Credit Union Help - Job Losses & Income Cuts

The North Alabama area is not immune to the economic troubles taking place worldwide. Unemployment in our area is near 9%. School systems in the area have been forced to layoff employees, reduce hours, and reduce payroll expenses. There are members within the credit union from all types of employers, some that have experienced significant declines in their revenues.

The credit union realizes that bad things can happen to good people. Being laid off or having your pay reduced is traumatic enough. Worrying about how to pay back a loan is usually the least of concerns when you are trying to put food on the table or trying to keep a roof over your head. If you have a loan with the credit union and have experienced a financial set-back, please contact one of our Loan Officers to update us on your situation. There are deferred payments, loan modifications, payment reductions, and other assistance tools available. People are embarrassed at times about their situations and they shouldn't be. The credit union is here for a reason - to help our members with their financial needs.

I can't think of a greater financial need that providing assistance when a job has been lost or when income has been reduced. Talk to us and together we can work out a plan.

Small Loan Amounts Available

One notable difference that you see at credit unions is the availability of smaller loan amounts on new loans. Qualified members can receive new loan amounts of $100 or more. Most traditional banks require a minimum amount of anywhere from $1,000 to $2,500 borrowed on a new personal loan. Why is this? The small loan is not profitable to the bank. That doesn't mean much to a consumer who has a $150 repair bill and only needs to borrow $150. The difference here is that the credit union's purpose is not focused on profit. We are here to serve and assist our member-owners with their financial needs, however small or large that the needs may be.

This is a good example of a credit service designed to help the bottom line of the consumer, not the bottom line of the financial institution.

Letter to the Editor - Huntsville Times

Below is the text copy of a Letter to the Editor sent to the Huntsville Times on this date.

The Senate recently added an amendment to regulatory reform that will establish government price controls that will reduce a merchants’ financial responsibility for the payment network they benefit from every day. It’s called interchange; which are what merchants pay to credit unions like ours and other financial institutions for processing a debit card transaction

If passed, this amendment will have a negative impact for our credit union members, as well as millions of consumers in Alabama. The Senate did not hold any public hearings on this interchange provision or conduct any studies before voting, yet it passed anyway. That was a mistake that needs to be rectified before Congress completes its work on this bill this month.

At North Alabama Educator’s Credit Union, the legislation will mean that interchange will cover only a small part of the cost of providing debit card services. Interchange covers the costs associated with credit and debit cards — things like fraud, and identity theft. All of these risks are assumed by us so that merchants can accept debit cards. Not to mention the merchants get paid for the transaction very quickly, sometimes even the same day.

Interchange fees are part of the cost of doing business, much like postage and advertising and they certainly are less costly than returned check charges. While it is true the merchants are paying more in interchange, it is not due to raised fees, but more people are using their cards for everyday purchases. Someone has to pay for these fees, but it should not be the consumer. They like using their credit and debit cards, and it is a service we want to be able to continue to offer.

There is still time for members of Congress to strip out these harmful interchange provisions, which really have no relation to the regulatory or Wall Street reforms the bill is intended to address. Economic times are tough enough these days. Consumers should not have to incur higher costs or accept fewer financial services if this ill-conceived debit interchange proposal were to become law. Please let your lawmaker know you don’t agree with the interchange amendment associated with the regulatory reform bill.

Sincerely,

Greg Olmsted, Manager/President
North Alabama Educators Credit Union

Reverse Mortgages

It seems like there are quite a few commercials and advertisements lately for reverse mortgages. Members are encouraged to do extensive homework on this type of product before responding to the many offers targeted at senior citizens. Frankly, I see some red flags that seem very similar to the underwriting problems associated with the sub-prime mortgage crisis of the past few years. There is no analysis of a borrowers ability to repay. Income is not an issue. The government insures the majority of these loans. The strength of the loan is based upon the home valuation increasing over time. Sound familiar?

There are no payments on these reverse mortgage loans. That means that loan interest is accruing for years adding tremendous profits to the banks that offer these loans. Reverse mortgages just seem like another mortgage product designed for consumers who may or may not be able to afford the money they are borrowing.

There are many online resources on the topic of reverse mortgages. I encourage members thinking about a reverse mortgage to research these resources. The AARP has good information offering pro's and con's on reverse mortgages. Below is a link to a good New York Times article on the subject - http://www.nytimes.com/2010/04/17/your-money/mortgages/17money.html

Another good resource by the National Consumer Law Center that has some good examples of seniors who have been victimized by brokers for reverse mortgages: http://www.consumerlaw.org/reports/content/ReverseMortgages1009.pdf

Interchange Fee Update - May 27th

Earlier this year the House passed the Wall Street Reform bill, with no major concerns for credit unions. The bill in the Senate also did not directly impact credit unions, until Senator Richard Durbin’s (D-IL) Interchange Amendment was adopted on the Senate floor by a vote of 64 – 33. It is important to note that there were no hearings or public comment to provide an analysis of the probable financial impact to consumers as a result of the interchange fee amendment. The amendment requires the Federal Reserve to develop regulations to ensure that interchange fees are proportional to costs of the transaction, not the cost of operating a debit card program, which does involve considerable expense and risks. Although there is language to exempt issuers under $10 billion in assets, VISA and the other networks would have no incentive to create two pricing structures and even if they did, merchants may be able to discriminate against what would be the higher priced credit union cards. In addition, merchants would be able to set maximum and minimum limits on purchases by debit cards. For example, they could decide to not allow card transactions on amounts of $5 or less. Regardless of any exemption or carve-out for credit unions, this interchange language would be extremely detrimental to the ability of credit unions to offer debit cards without having to institute account fees and other anti-consumer measures to make up the loss in revenue.

Because the House and Senate bills are different, they have to be reconciled in a “Conference Committee” which is comprised of committee leaders from both parties from the House and Senate, about 20 – 25 members in total. They will put together a final bill called a Conference Report, which is then sent back to the House and Senate for an up or down vote, without amendment. Once passed, it goes to the President’s desk. Making necessary changes (removing this interchange fee provision) in Conference Committee is what credit unions are asking for.

The insertion of this Interchange Amendment into the Wall Street Reform Bill is puzzling. Credit unions are not Wall Street. Credit unions did not create the near financial collapse to the entire country that Wall Street firms did with their complex financial products. Credit union members want to have affordable, convenient access to their funds. Debit cards have been a great product for members because of the convenience, safety, and worldwide acceptance. Debit cards have also been a great product for retailers. How many retailers now have online stores that could have never increased their sales without the card payment system that they now complain about?

It has been said before and I will repeat it again here. The card payment system is not broken. The retailers are profitable, even more so because of the expanded sales opportunities created by online sales. We are asking Congress to leave the card payment system alone and drop the interchange fee amendment from the Wall Street Reform Bill.

I would encourage members to voice their opposition to Congress on the proposed changes to the current card payment system. A special toll free telephone line has been established to allow members the opportunity to contact Congress on this issue. The number is 1-877-223-5275.

NAECU - One of the "Good Guys"

Madison Magazine ran an article recently on the credit union and our office in Madison. We were very pleased with the positive message relayed in the article. In these uncertain financial times, it is nice to be part of the solution rather than part of the problem.

Check it out! http://madisonalmagazine.com/index.php/business/671-naecu

Action Alert Update - May 14th

The interchange fee amendment did pass in the United States Senate. We do want to thank our two Senators, Senator Richard Shelby and Senator Jeff Sessions, for voting against the amendment. Additional opportunities to oppose this interchange fee amendment will be available in the future. I thank those members who took the time to review this issue and contact Senator Jeff Sessions for his support on opposing the interchange fee amendment.