JULY 12, 2013
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Two Two Case Studies on Engaging Members
Two Georgia credit unions are taking different but effective approaches to getting the "Don't Tax My Credit Union" message out to their members and enlisting their assistance in the campaign.

  Are Overdraft Fees Subject to Georgia Usury Limitations?
DBF Issues Order to Clarify That Issue

The Georgia Department of Banking and Finance issued a declaratory order establishing that state-chartered credit unions, like federal CUs, can charge overdraft fees without being subject to Georgia usury limitations.

  July 1st: Several New State Laws Now In Effect
Many of the more than 300 bills passed by the Georgia General Assembly earlier this year went into effect July 1, including several that are of interest to credit unions.

  Overdraft Price Study: CUs Fees Rise but Still the Best Deal
A recent national survey of overdraft charges found that while such charges by credit unions have risen, they are still lower on average than similar charges by banks.

  Lower OD Fees Linked to Location, Size
A study found that the biggest banks charge the largest overdraft fees, while community banks' and credit unions' fees tend to be lower, and that fees tend to be lower in the West and the Midwest than in the South and the East.

  New Commissioner Takes the Reins
Kevin Hagler, former deputy commissioner for supervision at the Georgia Department of Banking and Finance, was named commissioner of the department by Gov. Nathan Deal.

  Credit Unions, Front and Center!
The June 28 issue of the Atlanta Business Chronicle spotlighted credit unions in its Financial Quarterly section, noting that credit unions are growing stronger as the economy improves and are helping their members in many ways.

  Prepaid Cards as Paychecks?
BloombergBusinessweek reported that New York's attorney general is investigating several companies, including Home Depot and Walmart, over fees that are charged to employees who are paid via prepaid cards.

  Competition’s for the Birds – Literally!
Walmart and American Express have begun offering a financial product called Bluebird that offers several services in a mobile app, without annual, monthly or overdraft fees or minimum balance requirements.

  New Capital Rules for Banks Prompt Lending Concerns
The Atlanta Business Chronicle reported that bank lobbyists are warning that proposed stricter capital requirements for large banks, which would go into effect in 2018, could mean those banks will be making fewer loans.

Two Case Studies on Engaging Members

Credit unions across Georgia are engaging in the Don’t Tax My Credit Union campaign; placing the call to action on social media, on websites and even emailing membership asking for their involvement. And why? Because it is up to credit unions to be their own voice, to share with Congress the not-for-profit financial institution model is something that should be protected. Already more than 17,000 messages (please click here for details) have been sent to Congress from Georgia credit union advocates, but more are needed if we are to make a difference. Credit union members WILL support their credit union – in the Georgia 2013 credit union mid-year survey compiled in May, 80 percent of members responded they would contact their legislator to support the tax status of credit unions. There are people willing to be engaged – but it takes your credit union to ask them. Not sure where to begin? There are several ideas and examples of materials here, but below are two unique methods Georgia credit unions have utilized to engage their members:

First Reliance
First Reliance Federal Credit Union CEO Dina Thomas, center, and her team

First Reliance Federal Credit Union Member Kiosk Drive
First Reliance FCU engaged its membership in the campaign by setting up a computer kiosk in its lobby, providing immediate access to the call to action for members on a payday to maximize involvement. CEO Dina Thomas shared that it was vitally important for their credit union to get involved in the campaign, stating, “We cannot afford to lose our tax exemption. If we were to lose our tax exemption, our entire way of doing business would change. As a small credit union, I'm not sure if we would survive. This would definitely impact the community we serve.”

How did they educate their staff? Thomas shared it was simple, having each team member visit the DontTaxMyCreditUnion website and read through the information – and of course, take action and send messages to Congress. “This not only got them involved in the campaign, but prepared them for any questions the members may have,” said Thomas, and she shared the information with the board as well and encouraged them to take action.

But how difficult was it to set up?The setup of the member kiosk was not difficult. We decided to conduct our campaign on a Friday, which is our busiest day, and we used the member service PC located in the lobby,” said Thomas. She found providing a place for members to sit and take action was extremely helpful, especially for those members who do not have a computer at home.

But what about the members – has there been any push-back or negativity?No, our members have all been very supportive,” shared Thomas. A true sign of success: They have even had members call later that day to say they also called their representatives and voiced their support for the credit union tax exemption! The only drawback they have experienced was if a member did not have an email address, they were not able to send an email message. One solution in that situation is to send physical letters; samples found here.

Georgia United CUGeorgia United Credit Union Postcard Campaign
Georgia United CU engaged its membership by asking them to sign postcards available in each branch for their two U.S. Senators and U.S. Representative with the message of “Don’t Tax My Credit Union.” This postcard campaign is in addition to other efforts including placing the message on social media and the website, and engaging staff in sending emails. CEO Doug Foote shared that it was important for their credit union to be heavily involved. “We are very concerned that this issue will get ‘traction’ on Capitol Hill and our voice needs to be heard louder than ever before. We feel this could be the final battle that decides our tax status for years to come. If we don’t show our strength and our opinions, it could have consequences detrimental to our industry,” he stated. The potential loss of the credit union tax exemption impacts both federally chartered and state chartered credit unions, large and small, community and SEG-based – it impacts the entire industry!

How did they educate their staff? Foote shared that they held a company-wide meeting where he explained what is transpiring , taking 25 minutes to share just how important it is to mobilize the members and families on this issue. Then they took the “education” further, developing a comprehensive marketing/educational program for every member touch point. Foote noted, “Whether they are in a branch, our website, mobile banking, etc. there is a message regarding Don’t Tax My Credit Union and a call to action.” Just in the first week they had thousands of signatures, and the success can be tied to both the education by the credit union and the branches. “Our branch staff has been incredible and have taken this mission to heart,” said Foote. And the education continues – the board will received the same training in an abbreviated format at the next meeting.

But how difficult was it to get your branches engaged? Foote shared it was easy; “We are very fortunate and have a great staff – they heard the message and mobilized immediately!” The answer was simple for them; “It was not hard to engage our staff at all.”

But what about the members – has there been any push-back or negativity? Their credit union is just now a few weeks into the postcard campaign, but so far has not seen any push-back whatsoever from the membership. Foote attributes this to the educational component. “If we do our job of educating our members on how this would affect their families, we should have very little push-back.

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Are Overdraft Fees Subject to Georgia Usury Limitations?
DBF Issues Order to Clarify That Issue

On July 11, 2013, the Department of Banking and Finance issued a declaratory order that will provide parity between federal credit unions and state-chartered credit unions when imposing a fee for overdraft services. Recently a few state-chartered banks found themselves in court dealing with the question of overdraft fees and whether the imposition of such fees could be a violation of Georgia’s usury code. In order to be proactive, GCUA requested a ruling from the Department to clarify that parity exists between federally chartered credit unions and state-chartered credit unions on this issue. Since the Federal Credit Union Act authorizes federal credit unions to impose fees on deposit accounts without any usury limitations, the Department found that parity was needed to make sure state-chartered Georgia credit unions were not faced with a higher administrative burden than that of other state financial institutions when dealing with overdraft protection fees. To read the declaratory ruling click here.

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July 1st: Several New State Laws Now In Effect

The start of July is not just the midpoint of the year; it is typically the date many state bills that were signed into law take effect. There were more than 300 bills passed in the 2013 state session signed into law, and below are bills of interest to credit unions that went into effect on July 1st:

  • JonesSERVICE PROCESS: SB 113 by Sen. Emanuel Jones (D-Decatur) sets limits on how businesses are served notice, and to prevent summonses or garnishments from falling through the cracks by requiring they be served to a person with supervisory authority (as opposed to whomever is at the front door). With so many garnishment notices served at financial institutions, this change will be positive in helping credit unions mitigate unwanted “non response” issues to notices.
  • BANKRUPTCY EXEMPTIONS: Credit unions may recall that HB 531 by Rep. Mike Jacobs (R-Brookhaven) seeks to increase the bankruptcy exemption for motor vehicles from $3,500 to $5,000. As a result of our discussions, Rep. Jacobs committed to refrain from additional changes in the next session, or a change to the wild-card exemption (which would have been burdensome). This bill was amended onto SB 105 by Sen. Hardie Davis (D-Augusta), which protects charities that unknowingly receive donations that may be fraudulent. The Government Influence Team also successfully worked to prevent an attempt by others to attach additional language from HB 82 by Rep. Earl Ehrhart (R-Powder Springs) to SB 105; this co-opted language from HB 82 would have inadvertently removed credit unions from the provision denoting the ability to receive payment from a successor creditor. This HB 82 issue was defeated, and the bill passed the full Legislature without this negative amendment.
  • EFTs: HB 289 by Rep. Trey Kelly (R-Cedartown) clarifies state law governing electronic fund transfers to be in compliance with federal provisions as a part of the Dodd-Frank Act.
  • UNIFORMITY IN REGULATIONS: SB 185 by Sen. Jesse Stone (R-Waynesboro) was the byproduct of the State Bar Uniform Commercial Code Committee that brings Georgia law on par with other states. The legislation clarifies the transactions between creditors and debtors, and will be beneficial to credit unions and other financial institutions – especially those that lend in multiple states – as it will bring consistency.
  • CONTRACTS: HB 234 by Rep. Lynn Smith (R-Newnan) requires additional notice provisions in automatic renewals in contracts. It exempts financial institutions and their subsidiaries from this additional regulation to prevent additional compliance burdens on the credit union industry.
  • PROPERTY COVENANTS: HB 175 by Rep. Dustin Hightower (R-Carrollton) codifies case law regarding property covenants (that they run with the land for 20 years), and was on the radar as it opened up possibilities for various property association interests who have continually sought to supersede the priority lien status of financial institutions. There were several late-breaking amendment attempts in the final days of the session, none of which would have impacted credit unions.
  • WeldonLIENS: HB 434 by Rep. Tom Weldon (R-Ringgold) codifies case law regarding materialmen's liens. This bill was prompted due to an outlier court case where a lien was limited solely to the physical improvement to the real property, and did not include the “soft costs,” as is typical in materialmen's lien case law. The Government Influence Team worked closely with the lobbyists pursuing this bill, and it passed without any undesired attempts on lien statues.
  • CONDO ASSOCIATION: HB 458 by Rep. Alex Atwood (R-Brunswick) increases the insurance deductibles held with condos from $2,500 to $5,000, and was monitored throughout the process to prevent any unwanted amendments by condo/homeowner association interests who seek to supersede the financial institution’s priority lien status to force foreclosing parties to pay back fees/fines. This bill passed “clean” without these negative amendments, after being watched closely.
  • SHORT SALES: HB 83 by Rep. David Knight (R-Griffin) corrects the regulatory opinion stating that if a real estate agent is involved in a short sale, the agent is guilty of a felony. This law reverses the regulatory language and allows the practice (that many real estate agents engage in presently) to be permissible. The bill had opened the section of law applying to financial institutions, but passed without any negative amendments on operational procedures, foreclosure practices, lending capabilities, etc.
  • IGNITION INTERLOCK: HB 407 by Rep. Alan Powell (R-Hartwell) was monitored as it opened up the section of law pertaining to ignition interlock devices. This bill passed without any amendments that would have been negative to credit unions’ “CU Fresh Start” or second chance auto lending programs that utilize such devices.

While the above are bills that passed, there are many issues that were actively lobbied on behalf of credit unions that carry over into 2014. These include attempts to change the foreclosure statutes, attempts to alter how successor creditors can purchase pools of loans, attempts to supersede the lien priority status of credit unions and other financial institutions, attempts to regulate how deficiency judgments are handled, and attempts to regulate how electronic benefit cards could be used. Stay tuned!

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OverdraftOverdraft Price Study: CUs Fees Rise
but Still the Best Deal

The national average price for overdrafts (ODs) on checking accounts rose to $30 as of June, matching the national average charged by banks the past four years. The cost of overdrafts has steadily risen since 2009, according to data from Moebs Services, a Chicago-area economic research firm specializing in financial services. The survey covered 2,906 depositories reporting fees as of June 2013 compared with OD fees reported six months previous in December.

Credit unions' average for 2013 is $28, one dollar higher than in December 2012, but still considerably lower than what banks have charged the past five years studied. Banks have charged an average $30 since 2010, when they increased the price from $29. Credit unions charged $25 from 2009 through 2011 before increasing the fees in 2012 to $27 (see related article below).

Nationally speaking, the Moebs report states, "Despite the increases by credit unions (the past two years), their OD fees remain $2 lower than banks, which is still a statistical difference. Credit unions' falling OD volume forces them to increase price to maintain revenue. Overall industry OD revenue fell in the first quarter to an annualized total of $31.1 billion," according to Michael Moebs, economist and CEO of Moebs Services.

Median National Overdraft Charge
Year 2013 2012 2011 2010 2009
Banks $30 $30 $30 $30 $29
$28 $27 $25 $25 $25
National $30 $29 $28 $28 $26
Source: Moebs Services Survey June 2013

How do Georgia credit unions compare? GCUA recently conducted a survey of Georgia credit unions, updating information first gathered in 2008. The survey found 82.6 percent of all responding credit unions offered OD protection programs to their membership. The results showed the smallest fee charged in 2013 was $20, while in 2008 it was $16. In addition, the highest fee assessed on OD increased from 2008 to 2013, from $20 to $40. A total of 38.4 percent of the respondents charging for OD protection/courtesy pay programs said they charged $30, and almost 24 percent of those charging said the fee at their credit union was $35. To view the 2013 updated figures, as well as the results from 2008, click here.

However, price may not matter as much as the frequency of the charge. CUNA believes the stated price of an OD fee is not a good indicator of the impact on users. A better indicator is how often the fees are assessed and the data in the Moebs report suggests credit unions impose the fee much less frequently than do banks ─ resulting in a lower dollar value of fees paid by credit union members than paid by bank customers.

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Large and small banksLower OD Fees Linked to Location, Size

The largest financial institutions have the highest price at $35 per overdraft while the Main Street community banks and credit unions have the lowest price at $25. “The consumer who either occasionally or frequently overdrafts save substantially by going to community banks and credit unions,” says Moebs. The Moebs study also showed:

  • Financial institutions $25 billion to $50 billion in asset size had the biggest price increase ─ from $30 in 2012 to $35 in 2013, a 16.7 percent increase.
  • The largest FIs had the highest price ─ an average of $35 for institutions in two asset categories above $5 billion in assets.
  • The fee was $29 in the $100 million to $500 million asset range, and
  • $25 for smaller institutions.
The survey also noted regional differences. Financial institutions in the West and Midwest had lower OD prices with a median of $29, compared with $30 in the South and East. To read more click here for the Washington Post article on the Moebs report.
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ReinsNew Commissioner Takes the Reins

On June 28th Governor Nathan Deal appointed Kevin Hagler as commissioner of the Georgia Department of Banking and Finance. Hagler is no stranger to Georgia credit unions. He has been with the department since 1997, has served as deputy commissioner for supervision at the Georgia Department of Banking and Finance since 2008 and was responsible for the department’s oversight of state-chartered banks, credit unions and trust companies. Prior joining the department, Hagler worked for SunTrust Banks in Atlanta, after getting his start in the banking business at Altus Bank in Mobile, Alabama.

GCUA is pleased Governor Deal moved quickly to appoint a new commissioner for the department of banking and finance. By choosing Hagler, the governor has chosen someone who has earned respect within the credit union system for being a fair regulator. Hagler has been open to discussion with credit unions and the state trade association, and uses a collaborative approach when evaluating state regulatory issues and dealing with credit union issues.

In light of Hagler’s appointment as Commissioner, Lori Godfrey has been appointed to fill the position of Deputy Commissioner for Supervision effective July 1, 2013. Prior to her appointment as Deputy Commissioner for Supervision, Godfrey served as the Director for Supervision since January 2011.

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Atlanta Business ChronicleCredit Unions,
Front and Center!

In the June 28th edition of the Atlanta Business Chronicle the credit union industry was highlighted in their Financial Quarterly section. In the lead article, the publication shared that credit unions continue to get stronger as the recession fades, and credit unions are in an excellent position to help people. GCUA CEO Mike Mercer highlighted precisely who credit unions help: “Credit unions serve 95 million people around the country . . . these aren’t the super wealth people, yet these are not the homeless people . . . the vast bulk of our business comes from the 80 to 85 percent of the middle class.” Credit unions are “more aligned with people’s interests” than other financial institutions, said Mercer.

The special industry focus section expounded on how credit unions are progressively helping others, touching on membership growth, lending programs, SEGs, technology and reaching out to the underserved to name just a few. Thank you to all the credit unions who shared their time and insight with the reporters:

  • Associated CU
  • Atlanta Postal CU
  • Baxter CU
  • Credit Union of Atlanta
  • Delta Community CU
  • Excel FCU
  • First Reliance FCU
  • Fulton Teachers’ CU
  • Georgia’s Own CU
  • Georgia United CU
  • Hallco Community CU
  • MembersFirst CU
  • Mutual Savings CU
  • Peach State FCU
  • Pinnacle CU
  • Platinum FCU
  • The Coca-Cola Company Family FCU
  • United 1st FCU

This special credit union section provided not only great visibility for these credit unions, but all credit unions among the legislative, business and consumer readership.

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Prepaid cardPrepaid Cards as Paychecks?

Home Depot and Walmart were highlighted by BloombergBusinessweek on July 2nd as companies being investigated by the New York attorney general over fees charged employees on prepaid cards used as paychecks. Those companies and others, which include Time Warner Cable and Darden Restaurants, were asked for information about their use of the cards, including disclosures to employees and any fees workers pay.

Bloomberg notes more companies are using prepaid payroll cards, according to a February 2013 report by research and advisory firm Aite Group. The firm said $34 billion in gross dollar volume was loaded onto 4.6 million active payroll cards in 2012. Aite Group said the cards are a “sales opportunity” for bank issuers, adding the cards can potentially generate revenue and new bank customers. A New York law requires employees give advance written consent before being paid with a payroll card. The attorney general's office wants a summary of fees paid by employees or deducted from accounts as a result of payroll cards.

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BirdsCompetition’s for the Birds – Literally!

Seen the new television ads for Bluebird? No, that’s not a new avian fad or a flock of retirees heading to Florida. Click here to learn more about the financial services product by Walmart and American Express that touts direct deposit, bill pay, and multiple accounts in a mobile app with no annual, monthly or overdraft fees, and no minimum balance requirements.

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Big banksNew Capital Rules for Banks
Prompt Lending Concerns

On July 9th, the Atlanta Business Chronicle reported the banking lobby contends the proposed stricter requirements for big banks may mean fewer loans. The proposed rule states that eight “systemically important” banks must have higher requirements to be considered well-capitalized. The rule, which would not go into effect until 2018, would require the eight banks to raise billions of dollars in additional capital.

But how will the rule impact community banks? On July 2nd the Atlanta Business Chronicle reported community banks are grateful to the Federal Reserve Board for trying to minimize the burden of new capital requirements, but they wish the Fed had just exempted them altogether from the new Basel III rules. Look here for details of the final rules. The Fed made several changes from its proposed capital rules in order to accommodate the concerns of smaller banks, such as in how the risks of residential mortgages are weighed, and how unrealized gains and losses and trust preferred securities are treated at community banks. Community banks also will get more time than big banks to meet the new capital requirements. This "tiered approach ... is essential to ensuring these new standards do not stunt access to credit in communities across the nation," said the Independent Community Banks of America in a statement released after the rules were adopted.

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