July 27, 2012
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Engage In the Elections!
The Primary Elections are just around the corner on Tuesday, July 31st ... and one simple way your credit union can make a difference is by encouraging your members and staff to take the time to vote.

 
     
  What's the Hold Up, Congress?
CUNA President/CEO Bill Cheney poses a simple question regarding the member business lending legislation and the positive impact it can have on businesses. Who should Congress listen to?

 
  Ready to Hike the Hill?
Are you ready? In September, credit union advocates will travel to Washington D.C. to speak with members of Congress on issues of industry importance.

 
  Settlement by Card Giants Could Bring Cost to Credit Unions, Consumers
Reduced credit card interchange rate fees, mandated as a result of an historic lawsuit settlement between merchants and credit card companies could cost credit unions with credit card programs up to a total of $50 million.

 
  Have Their Cake and Eat It Too?
The recent card settlement opens the way for millions of businesses to add fees to consumers that pay via credit card, but several are weighing the risk of consumer backlash.

 
  Third Party Vendors, Capitol One and a $210 Million Fine
The Consumer Financial Protection Bureau took its first enforcement action by fining Capital One Bank for deceiving millions of customers into buying costly and unneeded services when they signed up for credit cards.

 
  Growing Trend: Older Americans Hit Hard with Foreclosures
The impact of foreclosures hits older Americans hard according to a new report by the AARP.

 
  Survey: 1 in 6 Georgians Putting 'American Dream' on Hold
The Atlanta Business Chronicle reported on the new survey by the Georgia Credit Union Affiliates that shows that more than one in six Georgians are putting their hopes of home ownership on hold.

 
 
 
Engage In The Elections!

The Primary Elections are just around the corner on Tuesday, July 31st ... and one simple way your credit union can make a difference is by encouraging your members and staff to take the time to vote. Typically Primary Elections have low voter turn-out. However, many races across the state ONLY have Primary competition, making a single vote all the more powerful. For various tools to engage your members and staff in the importance of voting, please access the credit union resource page on ElectionWatch 2012, the get-out-the-vote website for credit union members.  Remember, if credit union people don’t vote, credit union people don’t count!

In addition to encouraging the 1.9 million credit union members in Georgia to vote in the Primary Elections, credit unions all across the state have been engaging in campaigns to make a difference. As of press time, over 120 advocates from 15 credit unions have engaged in some form of campaign activity for federal or state candidates, making an even bigger difference in the Primary Elections. Click here to see previous support provided by credit unions across Georgia, and please take advantage of future opportunities to engage in campaigns. There are several other events in the planning stages, and a few hours of campaign work can make the difference in any election!
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What's the Hold Up, Congress?

Some legislators have selective hearing. In a July 19th article in The Huffington Post, CUNA President/CEO Bill Cheney poses a simple question regarding the member business lending legislation and the positive impact it can have on businesses. Who should Congress listen to?

Credit unions, with a plan to help small business and create jobs at no taxpayer expense?

Or the banks, which "offer roadblocks rather than solutions?"

Coming down in favor of credit unions should be a "no brainer". Small businesses still need access to capital. Nearly one-quarter of small business owners attempted to secure loans from banks in the past year, and more than half of those business owners that looked for loans were denied. This is a clear indication that a substantial number of small businesses continue to need more access to capital. Credit unions could help alleviate these capital concerns if the MBL cap was increased to 27.5% of total assets, from 12.25% of assets. Doing so would inject $13 billion in new funds into the economy and create 140,000 new jobs.

Many in Congress, Cheney noted, are listening to credit unions and supporting legislation that would help small businesses spur the economic recovery. But surprisingly, some legislators won't or can't listen, or are having trouble making up their minds. Unfortunately, some legislators are likely confused by bankers' bombast. But they shouldn't be. "In what universe is it reasonable, moral or commendable to listen to - and act on the recommendations of-an industry that offers roadblocks, rather than solutions, to getting our economy back on track?," he said. As further evidence:

  • Polling revealed that 90 percent of small business owners believe that the availability of small business loans is a problem;
  • Data from financial institution regulatory reports suggest that banks-both large and small-are turning away many business borrowers, with loans outstanding declining by -2.0 percent last year. At the same time, credit union business loans increased by 5.1 percent; and
  • Total bank business loan portfolios declined over the cycle, while credit union business loan portfolios grew at a healthy rate.

Cheney urged readers of The Huffington Post to urge their senators to pass S. 2231, the Credit Union Small Business Jobs Act, and support credit unions that back small business and our nation's economic recovery.

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Ready to Hike the Hill?

DC in the Fall; what a great time to get in front of Congressional leaders and staff to tell them how credit unions are serving their members and communities. While Congress continues to struggle to find common ground when it comes to legislation, and legislators are rapidly preparing for a rather tough election year, it is still important for legislators to hear from those back home. Please make plans to join the annual “Hike the Hill” trip to DC!

The event is scheduled for September 19-21 2012, before what most believe will be an early October recess for a “last campaign push” before voters go to the polls. In the gridlock of Congress it becomes even more important that legislators meet with and hear from credit union advocates so they know we are actively engaged on our issues. This trip will afford those attending a great opportunity to share with Congress the strength of credit unions in Georgia, and the need for regulatory reforms that will allow credit unions to better serve their members. Please make plans to join your colleagues and other credit union loyalists. Grassroots takes all of our involvement. We need you! 

Details:

  • Accommodations have been reserved at the Hampton Inn DC Downtown Convention Center, located at 901 6th Street NW, Washington, DC 20001. Room rate is $259.00.  
  • Tentative plans have our group flying to DC on Wednesday, September 19th (this is the first day Congress is due back from a recess) for arrival around lunchtime for an afternoon briefing, with a possible dinner with Hike attendees from the Kentucky League. 
  • Thursday is comprised of Hill visits, with time at the end the day to enjoy a leisurely dinner. 
  • If needed (and it usually is), remaining Hill visits to be completed on Friday morning. Plan for an early afternoon departure time on September 21st.
Hill visits are being finalized, and we need to get our participants lined up. If you or someone from your credit union would like to participate in this event, please contact either Becky Sambol or Cindy Connelly by August  15th. 
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Settlement by Card Giants Could Bring Cost to Credit Unions, Consumers

Reduced credit card interchange rate fees, mandated as a result of an historic lawsuit settlement between merchants and credit card companies could cost credit unions with credit card programs up to a total of $50 million according to estimates by CUNA. Visa, MasterCard and several large banks (defendants in a lawsuit brought by groups of merchants and their trade associations) on July 13th agreed to pay billions to merchants to settle a long-standing credit card interchange fee class action lawsuit. In addition, the settlement requires a reduction in credit card interchange rate fees (IRF) of 10bp for an eight-month period, likely beginning in mid-2013. The rate reduction applies to all card issuers, including credit unions.
 
If the total credit IRF reduction is $1.2 billion, credit unions with credit card programs would lose about $50 million in total revenues, or about 0.5 bp on their total assets, CUNA Chief Economist Bill Hampel said. This loss would be concentrated among the relatively small number of credit unions that have very active credit card programs, he noted. Interestingly, the National Association of Convenience Stores has rejected the settlement. However, the Electronic Payments Coalition (EPC) attributed that position to the trade groups' interest in keeping its damage claims alive.
 
EPC also said that, with the exception of NACS, all other class representatives through their court appointed lead counsel have "determined that this settlement is in their best interests as well as the millions of other merchants they represent." The settlement resolves all competitive issues between merchants and the networks. According to press reports, some merchant groups including the National Community Pharmacists Association and the National Grocers Association said that they are still reviewing the court documents and assessing its impact on their members.

Other aspects of the settlement include:

  • Visa, MasterCard and the banks would create a $6.05 billion fund (a record amount for a class action settlement) to repay retailers for past fees charged.
  • Retailers would be permitted to assess "check out" fees or surcharges on credit card purchases, which had previously been prohibited by Visa and MasterCard rules (see related article).

CUNA President/CEO Bill Cheney said that the surcharging aspect of the settlement - as well as the provision that consumer-owned credit unions would see a reduction in interchange revenue - are signs that the settlement does nothing for consumers. The Wall Street Journal ran an article on July 13th from the consumer perspective that demonstrates the same thought ... that it will only equate to more cost to consumers.

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Have Their Cake and Eat It Too?

As mentioned in the above related article, the recent card settlement with Visa, MasterCard and bank credit-card issuers opens the way for millions of businesses to add checkout fees when customers pay via credit card. The Wall Street Journal reported on July 18th how many business owners are wrestling with whether or not to even to do so. For the first time, retailers, doctors, bakeries and other merchants accepting credit cards will be able to recoup the interchange fees they incur each time they process a credit- card transaction by passing them along to the consumer. These fees, which are between 1% and 3% of the purchase, aren't visible to consumers and for decades, credit-card companies have prohibited merchants who accept their cards from imposing a surcharge on credit-card users. But now that they have the opportunity to do so, they fear the consumer backlash. Read more here.

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Third Party Vendors, Capitol One and a $210 Million Fine

The Washington Post reported on July 18th that the Consumer Financial Protection Bureau took its first enforcement action by fining Capital One Bank for deceiving millions of customers into buying costly and unneeded services when they signed up for credit cards. The nation’s fifth-largest bank will pay $210 million, mostly to reimburse consumers who were duped into paying for credit monitoring and other add-ons. Targeting the unemployed or people with poor credit, call-center agents falsely claimed that such services were mandatory or free. Some customers were wrongly told that enrolling would improve their credit scores or provide debt forgiveness if they got sick. The case marks the Consumer Financial Protection Bureau’s first extensive investigation into the operations of a financial powerhouse, an effort that comes on the anniversary of the Bureau’s opening.

Officials at the consumer bureau say a third-party vendor, hired by Capital One, used high-pressure tactics to deceive customers. Some cardholders were even enrolled without their consent, CFPB officials said. They were then automatically billed for the product, which they had trouble canceling. Capital One settled the charges without admitting or denying wrongdoing, though the bank took responsibility. “We are accountable for the actions that vendors take on our behalf,” Ryan Schneider, president of Capital One’s card business, said in a statement.

The bank will pay the consumer agency a $25 million fine and $35 million to its regulator, the Office of the Comptroller of the Currency (OCC). Capital One will also refund $150 million to 2.5 million consumers who purchased credit-monitoring and payment-protection services between August 2010 and January. The average payout is expected to be less than $100 per cardholder.

From a credit union perspective: the CFPB bulletin on the enforcement addresses Regulation B (Equal Credit Opportunity Act) and Regulation Z (Truth in Lending Act) provisions, as they relate to credit card practices. While only credit unions with more than $10 billion in assets fall directly under CFPB supervision, on matters involving interpretive guidance on consumer protection laws and regulations under the CFPB's purview the NCUA will defer to the CFPB. The guidance sets forth both steps to be taken to ensure vendors market and sell credit card add-on products in a manner that limits the potential for statutory or regulatory violations and related consumer harm, as well as a list of features that should be included in compliance management by financial institutions that offer credit card add-on products.
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Growing Trend: Older Americans Hit Hard with Foreclosures

On July 18th, the AARP released an analysis of why the foreclosure crisis has struck many Americans in their retirement years. The report found that while people under 50 are most likely to face foreclosure, the risk of “serious delinquency” on mortgages has grown the fastest for people over 50. Of the 1.5 million Americans over the age of 50 to lose their homes to foreclosure between 2007 and 2011, the highest age category was those who are over the age of 75. Why? The New York Times reported that older Americans are losing their homes due to pension cuts, rising medical costs, shrinking stock portfolios, and falling property values...and this demographic is sadly not saving enough money.

Foreclosures create unique challenges for older people the study found. They are less able to find new jobs and more vulnerable to becoming homeless, analysts say. Selling houses is also a challenge for many older people. The value of real estate has collapsed, especially in wealthy suburbs of Atlanta, Dallas, Chicago and other sprawling metropolitan areas. According to AARP (via the Atlanta Journal Constitution):

  • About 600,000 Americans who are 50 years or older are in foreclosure.
  • About 625,000 in the same age group are at least three months behind on their mortgages.
  • About 3.5 million - 16 percent of older homeowners - are under water.

AARP said that over the past five years, the proportion of loans held by older Americans that are seriously delinquent jumped by more than 450 percent.

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Survey: 1 and 6 Georgians Putting 'American Dream' on Hold

The Atlanta Business Chronicle reported on the new survey by the Georgia Credit Union Affiliates that shows that more than one in six Georgians are putting their hopes of home ownership on hold. The three main reasons Georgians cited for postponing a home purchase are:

  1. pay cuts (38 percent),
  2. wanting to first pay off existing debt (48 percent),
  3. and uncertainty about the national economy (47 percent).

Two percent of the 7,150 credit union members who were questioned in June for the survey said owning a home was never a goal.

This article appeared in response to Consider This, the monthly e-news brief distributed to journalists across the state. The topic has received interest and coverage from several other media in Georgia. If you plan to speak with a local reporter about this topic, click here for talking points about “The Changing Landscape of Home Ownership”. Also, click here for past issues of Consider This.

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