e-Weekly

June 8, 2011

Credit Unions focus on Fed as interchange delay fails in Senate
Credit Union National Association (CUNA) President/CEO Bill Cheney said Wednesday, June 8, that the U.S. Senate's failure to delay implementation of the Federal Reserve's (Fed) debit card interchange fee cap is deeply disappointing and CUNA and credit unions will continue pressing the Federal Reserve to improve the proposed rule to minimize negative effects on credit unions and their members.
 
In the Senate vote, credit unions won the majority of votes when the Senate weighed in on an amendment--54 in favor and 45 against--to effect a delay and require an impact study of the interchange cap and the small-issuer exemption. However, to pass the amendment needed a total of 60 votes in favor.
 
Promptly after the Senate vote, CUNA sent a letter to all Fed governors to reiterate several recommendations that could help insulate small issuers from the negative impact on their income that many fear will be the result of the Fed's current proposal. Among the actions Cheney suggested:

• Establish a monitoring process under which the card networks would first report to the Board that a two-tiered structure has been established and then report annually on how such a two-tiered system is working, and also provide that information to Congress;
• Include all allowable and reasonable costs in setting the cap on interchange fees; and
• Revise the proposal regarding routing and exclusivity provisions to consider either exempting small issuers or delay the provisions for up to 24 months for small issuers.

CUNA is also involved in litigation to challenge the law and rule in an endeavor to preserve the revenue credit unions need to offer debit card services. CUNA filed an amicus brief in the suit against the interchange provisions brought by TCF Financial.
 
The Fed's proposed interchange regulations, which now seem to be on track for at least the fee cap provisions to go into effect July 21, would limit debit card transaction fees to as little as 12 cents per transaction, if adopted as proposed.
 
The Fed has acknowledged there are costs it could include but did not in the proposal. An exemption for issuers with under $10 billion in assets is include in the statue and acknowledged in the Fed proposal, but CUNA, the leagues and credit unions emphasize that the exemption is flawed and will not work in practice if it is not subject to enforcement by the Fed.

 
Credit Union Association of Rhode Island scholarships awarded
The Credit Union Association of Rhode Island recently awarded eight scholarships to students that were either entering or returning to college this autumn. The recipients were chosen from hundreds of applications submitted to credit unions from throughout Rhode Island.

The quality of the applications impressed the panel of credit union executives that made up the selection committee. “The commitment to the community that these young people demonstrate is truly impressive,” said Rob Kimmett, senior vice president, marketing and public relations. “Every year we are more impressed by the talent and commitment of the young people applying for these scholarships.”

The student winners are:

• Kyle W. Sexton sponsored by Blackstone River Federal Credit Union
• Kelsey T. Lima sponsored by Columbus Credit Union
• Michael Nero sponsored by Cranston Municipal Employees Credit Union
• Rebecca Draper sponsored by Navigant Credit Union
• Rebecca Dinerman sponsored by Pawtucket Credit Union
• Eric J. Pereira sponsored by Pawtucket Municipal Employees Federal Credit Union
• Ariana A. Lefebve sponsored by Rhode Island Credit Union
• Peter Patriarca sponsored by Westerly Community Credit Union

30-, 15-year rates continue to set yearly lows
Thirty- and 15-year fixed-rate mortgages slid even further during the week ended June 2, again setting new yearly low points, with 30-year loans averaging 4.55% and 15-year loans averaging 3.74%.

The previous lows for this year were set the week before.

Freddie Mac Vice President/Chief Economist Frank Nothaft said that the fixed mortgage rate reductions related to lower weekly U.S. Treasury yields, which dropped "amid financial market concerns that the current lull in the economy is continuing." The housing market also remains slow, he added.

Five-year adjustable rate mortgages (ARM) held steady during the week, again averaging 3.41%. One-year ARMs increased slightly, totaling 3.13%.

Five-year ARMs averaged 3.94% this time last year, while one-year ARMs averaged 3.95%.

Credit union loans increase in April for first time in eight months
U.S. credit unions reported an increase of 0.17% in their loan portfolios in April--the first monthly increase since August of last year--according to a Credit Union National Association (CUNA) economist's analysis of April's monthly estimate of credit unions.

The gain for credit union loans compared with a 0.1% decrease in March. Adjustable-rate mortgages grew 2%, home-equity loans rose 1%, used-auto loans increased 0.8%, and credit card loans went up less than 0.1%. New-auto loans fell 0.7%, unsecured personal loans dropped 1.1%, and fixed-rate mortgages declined 1.8%. Credit union loans totaled $575.2 billion, compared with $579 billion in April 2010, according to the monthly estimate.

"Loan balances, however, typically rise 0.24% in April due to seasonal factors, so the underlying monthly trend is running at a negative 0.07%," Steve Rick, CUNA senior economist, told News Now. "Over the last year, credit union loan portfolios are down -0.7%. Used-auto loans, adjustable-rate mortgages and home equity loans grew at around 1% or greater in April.

"Recent declines in consumer confidence surveys may be a leading indicator of weak loan growth for the remainder of the summer," he added. "If job growth doesn't pick up soon, loan growth in 2011 may not be that much better than the negative 1.2% reported last year."

Credit union savings balances grew 0.7% in April, compared with a 1.3% increase during March. Share drafts led savings growth, increasing 4.3%, followed by regular shares (1.1%), individual retirement accounts (0.2%) and money market accounts (0.1%). One-year certificates fell 0.4%. Credit union savings in April totaled $833.8 billion--or $35.1 billion more than the $798.7 billion in April 2010.

Credit unions' 60-plus-day delinquencies remained at 1.6% during April.

The loan-to-savings ratio remained at 69%. The liquidity ratio--the ratio of surplus funds maturing in less than one year to borrowings plus other liabilities--remained at 19%.

The movement's overall capital-to-asset ratio remained at 10% in March. The total dollar amount of capital is $96 billion.