State Farm Insurance Case

Today we were notified by State Farm Insurance that they would not pay anything on a claim that we had filed regarding a repossessed vehicle that had physical damage prior to our possession of the vehicle. The Credit Union was properly listed as a loss-payee with State Farm Insurance as required by all borrowers who have a collateral loan with the Credit Union. The Credit Union contacted State Farm Insurance as soon as the vehicle was repossessed since the damage was actually causing further water damage from rain. The State Farm Insurance claim agent stated that "we needed to sell the vehicle first" before any claims would be possible. If a loss existed after the sale of the vehicle we then could file for a claim, but not before. Other insurance companies by the way do not require us to sell a damaged vehicle "as is". What is the purpose of insurance if you can't have a vehicle repaired BEFORE you have to sell it? Makes sense right? It also makes sense that the probable pool of interested buyers will be fewer and the value of the vehicle will be less with physical damages that have not been repaired.

Needless to say the vehicle sold for less than what the borrower owed on the vehicle. That was pretty much expected. The borrower is responsible for any deficiency balance that remains after the sale of a repossessed vehicle unless the borrower has filed bankruptcy. To reduce that amount owed to the borrower, the Credit Union filed a claim (as instructed by State Farm Insurance) on the loss that remained following the sale of the vehicle. We expected to have to pay the deductible in force and and would receive the difference from State Farm Insurance. Now State Farm Insurance is saying that they will not be paying anything towards this claim, stating that "a loss does not exist".

This is just bad business. Insurance companies are notorious for taking premiums but then being less than enthusiastic about actually paying a covered claim. This is also a bad situation for the member who had their vehicle repossessed. They will now owe a remaining balance on a vehicle that they do not own. Had State Farm Insurance covered the damage claim prior to sale of the vehicle there is no doubt that the remaining loan balance would be much smaller and possibly paid in full in this case. The Credit Union is reviewing our legal options in this case. We will also be encouraging the credit union member to pursue their own legal options against State Farm Insurance since the actions of the insurance company greatly contributed to the deficiency balance that still remains after the sale of the vehicle.

The Credit Union will have no choice but to review our options for insuring adequate protection of our collateral loans. If the Credit Union determines that this claim incident is the normal standard practice for State Farm Insurance or any other insurance, the Credit Union has a right to restrict which insurance companies will be acceptable for our collateral loans.

0.00% Financing Myth

Is 0.00% auto loan financing always the best deal? Maybe not.

Consider the following example;

Saw a manufacturer’s offer of 0.00% financing or $3,000 off the price of the car. Which is better for the consumer? Consider a $23,000 vehicle;

$23,000 financed at 0.00% interest for 60-months would be $383.33 monthly. (Total of payments = $23,000)

$20,000 financed at 2.75% interest for 60-months would be $357.14 monthly. (Total of payments = $21,428.40)

A credit union member financing that vehicle with the credit union at 2.75% (assuming they qualified for that rate) would save $1,572 over the loan period.

Lending rates are already low now so a 0.00% rate does not offer the savings that most people think it would when compared to a decent rebate or price discount.

Another big advantage here is that the consumer would have equity in the car and be in a much better position if they totaled the vehicle or needed to sell within a few years. The key with any major purchase is to compare all available financing options and review the differences.

Scams on the Rise

There have been multiple blog posts on the subject of scams and fraud. Unfortunately, the weak economy is good at producing a steady stream of financial scams targeted towards consumers. It is extremely important to see the warning signs of a potential scam.

(1) Do you know who you are dealing with? Dealing with strangers over the Internet, phone, or text regardless of what they promise is never a good idea. Con men are called that because they try to obtain your "confidence" in their offer. Scammers will lie, cheat, and steal their way to your pocketbook if you let them. If someone claims to be from your financial institution, verify that they actually work there by calling a published number that you can locate yourself.

(2) Does it seem like easy money? The old phrase of "does it sound too good to be true?" applies here. If you never entered a lottery it would make it very difficult to actually win one. Real sweepstakes and lotteries also do not require winners to pay upfront costs to receive their winnings. A job or investment opportunity that promises easy money should be scrutinized closely. Any checks received can be verified as legitimate before they are negotiated. Ask your financial institution before negotiating any such items if they can help. Never provide your personal account information to receive winnings or a deposit from a stranger. Money can go out as easily as it comes in!

(3) Is there some urgency or secrecy to the request? If a stranger is trying to lure you into a decision because time is running short, that would be a huge red flag. Asking for your secrecy in a transaction is also a warning sign and could point to possible illegal activity taking place. If the urgency for action is supposedly related to one of your financial accounts, verify with your financial institution that a problem actually does exist. Financial institutions will never ask you for personal information on a call or contact made to you.

Consumers are ripped off every year by scams. Individual losses can vary from a few hundred dollars to hundreds of thousands of dollars. The Internet is a great place to research possible scams that are presented for consideration. As an example, typing in "secret shopper scam" in a Google search will provide a considerable number of hits and actual examples. Everyone should take the time and effort to research questionable claims and offers. A few minutes of research can prevent years of heartache over a financial loss that could have been prevented.

Payday Lending

The Payday Lending industry has experienced tremendous growth over the past few years. Part of that growth can be attributed to the downturn in the economy. Consumers are running out of money before their next paychecks arrive. Payday Lenders are convenient with extended hours, many locations, and a streamlined process that provides short term cash in a quick manner. A recent seminar speaker recently cited that there are more Payday Lenders out there than McDonald’s restaurants. Payday Lenders are a legal business like any other lender and they fully disclose the fees and charges associated with their services. The cost may be high for obtaining cash from a Payday Lender but the owners of these establishments are correct in that they are not tricking or disguising their fees. The average fees for a short term loan (2-weeks repayment term) from a Payday Lender are $15-$30 for every $100 borrowed. That equates to an average of 391% to 780% Annual Percentage Rate (APR) cost. Again though, this cost is clearly disclosed on the loan agreements from these Payday Lenders. Consumers who rollover these high cost loans continue to pay these high fees over and over again to a point where the initial amount borrowed is a small fraction of the total amount owed. It often becomes a vicious cycle every pay period where the financial hole just grows larger and larger.

Some would ask why would anyone borrow money at a rate of 391% APR and higher? Some consumers feel they have no other options because of bad credit history. Some consumers feel embarrassed and don’t want their banking institution to know about their financial situation. Some consumers are just unbanked and don’t trust financial institutions. Most obtain these “short-term” loans from Payday Lenders with the full expectation that it will just be a one-time use. The problem is that financial needs continue to pop up and the easy fix is to go back to the Payday Lender.

The key to escaping the financial hole is to realize that there are other options. The credit union has loan options that do provide money to provide short-term funds or payoff these Payday Lender loans. Our Fresh Start Loan for weak to poor credit consumers can provide up to $500 at a much lower loan rate than a Payday Lender, 18% APR versus 391% APR and higher. Credit union members should also not feel embarrassed to come to the credit union for help. That is what we are here for. We are familiar with these Payday Lenders and will do all that we can to end the money pit cycle. It is important to note though that consumers need to do their part also in changing some of their spending habits and working with a financial budget to reduce the possibility of financial stress. Disposable incomes are tighter now more than ever they say so having a plan and sticking to that plan is essential. It’s not easy by any means but the credit union has resources to assist our membership. 

Protecting your Mobile Devices

Smart phone and iPhone usage continues to increase as consumers recognize the many benefits of mobile communications. Consumers can conduct a wide array of transactions on their mobile phones. Mobile phones are now tied to your money in many ways so it is important to protect your cell phone as you would your purse or wallet. Create a PIN code to access your phone. Place a small label on the back of the phone with your contact information so that you could be contacted if you ever lost your phone. Avoid the “remember my password” option in connection to financial accounts, email, and shopping applications. Everyone should have the contact number for their phone service provider handy so that their lost or stolen phone can be disconnected in a timely manner if necessary. If a thief had possession of your phone, what could they do with it? That is the question that every mobile phone user should be asking. There was a recent news story where smart phones and iPhones were purposely left for others to find. A high percentage of those finding the phones were accessing applications on the “lost” phones. These applications included home banking, email, photos, and downloaded files. If common citizens would access this type of information, imagine what a mobile phone thief would do in a short amount of time?


The future of mobile phones will only enhance the need for device security. Mobile phone devices are expected to become the primary payment system of the future, replacing debit and credit cards. Consumers should begin thinking about their mobile devices in the same mode as they would cash. Protect your identity and money by properly securing your mobile devices.

Robbery of Main Office Location

Our main office location was robbed on Friday, May 18th just after 3:00 PM in the afternoon. There was just one robber involved in the robbery that involved a note demanding money from one of our tellers. The good news is that no employees or members were injured during the robbery and the robbery suspect was apprehended on May 20th. Our credit union staff did a tremendous job of remaining calm and securing the crime scene following the robbery. Multiple security video sources have been utilized in documenting the robbery and the actions of the robber before, during, and after the robbery. The evidence in this case is very strong and we feel confident of a conviction of the suspect in custody.

We are extremely thankful for the actions of the Huntsville Police Department and the Federal Bureau of Investigations in this case. We also are very appreciative of the many members and friends within the community who were concerned for our safety and well being after the robbery. Robberies seem to be increasing throughout the community. The security of our employees and members is our primary objective. Overall security measures are being evaluated as a result of this robbery.

Any robbery can be a scary event for the victims involved in the robbery. Our impacted staff have received counseling to deal with the emotional issues that can develop from a robbery event. Additional counseling sessions will be available going forward.

We are very thankful for the outcome of this particular robbery. No one was injured, any money lost was insured, the robbery suspect was apprehended, and the criminal case is expected to produce a conviction. This is the best possible outcome from a robbery incident.

Many Uses for VISA Gift Cards

VISA Gift Cards have been gaining in popularity because of the many uses of the prepaid cards. Most people think about VISA Gift Cards as a universal gift for the many occasions that take place over the course of a year. Birthdays, graduations, weddings, Christmas gifts, anniversary's, and house warming events are all applicable uses for VISA Gift Cards when given as a gift.

Consumers are beginning to realize the value of VISA Gift cards though for a variety of reasons that can help themselves. More and more travelers are purchasing VISA Gift Cards since the cards are accepted anywhere that accepts VISA. Parents are using these cards as a safety net for children going off to school or being away from home from a short time. These VISA Gift Cards are great for Internet purchases which prevents exposing your own credit or debit card numbers in online data bases. Internet usage of the VISA Gift Cards is available with a simple online registration process for the card. Another growing use of VISA Gift Cards by consumers is using the prepaid cards to prevent unwanted overdraft fees on their checking accounts. If members get into financial trouble with overdrafting their checking accounts with their checkbook or VISA Debit Card, purchasing and using a VISA Gift Card will eliminate overdraft fees since you can only spend what is available on the card. Members who have lost and reordered a new VISA Debit Card can also benefit from a prepaid VISA Gift Card during the interim time it takes to receive the new VISA Debit Card.

There are obviously many beneficial uses of VISA Gift Cards. All offices of North Alabama Educators Credit Union sell VISA Gift Cards for a price of $2 per card. The cards can be loaded with prepaid amounts of $10 up to $500 per card.

Low Rates on Deposits

Most credit union members are aware that deposit rates have remained low for some time now. The Federal Reserve overnight target rate has been 0.00% to 0.25% for an extended period of time and is not expected to change until 2014. Investment options available to the credit union on our investments remain low, especially given the fact that the credit union's investment portfolio remains conservative for the safety of our membership.

North Alabama Educators Credit Union saw an increase in total assets during 2011 of roughly 7.00% which was the outcome of members bringing their deposits to the credit union. The flip side of our balance sheet is loans and investments. Loans to members saw a decrease of roughly 2.00% during 2011 which can be attributed to a weakened economy and reduced loan demand throughout the industry. Ideally, a credit union wants to maintain a fairly matched level of new deposits and new loans. The investment market remains low as stated earlier so loans to members is the preferred usage of money that comes into the credit union from deposits.

What does this mean to our credit union members? Unfortunately it is a good time for borrowers but a bad time for savers. Our loan rates are already low and will be dropping further on various loan programs. Our deposit rates on regular shares, super shares, certificates, and IRA's are lower than other financial institutions for the time being. We would encourage our members to compare available offerings on certificates maturing with North Alabama Educators Credit Union. We want our members to earn the most that they can on their hard earned dollars.

As the economy and loan demand improves over time we fully expect to offer more competitive rates on our deposit accounts. The credit union is a financial cooperative so deposits and loans go hand in hand. Longer term members might remember an old credit union phrase of "nobody borrows until somebody saves". These days the opposite is true as credit unions are seeing an influx of deposits combined with the flat or negative growth in loans. This current trend will change over time as economic cycles always do.

Public Deposits - Letter to the Editor

The Huntsville Times published my "letter to the editor" this past weekend. I appreciate the newspaper publishing this submission. Below is the text of the letter;

Rep. Mike Ball and Sen. Bill Holtzclaw have filed bills in the House and Senate that would allow credit unions to become qualified public depositories. HB 315 and SB 299 seek to give credit unions the ability to accept public deposits, providing municipalities such as fire departments, schools, libraries, and local government entities a choice in where to put their money.

There is no legitimate reason credit unions should be prevented from being public depositories. Municipalities deserve the right to choose where to deposit their money. Credit unions are locally-owned and federally insured. Credit union profits get returned to the membership through lower fees, better loan rates, and better returns on deposits. Permitting credit unions to compete for deposits not only helps keep bank savings rates higher, it creates flexibility for municipalities and the opportunity for higher yields on the public deposits.

At a time when local and state government are tightening their budgets to find effective ways of managing public money, credit unions should not be forced to turn them away. This legislation is about choice – and the choice should be in the hands of municipalities working for the public, not in the hands of banks working for themselves. Thirty-three other states allow credit unions to accept public deposits, it’s time Alabama gives its municipalities a choice.

Sincerely,

Greg A. Olmsted, President/CEO
North Alabama Educators Credit Union

Children Away at College?

Parents with children attending college away from home know the difficulties of transferring money to their child for unknown expenses. College students also receive checks for a variety of reasons while at school. How can the parent and college student stay connected financially when they live far apart from one another?

North Alabama Educators Credit Union has a solution to meet a variety of financial needs for students attending college away from home. The Credit Union Service Center (CUSC) network provides over 4,400 branches nationwide where a member can transact basic transactions like deposits, withdrawals, loan payments, and check cashing services. For example, college students attending the University of Alabama and Auburn University have a branch nearby that is available for these type of transactions. Best of all, the branch access is free of charge.

A parent or guardian could deposit money into the student's account here in Huntsville and the student could withdraw the money from the CUSC location close to the school. If a student received a check for some reason at school they could deposit that check at the CUSC location as well. Again, these transactions do not have a charge which is better than withdrawing money at another financial institution's ATM that might have a hefty surcharge fee for a withdrawal. North Alabama Educators Credit Union is a member of the CO-OP ATM network which provides over 28,000 ATM's nationwide for free cash withdrawals.

Most college towns have a CUSC location nearby since most colleges and universities have a credit union nearby. To search for available CUSC locations, visit the online site at http://www.cuservicecenter.com/. The cooperative nature of credit unions working together to provide this expanded branch access is a valuable benefit for credit union members.

Fake Checks

Fake checks continue to circulate throughout the country. How can you spot a good check from a bad check? Not easily. The technology of printers today allow thieves to print off good copies of legitimate checks. This is why check holds on deposits are much more common now.

The best method of identifying a possible counterfeit check is by looking at the reasons on why the check was received in the first place. Strangers don't send checks for thousands of dollars to other strangers for no reason. If a check recipient is asked to send part of the check proceeds back to the stranger for any reason, there is a 99.9% chance that the check is a counterfeit item. Mystery shopper programs, sweepstakes and lottery contests, inheritance gifts from long lost (and unknown) relatives, payroll processing job offers using a consumer's personal account, and Internet sales where the buyer sends more than is needed for the purchase price are all examples of scams involving counterfeit checks.

Victims of these scams often say later that they had a bad or uneasy feeling about the fake checks being negotiated. They convince themselves though that the official check and overnight mail package could only have come from a "legitimate" entity. These same victims also refer to official looking websites and mail correspondence that looks like the real thing. Criminals can copy and reproduce anything. They try to build confidence in the victim's mind that the offer being presented is the real deal. Sadly, greed is also a contributing factor to many of these fake check scams as the victims are promised easy money for their efforts.

Don't be a victim. Ask your credit union or financial institution to research the item and be sure to provide all information about how the check was received. Depositing a counterfeit check item is a crime so be sure that all check items are legitimate BEFORE they are deposited.

The website below provides excellent resources and information regarding fake check scams;
http://fakechecks.org/

Scholarship Money from NAECU

Our annual scholarship contest is underway with $1,500 being available for our 1st place winner and $750 being available for our 2nd place winner. The scholarship application is available at any office or online at the link provided below. The deadline for submitting the completed scholarship application is Monday, April 2, 2012. (The form states April 1st but since April 1st falls on a Sunday we will accept applications through the following day).

The essay portion of the scholarship this year will be a typed essay of at least 250 words on "How can financial institutions improve their value to consumers?".

We would encourage our members who are graduating high school this semester to apply for the available scholarship money. Keep in mind that all students of public or private schools in Madison, Morgan, or Limestone Counties are eligible for credit union membership with North Alabama Educators Credit Union.

Best of luck to all scholarship candidates! Here is the credit union page for additional information and the scholarship application;

http://www.naecu.org/news/scholarship.html