment. Republican senators, who had vowed to block the confirmation of any CFPB director unless the bureau’s structure and funding are changed, have been holding pro forma sessions to supposedly prevent such an appointment.

Richard Cordray
CFPB Director Richard Cordray

Opponents of the CFPB director nomination have argued that the CFPB will lack transparency if run by a single director. These same opponents have been pushing for a five-member board to head the new agency, among other changes. Cordray’s term could run through the end of 2013 if Obama is re-elected. On January 5th, Cordray named Raj Date the agency’s first deputy director. Date had been running the consumer agency since August in the role of special adviser to U.S. Treasury Secretary Tim Geithner.

As authorized by the Dodd- Frank Act, once a director is in place the bureau can begin supervising nonbanks, such as payday lenders and check cashers, not currently subject to federal regulation, and the new director announced that the CFPB launched its nonbank supervision program that day.

Under the nonbank supervision program, the CFPB will conduct individual examinations, and may require reports from businesses to determine which ones need greater focus. The CFPB last June issued a notice and request for comment on the kinds of large nonbank lenders it should regulate. It plans to issue a final rule by July 21. Read the CFPB’s press release.

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Crystal ballCongressional Crystal Ball for 2012

In 2011 there was much press on the divide in Congress around the deficit ceiling, and the super committee’s failed attempt to come to an agreement on tax reform. For credit unions it was a roller coaster of a year; the interchange debit rule (and the efforts leading up to the rule), the opening of the Consumer Financial Protection Bureau, consistent efforts to increase the member business lending cap which would allow credit unions to provide much needed capital for small businesses, and protecting the tax status of the industry. What can credit unions anticipate in 2012?

There are multiple federal issues that will arise in 2012 that could impact our industry. However, credit unions are being utilized more and more as a resource due to the grassroots efforts of advocates just like you. And, being utilized as a resource means helping shape legislation before it gets to the floor for a vote. Legislators are tapping into the credit union industry for their opinions on legislative matters outside the standard “credit union issues” here at home and in D.C. This provides the opportunity to move pro-credit union initiatives forward, share how legislation could impact our membership, and remind Congress of the regulatory burden placed on credit unions, so as to seek ways to lessen current and future burdens. Issues to watch in 2012:

  • Tax Reform Efforts: In an election year, tax reform overhaul is not considered likely. However, ways to lower the deficit continue to be on legislators’ minds of both parties. Any proposals will need to be closely monitored to ensure that the credit union tax exemption is protected.

    From a Grassroots Liaison perspective, do you have employees who may not understand why credit unions are tax exempt? Credit unions are granted their tax exemption status as not-for-profit financial cooperatives through Congressional action, but it is important that all in the industry understand what sets us apart from banks. Send your fellow employees HERE for the basic principles behind what makes credit unions unique.
  • MBL: The credit union efforts to move forward member business lending legislation continues into 2012. However, grassroots efforts come from different angles, one being the actual small-business owner. As more and more small-business owners contact their members of Congress on the importance of obtaining continued credit from their credit unions, the issue can change in the minds of legislators and the door of opportunity opens. Be sure to encourage your small-business owners to make the connection with their legislators.
  • Elections: Part of growing grassroots power for credit unions means efforts to keep pro-credit union candidates in office. Consider the implications of all of the grassroots efforts you and your credit union have put forth building a positive relationship with a legislator, just to see them replaced with an individual who has zero connection with our industry (or worse, have the opposite viewpoints from our industry!).
It is key for the long-term legislative success of credit unions to support individuals who support what you do and the members you serve. Support ranges from PAC fundraising, inviting legislators to your credit union, and engaging in campaign activities. Watch for opportunities in 2012 for your credit union to be involved, or contact a member of the Government Influence Team (Cindy Connelly, Mike Culbertson, or Brandee Bickle) today!

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Top Five Predictions for CUs in 2012

Last year was a whirlwind for the U.S. economy and credit unions trying to rebound from a lingering recession, persistent unemployment, a depressed housing market, and worldwide economic trouble, especially in Europe. So what does 2012 have in store for credit unions?

Steve Rick, senior economist for CUNA, shares his top five economic predictions for what credit unions will experience next year. They are:

Top 5Return of loan growth. After three years of basically no growth, credit unions in 2012 will see the return of loan growth. “Loan balances will grow 3 percent next year, which is good, because we are, after all, credit unions,” Rick said. “Although 3 percent is not great, it's better than zero.” Why will there be loan growth? Essentially, low consumer spending during the past three years has created substantial pent-up demand for durable goods – by definition anything that lasts three years or longer, such as cars, appliances and furniture. “These are the types of items for which credit unions usually make loans,” Rick said.

A big improvement in loan quality. Loan quality will strengthen and improve as reflected by a drop in the loan delinquency rate. For 2011, the loan delinquency rate for credit unions was 1.6 percent – which means for every $100 in loans, $1.60 is not performing (paying interest), Rick explained. For 2012, the forecast is 1.35 percent. Why the improvement? “Two reasons," Rick explained. “Strength of the economy, and job growth. They will help people stay current on their loans, and those who are delinquent to get caught up on their payments.”

A nice drop in credit unions' provision for loan losses. This is a ramification of significant improvement in loan quality. “We expect the provision to be down to 40 basis points of average assets in 2012 from 51 basis points in 2011,” Rick said. “In 2007, it was 43 basis points. So in 2012, we predict it will be lower than – at 40 basis points – pre-recession levels.” According to Rick the recession started in December 2007.

Credit unions' bottom lines should improve. In 2012, credit unions' return on assets (ROA) – which is net income divided by average assets – should be 85 basis points, or 0.85 percent, up from 70 basis points, or 0.70 percent, in 2011, Rick said. The 15-basis-point jump is forecast because of better provisions for loan losses engendered by better loan quality mentioned earlier. Also, the corporate stabilization assessment will be nine basis points of insured shares in 2012, according to NCUA estimates. That compares with 25 basis points in 2011. “That drop will help boost credit unions' bottom lines,” Rick said.

Credit unions will have turned the corner when it comes to allowance for loan losses. The allowance for loan-loss ratio is the allowance for loan losses account relative to total loans. In other words, out of all the loans that credit unions have on their balance sheet sheets, what percentage of them are bad loans? "The allowance ratio was a little over 1.6 percent in 2011," Rick said. It was 0.7 percent before the recession. For 2012, it will continue to trend downward. Because of the better credit-quality outlook for 2012, credit unions may have overfunded their allowance account and will let it run down next year.

"For the first time in five years, credit unions in 2012 will keep loan-loss provisions – because that allowance has been built up over the past few years – less than net loan charge-offs," he explained. "That will bring down the allowance for loan-loss accounts in absolute (dollar amounts) and relative terms (percentage of total loans)." To see additional research and statistics on credit unions, please click here.

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Minimum chargeSmall Merchants Feeling Consequences
of the Durbin Amendment

On January 10th, The Atlanta Journal-Constitution ran an article about how consumers could see more $5 or $10 minimum-charge rules – or, as they put it polite requests – when using credit or debit cards this year. This is a result of merchants’ attempts to cope with the unintended consequences of the new federal limits on how much card issuers can charge businesses. As you may remember, when the Durbin amendment was passed, it required the Federal Reserve Board to set the interchange rate and it was mentioned that the discounts that smaller merchants received would go away once the new fee was set. But the larger merchants were successful in their messaging that lowering the fee will help everyone. It looks as though that might not be true. Click here to read the article.

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Helping People Afford Life: GCUA Annual Convention Planning Is in Full Swing

Annual ConventionGather your staff and volunteers and get ready for one of the best annual conventions you’ve attended in years! The GCUA Annual Convention will be held May 9-12 at the beautiful Westin Savannah Resort & Spa and the Savannah International Trade and Convention Center.

The focus this year is on the people credit unions serve, and how credit unions are Helping People Afford Life. The lineup of speakers includes credit union loyalists and experts in the financial services sector. The convention kicks off with the annual REAL Deal Reunion and the spring conference of the Georgia Credit Union Marketing Council. Over the remaining days, professionals and volunteers will enjoy valuable networking and learning sessions to enhance their insights into the needs of members with middle-class aspirations.

The economy has hit many credit union members square in the wallet, and left many others struggling to maintain even the most basic of life’s necessities. All the while, credit unions have been there to help. As America rebounds from the economic difficulties of the last five years, the credit union industry is in a position to be a trusted source for consumer and small business financial services. Will your credit union be able to meet the changing needs of members? Attend the 2012 GCUA Annual Convention for vital information you will need to succeed in Helping People Afford Life, and to see your credit union thrive into the coming years. Visit gcua.org for convention information, and watch your email in-box for regular updates. We’ll see you in Savannah!

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Invest in America
From left: Leslie Norush, National Business Consultant, CU Solutions Group/Invest in America; Andrea Shorr, Marketing & Public Relations Specialist at LGE Community CU; Stephen Cohen, VP of Marketing and Community Relations at LGE; Liz Lewis, VP of Service Center Operations at GCUA

Georgia Credit Unions Get BIG Payoff from Invest in America

Providing incentives to credit union members benefits the members as well as the credit unions. In fact, in December 2011, Georgia credit unions received more than $90,000 in incentive dollars collectively for their participation in the Sprint Member Discount Program offered through Invest in America (IIA), a member rewards program.

Helping members realize the vast benefits of using a credit union can be challenging. But Invest in America – offered through CU Solutions Group, a CUSO operated by the Michigan Credit Union League – has helped credit unions in Georgia and across the country earn while saying thank you to members. Georgia Credit Union Affiliates introduced credit unions to the Sprint Member Discount Program in 2009. The program offers a 10 percent discount on regularly occurring fees for new and existing individual and business accounts. Additionally, the new Sprint activation fee for credit union members is waived. Credit unions earn simply by signing up for the program and fulfilling minimal marketing requirements.

The $90,000 incentive payout was made to 20 credit unions in Georgia. Funds are disbursed annually based on credit unions’ membership size, their marketing efforts and the number of credit union member activations nationwide. More than 1.3 million members currently take advantage of the discounts. Nationally, credit unions received $7.3 million in marketing incentives for participation in the Sprint program during the 2010-2011 contract year. For more information or to sign up for the program, click here or contact Liz Lewis at (770) 476-9625 ext. 3479.

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CardsWhat to Expect in 2012 from Credit Cards

CardRatings.com recently offered advice from experts on what consumers can expect in 2012 from credit card issuers.

  1. While lenders and issuers maintain strict underwriting standards, they will not be as strict as in recent years, according to John Ulzheimer, president of consumer education at smartcredit.com. Credit scores have risen for many consumers, and one result is that banks have increased their offers of credit.
  2. Rewards cards will remain the most popular type of card. Banks want deeper, product-driven relationships – especially checking accounts – with customers, according to Dennis Moroney, research director at Tower Group. For that reason, the 0 percent balance transfer offer is making a comeback, he said.
  3. Card holders will be rewarded with cash. Capital One's Cash MasterCard set the standard with 1% cash back on every purchase for the first year. On the first anniversary of the card activation, the customer gets a 50 percent bonus on everything earned in the previous 12 months.
  4. Travel and airline perks will remain popular. High-fee cards will offset their costs by covering foreign transaction fees and baggage fees and offering priority boarding, according to Curtis Arnold, founder of CardRatings.com. Banks lost many customers to credit unions in 2011, Ulzheimer added. These perks make banks look more attractive.
  5. Debit reward programs are likely a thing of the past. The negative publicity banks received over proposed debit card fees in 2011 have moved more people to credit cards, and debit reward programs are a casualty of that migration, said Arnold. Look for more debit-credit duo cards, Moroney said.
  6. Chip and PIN cards are gaining momentum, Moroney said. Chips protect against card-present fraud, he added, and online security is not a concern, as it is with mobile banking. Ulzheimer told CardRatings.com he doesn't think the mobile banking market will take off as some predict, but card issuers still must find a way to market their brands via mobile devices.

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