The Maine Credit Union League has launched a disingenuous “own it” awareness campaign.
The campaign focuses on stories of various credit union members.
For example, one story is about a credit union member talking about the benefits of of mobile banking and remote deposit capture and another story is about a business owner, whose business is open late and being able to run to his or her credit union's ATM at any time.
However, these stories are not unique to credit unions. I can go to my bank's ATM any day or night.
Moreover, these stories have nothing to do with owning their credit union.
Outside of having the right to vote and a claim to the residual, if the credit union voluntarily dissolves (which is very rare), what do credit union members really own?
As I pointed out in a September 2009 posting, they own very little.
Friday, February 6, 2015
Wednesday, February 4, 2015
CFPB Consent Order Identifies Illinois CU Contracting with Fee Harvesting Subprime Credit Card Company
The Consumer Financial Protection Bureau (CFPB) ordered Continental Finance Company LLC, a subprime credit card company based in Delaware, to refund an estimated $2.7 million to approximately 98,000 consumers who were charged illegal credit card fees.
According to the consent order, a credit union, which was not fined, contracted with Continental to issue fee harvesting credit cards.
The consent order notes that from at least April 2012 through December 2013, Continental contracted with a privately insured Illinois credit union for the credit union to issue credit cards on the Discover network: the Cerulean Card, the Matrix Card, and the Verve Card.
While the consent order does not name the credit union,my June 14, 2013 blog post identified the credit union as Services Credit Union in Naperville, Illinois.
Between approximately April 2012 and July 2013, over 290,000 cards were issued.
Under the agreements, the credit union issued the cards and immediately assigned the receivables to Continental for funding and servicing.
Once the credit union assigned its rights, Continental serviced the accounts from billing to collections, advanced all funds to consumers, and received all fees assessed pursuant to the cardholder agreements.
In approximately December 2013, the credit union terminated its sponsorship agreement with Continental. The credit union has not issued any additional Continental Cards since approximately July 2013.
What is missing from the consent order is how much this credit union was paid by Continental.
Read the consent order.
Read the press release.
According to the consent order, a credit union, which was not fined, contracted with Continental to issue fee harvesting credit cards.
The consent order notes that from at least April 2012 through December 2013, Continental contracted with a privately insured Illinois credit union for the credit union to issue credit cards on the Discover network: the Cerulean Card, the Matrix Card, and the Verve Card.
While the consent order does not name the credit union,my June 14, 2013 blog post identified the credit union as Services Credit Union in Naperville, Illinois.
Between approximately April 2012 and July 2013, over 290,000 cards were issued.
Under the agreements, the credit union issued the cards and immediately assigned the receivables to Continental for funding and servicing.
Once the credit union assigned its rights, Continental serviced the accounts from billing to collections, advanced all funds to consumers, and received all fees assessed pursuant to the cardholder agreements.
In approximately December 2013, the credit union terminated its sponsorship agreement with Continental. The credit union has not issued any additional Continental Cards since approximately July 2013.
What is missing from the consent order is how much this credit union was paid by Continental.
Read the consent order.
Read the press release.
NCUA Makes the Case for Bifurcating CU Industry
In its proposed risk-based capital rule, the National Credit Union Administration (NCUA) makes the case for two credit union industries -- one comprised of large, complex credit unions and the other made up of smaller, more traditional credit unions.
Analysis by NCUA found that the line of demarcaation is at $100 million in assets. All credit unions with over $100 million in assets are defined as "complex" and would be subject to the proposed risk-based capital requirement.
The NCUA Board believes there are a number of products and services offered by credit unions with $100 million or more in assets "that are inherently complex based on the nature of their risk and the expertise and operational demands necessary to manage and administer such activities effectively."
These products and services include member business loans, participation loans, interest-only loans, indirect loans, real estate loans, non-federally guaranteed student loans, non-agency mortgage-backed securities, derivatives, internet banking, and more.
NCUA notes that "as of June 30, 2014, all credit unions with more than $100 million in assets were engaged in the products and services listed above, with 99 percent having more than one complex activity, and 87 percent having four or more. On the other hand, less than two-thirds of credit unions below $100 million in assets are involved in even a single
complex activity, and only 15 percent have four or more."
NCUA points out that complex activities are always present once a credit union reaches $100 million in assets. That is not the case for credit unions with less than $100 million in assets.
The same argument can be made for taxing credit unions. Large credit unions are distinctly different from smaller, more traditional credit unions with regard to the products and services they offer and their level of complexity.
Analysis by NCUA found that the line of demarcaation is at $100 million in assets. All credit unions with over $100 million in assets are defined as "complex" and would be subject to the proposed risk-based capital requirement.
The NCUA Board believes there are a number of products and services offered by credit unions with $100 million or more in assets "that are inherently complex based on the nature of their risk and the expertise and operational demands necessary to manage and administer such activities effectively."
These products and services include member business loans, participation loans, interest-only loans, indirect loans, real estate loans, non-federally guaranteed student loans, non-agency mortgage-backed securities, derivatives, internet banking, and more.
NCUA notes that "as of June 30, 2014, all credit unions with more than $100 million in assets were engaged in the products and services listed above, with 99 percent having more than one complex activity, and 87 percent having four or more. On the other hand, less than two-thirds of credit unions below $100 million in assets are involved in even a single
complex activity, and only 15 percent have four or more."
NCUA points out that complex activities are always present once a credit union reaches $100 million in assets. That is not the case for credit unions with less than $100 million in assets.
The same argument can be made for taxing credit unions. Large credit unions are distinctly different from smaller, more traditional credit unions with regard to the products and services they offer and their level of complexity.
Tuesday, February 3, 2015
CU Signs Deal for Naming Rights to Minor League Baseball Field
The Washington Post is reporting that Frederick-based Nymeo Credit Union has inked a deal with the Frederick Keys for the naming rights to the city’s minor league baseball field.
The terms of the deal have not been disclosed; but a city-sponsored study in 2013 found that naming rights could bring in as much as $250,000 a year.
The city’s Board of Alderman still must vote to approve the deal.
Is buying the naming rights to a minor league field consistent with the tax exempt purpose of credit unions?
Read the story.
The terms of the deal have not been disclosed; but a city-sponsored study in 2013 found that naming rights could bring in as much as $250,000 a year.
The city’s Board of Alderman still must vote to approve the deal.
Is buying the naming rights to a minor league field consistent with the tax exempt purpose of credit unions?
Read the story.
CU Tax Expenditure Tops $25 Billion, FY 2015 - 2024
The Office of Management and Budget in its Analytical Perspective estimated yesterday that the tax expenditure associated with credit union income being exempt from taxation is $25.39 billion over the next 10 fiscal years.
Monday, February 2, 2015
Do Credit Unions "Rat" on the Industry's Bad Actors?
It is often argued that the financing structure of the National Credit Union Share Insurance Fund incents credit unions to monitor each other.
In 1997, the Treasury Department wrote:
However, with the exception of a few credit unions objecting to an expansion in the business lending authority for credit unions, there appears to be a dearth of evidence regarding credit unions raising the alarm about unsound or illegal practices of bad credit union actors.
For example, did any credit unions raise alarms prior to the financial crisis regarding corporate credit unions doubling down on their bets on risky mortgage-backed securities?
Did any credit unions point out to their regulators the risk associated with Norlarco CU (CO) or Huron River Area CU (MI) making speculative residential loans outside of their market areas in Cape Coral (FL)?
I suspect not.
While credit unions probably know who are the bad actors in their industry, the concept of credit unions squealing on bad actors is probably a modern myth.
In 1997, the Treasury Department wrote:
"Because their 1 percent deposit is at risk when other credit unions fail, and because the Share Insurance Fund may have to levy additional assessments on surviving credit unions, credit union managers have an incentive to alert federal regulators to unsound or illegal practices at other credit unions. Although credit unions cannot directly prevent excessive risk-taking by other credit unions, they can report undesirable practices by other credit unions to regulators, who can take remedial actions."
However, with the exception of a few credit unions objecting to an expansion in the business lending authority for credit unions, there appears to be a dearth of evidence regarding credit unions raising the alarm about unsound or illegal practices of bad credit union actors.
For example, did any credit unions raise alarms prior to the financial crisis regarding corporate credit unions doubling down on their bets on risky mortgage-backed securities?
Did any credit unions point out to their regulators the risk associated with Norlarco CU (CO) or Huron River Area CU (MI) making speculative residential loans outside of their market areas in Cape Coral (FL)?
I suspect not.
While credit unions probably know who are the bad actors in their industry, the concept of credit unions squealing on bad actors is probably a modern myth.
Sunday, February 1, 2015
Two CUs Buy Air Time During Super Bowl
Credit Union Journal is reporting that two large credit unions are spending big to attract attention during the Super Bowl.
BECU, a $13 billion institution in the Seattle suburb of Tukwila, Wash., and $8.8 billion The Golden 1 CU, Sacramento, Calif., will run television commercials during Sunday's Super Bowl.
Both credit unions will have 30-second commercials air during local breaks.
I don't know how much these television ad buys will cost; but I figure that these ad buys must be expensive.
This begs the question -- is this the right use of the credit union tax exemption?
Read the story.
BECU, a $13 billion institution in the Seattle suburb of Tukwila, Wash., and $8.8 billion The Golden 1 CU, Sacramento, Calif., will run television commercials during Sunday's Super Bowl.
Both credit unions will have 30-second commercials air during local breaks.
I don't know how much these television ad buys will cost; but I figure that these ad buys must be expensive.
This begs the question -- is this the right use of the credit union tax exemption?
Read the story.
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