Thursday, May 23, 2019

Current Expected Credit Losses (CECL): How it Could Impact YOU

Have you ever been presented with a solution in search of a problem? The general outlook for most people is if it isn't broke, don't fix it. The Financial Accounting Standards Board (FASB) several years ago decided that the method by which all financial institutions reserve funds for loan losses needed to be changed. The current method of reserving funds for loan losses is historical, meaning it looks at loan losses of the past and applies that loss ratio to similar loan pools on hand now. Sounds reasonable, right? It should also be noted that financial institutions in general, especially credit unions, have not suffered any major problems with adequate funding of reserves for loan losses under the current system.

FASB has decided, on their own, that a new method of reserving for losses called "Current Expected Credit Losses (CECL) would be a better method for providing a more accurate picture of a financial institution's balance sheet to potential investors or anyone evaluating a particular institution. When implemented, a credit union would have to immediately incur an expense to the allowance account (a reserve fund for loan losses) when a new loan is funded. This would be before any loan interest is collected on that loan or before a first payment even has the chance to be delinquent. The allowance amount to be funded would be the "expected" total loss of that new loan. Again, no income will have been earned yet before the credit union is being asked to incur expense for funding a loan. Seems a bit backwards, doesn't it? Crystal balls are also not readily available so determining a future loss is largely reliant on what we use now, past loss history of a loan type.

What could be the negative impact of CECL on consumers? Some institutions could limit lending to higher credit risk members who have lower credit scores. The cost of that credit will also likely rise to offset the added expense of immediate funding for a loss that may or may not occur. Our delinquency rate by the way is consistently less than 1% of our total loans to members so delinquency is not a huge problem now. Members with lower credit scores need access to credit just like everyone else does. CECL could greatly impact a credit union's ability to serve the very members that we exist for. It is generally accepted that most credit unions will see more expense to their bottom line using the CECL method versus our current allowance for loan losses method.

Unless further delays are enacted, CECL funding requirements will be required of all institutions by the fiscal year after December 15, 2021. Significant expense resources are also being utilized to insure that data systems are in place to support and comply with CECL prior to the implementation date. All these adverse impacts for a solution to a problem that never existed. North Alabama Educators Credit Union is proceeding with CECL models for consideration/testing and use by the required date in accordance with what the regulation will require.

There is a Senate bill in Washington, DC to delay implementation of CECL to study the possible negative effects on consumer credit. Senator Thom Tillis of North Carolina introduced the Continued Encouragement for Consumer Lending Act (S. 1564) earlier this week.

Thursday, September 6, 2018

Caller ID Spoofing Fraud

Local credit unions combined forces to produce a Public Service Announcement (PSA) on the growing Caller ID Spoofing problem going on throughout the country.

Here is a link to the PSA video: CLICK HERE

Basically, Caller ID as a reliable technology is dead. Do not rely on Caller ID as a verification of who is calling you. Caller ID can be tricked to show any number that the caller wants, such as a financial institution or government agency.

Credit unions have spent decades of building trust with our members and scammers are abusing that trust with Caller ID Spoofing. NEVER give out personal information on an unsolicited call regardless of who is supposedly calling you. Scammers are trying to gain the 3-digit security code on the back of your credit or debit card. Don't do it!

Thursday, May 31, 2018

Video Surveillance

All financial institutions will employ a variety of video surveillance equipment throughout the offices of each operational location. Video recording is taking place both inside and outside of our offices. This video is there to document a number of events taking place over the course of a given workday. Video is capturing vehicle and pedestrian  traffic as they come and go from our parking lots. This capability has assisted the credit union in cases of vehicle accidents, property damage to our buildings, personal injury falls, and fraud and/or crimes to document vehicles being driven. Several years ago our main office was robbed and we were able to capture images of the getaway vehicle that dropped off the robber before the robbery.

The outside cameras have helped while we are closed also to document storm damages or criminal activity taking place on our lots after hours. Police departments often review our outside video coverage for events that have taken place near our offices.

Once an individual steps into one of our offices, there are numerous cameras throughout the building that will capture different angles of people coming and going. This is why we ask that hats and sun glasses be removed. If you've ever seen robbery suspects the vast majority have hats and sun glasses on to help disguise their appearance. We once had one of our credit union members walk in with his full face motorcycle helmet on while doing a transaction at the teller window. When I saw this live on my office monitor I immediately went to verify that all was ok but to also counsel that member to never to do that again. We have tellers who have been involved in robberies and they do not need scary situations being presented to them in the course of their daily jobs. Our cameras at the teller lines have helped to document disputes over money exchanges and service. Video is pretty honest and comes in handy often.

Video surveillance is there for both your protection and that of the credit union employees.

Friday, March 30, 2018

Con Artists Taking Advantage of Western Union Settlement

If you were a victim of a scam between January 1, 2004, and January 19, 2017, and used Western Union’s money transfer system, you are able to file a claim to get your money back.
However, scammers are now trying to take advantage of this settlement to scam you again!

They will send an official-looking email about the Western Union settlement and ask you for information about your transaction, along with your name and ad...dress. The thing to know is that you cannot apply for a refund by email. These emails are scams. Do not respond and do not give any information.

Better Business Bureau offers tips on how to submit a claim:
· Go to for more information and to file your claim. The deadline is May 31, 2018. · Only the amount you transferred via Western Union is eligible for a refund. Other expenses like Western Union fees, other losses, or transfers sent through other businesses are not eligible for a refund.  · If you sent money to a scammer via Western Union and don't have paperwork related to the transfer you may still be eligible for a payment.

If you have already applied for a refund and you get an email about it, call Gilardi & Co., the claims administrator, at 1-844-319-2124.

If you have not yet applied for a refund and get an email asking you to apply for one by responding to the email, please tell the FTC.

Source: and Federal Trade Commission: United States Federal Trade Commission, - not subject to copyright protection. 17 U.S.C. 403.

This tip provided by the BBB of North Alabama.

Friday, September 22, 2017

Equifax Data Breach - What Should You Do?

There was a national webinar held yesterday on 09/21/2017 where over 1,300 credit union security members from across the country received information and suggestions related to the recent Equifax data breach. The webinar was frankly a sobering several hours. This data breach is far worse than any so far since it impacts 143 Million consumers. Basically anyone who has a credit report on file with Equifax is included in the data breach. What is most concerning about this data breach is that the data stolen is a treasure trove of all the most critical, personal information. Names, addresses, birth dates, social security numbers, employment information, and in some cases, driver's license information. 

With this information, a data thief could create account relationships of all types. Deposit accounts, loan accounts, rental agreements, medical insurance, and others could all be fraudulently created. 

Scary stuff for sure and a helpless feeling for many consumers. What should consumers do?

Access to the credit file must be restricted to avoid use by a criminal. Restricting that access can either be done by a credit freeze or a fraud alert. 

A credit freeze is when the consumer establishes a block on their credit report where nobody can access their file. The consumer establishes a PIN that only they know. To unlock that credit file the consumer must log into the credit bureau site and provide that PIN. There normally is a cost for a credit freeze but given the scope of this massive potential for identity theft, hopefully any costs will be waived for a period of time. It is VERY IMPORTANT for anyone using the credit freeze to secure their PIN in two separate secure locations. Consumers who lose their PIN will have a difficult time getting their credit file unlocked. A credit freeze must be placed by the consumer on each of the credit bureau agencies.

A fraud alert may be preferable since the credit file could be obtained but no action would be available/legal unless the consumer was notified by the established contact number listed in the fraud alert. The fraud alert is intended for identity theft victims. The fraud alerts typically expire ever 90 days, unless the consumer is a direct identity theft victim and then the fraud alert is good for 7 years. In my opinion, Equifax has just created 143 Million identity theft victims so hopefully the 90 day period will be extended for all new fraud alerts added because of this data breach. Another good aspect of the fraud alert is that it only requires the consumer to notify one credit bureau which then contacts the other credit bureaus to file on their reports also. 

Credit monitoring services are also recommended to alert consumers to activity involving their credit report or personal identification. Utilizing the various account alerts on deposit and credit accounts is also recommended to keep a close eye on any unusual activity that might take place. 

Consumers and financial institutions are going to be dealing with an elevated risk of identity theft concerns for many years as a result of this Equifax data breach. Consumers are encouraged to visit the various credit bureau sites below for specific information and steps to better secure your personal credit file(s). 

For those without Internet access, Equifax has a dedicated incident response number of 1-866-447-7559 with hours of 7:00 AM to 1:00 AM, everyday including weekends.

Friday, August 25, 2017

Federal Reserve to Begin Same Day ACH Debits on 09-15-2017

A big change is coming on 09-15-2017 that will affect those consumers who have been using a bit of "float" time on their checking transactions. In the past, consumers have written checks on the day that they will be paid that night. Payrolls and other direct deposits that post in the evenings are being posted for recipient access by the following business morning. In the past, these checks written would never be presented for payment in the same day unless a merchant physically brought the check to the financial institution. That all changes on 09-15-2017. The Federal Reserve will then be processing same day Automated Clearing House (ACH) debits several times during each business day. This means that a check written at 10:00 AM could be presented electronically to the financial institution for payment that same afternoon. This only applies to those merchants who will convert checks written to an ACH debit as a means of receiving their money. The big box retailers will most certainly do this but smaller, local merchants probably will not at least not at the beginning of this change. 

This will also apply to any debit authorizations given over the telephone or Internet. If you authorize a debit from your account with a merchant that morning, it is possible that your checking account will be debited that afternoon for the transaction amount. Again, there is a cost for a merchant processing multiple debit files throughout the day so not all merchants will utilize the availability. 

The problem for consumers is that they will not know which merchants (1) Convert written checks to ACH debit drafts, and (2) Process multiple debit authorization files throughout the day.

The best advice is to maintain a practice of only authorizing transactions on your checking account for funds that are already in place within the account, or available from an overdraft source. Legally, funds are already supposed to be in the account at the time of the transaction. Online home banking, mobile apps, and audio response systems are all available to verify available balances before transactions are performed. 

Please remember that this same day ACH debit change is coming from the Federal Reserve and will affect all financial institutions. Also know that same day ACH credits (deposits) began a year ago to speed up deposits coming into accounts.

Friday, June 23, 2017

Why North Alabama Educators Credit Union?

Consumers have many choices out there, so why choose North Alabama Educators Credit Union (NAECU) for financial services? 

To begin with, we're a credit union. The financial structure of a credit union means that you as a consumer will receive a better overall benefit. NAECU is owned by our 10,200+ members and governed by our nine volunteer board members who are mostly either current or former employees of a school system. There are no outside investors from other states or countries making decisions that impact our local member-owners. NAECU is a "not for profit" entity so our objective is to maintain safety and soundness reserves while returning all other profits back to our members in the form of lower loan rates, higher savings rates, and much lower fees than traditional banking institutions. An example of this would be our low cost, low dollar loans of $500 or less that traditional for profit institutions are not interested in since they do not produce enough profit. Again, profit is not a primary motivator with a credit union. 

Being a mid-sized credit union at roughly $90 Million in Total Assets, NAECU has the ability to offer many of the same popular electronic services as the big multi-billion dollar institutions such as home banking, bill payment, mobile App, remote check deposit through SPRIG, debit card controls through our MobiMoney app, online loan applications by phone or tablet, and a Surcharge Free ATM locator App to find one of over 28,000 ATM's available. The big difference is that our members can actually speak with our staff and management about any issues or problems that need to be resolved. It is rare for account holders of the big regional banks to be able to speak with the CEO on an inquiry or problem on their account. As the CEO of NAECU my job is to work for our members so I am always eager to meet or speak with any of our members and do so quite often over the course of each week. Our staff has the time to be more friendly and helpful during member visits, something not always available at the much larger institutions where long lines tend to promote speed over service. 

There is nothing wrong with being members of multiple credit unions. Each credit union, regardless of their size, operate under the same "not for profit" structure. Each credit union offers different strengths that may change over time. Consumers benefit when they compare services available to them. It is our job at NAECU to offer the best services at the best prices whenever possible, recognizing though that we have to manage the balance sheet of our member's deposits and loans in the process. Our auto loan rates remain some of the most competitive in the area because our balance sheet right now could use more loans rather than deposits. It's not a bad thing but indicative of how pricing and availability of services takes place. Every credit union needs borrowers AND savers. 

NAECU has been around since 1955 and is still going strong. How many institutions can you think of that have been merged or sold in the last 10 years? One of the business models of small community banks is to build a customer base and then sell that bank, plus their customers, to a larger regional bank. The customers don't benefit from those acquisitions but the bank investors sure do. NAECU is the most local type of organization you can think of since the vast bulk of our member-owners live and work right here in the Tennessee Valley. 

It sounds corny but the primary objective of NAECU is to help improve the bottom line of our member-owners above our own. Ownership does have benefits. It is the difference between being a member of an organization that works for you versus being a customer of an organization that needs you to produce income for the real owners, the investors.