Filed under: credit unions
As I was half joking that my credit union always likes an idea far better before we’ve tried to implement it, it occurred to me that ideas are much like love.
Some credit unions find one idea they love (serve a group of people with good service and low rates) and they marry it and have a long, monogamous relationship with it. Theirs is a bond that is faithful, strong and never changing.
Some credit unions fall on the other end of the spectrum. They are addicted to that rush of heady excitement you feel when you first meet a new idea. They are serial daters, meeting lots of ideas and never quite settling down with just one. In order to meet their strategic goals, they race after the next big thing and place more credence in the idea they are trying tomorrow, rather than yesterday’s idea that they are doing today.
This leads me to my assertion that ideas are like love. When you first come up with an idea, the possibilities seem limitless. Working with that idea is fun and you enjoy its company very much. It isn’t until you start spending a lot of time with the idea and introducing it to others that you realize it has its faults.
And like relationships, the life of an idea often takes the same path as relationships.
There’s that idea that withers due to neglect
It seemed like a great idea when you sat around the table and came up with it. Everyone liked it and left the meeting feeling good about life. But the group assigned to making the idea a reality didn’t meet soon enough and by the time they did, everyone had kinda lost that lovin’ feeling and nobody quite remembered why they were assigned to do this new thing. And like some relationships do, the idea just faded until there was nothing left of it.
And then you have your dysfunctional idea
That’s the idea that not everyone on the team loves. So when things get rough during implementation, a few people will shake their heads knowingly and mutter, “I told you so.” Those same people make no attempt to help the idea get off the ground and if it ever does, it’s hard to prove to the naysayers that the idea is any good – no matter the results.
And the blind love idea
This is the idea that people hold on to until the bitter end, and sometimes even after. You loved the idea so much and you put so much effort into making it grow, that when it turns out to be no good, nobody can cut the ties to it.
Like love, good ideas need certain ingredients to thrive:
- Good communication – Someone needs to be the MIS (Make It So) Leader and ensure that everyone knows what is going on. Consistently tell people why are we doing what you’re doing and how you are doing it.
- Commitment to see it through – The MIS Leader needs to keep momentum up and keep distractions at bay. Don’t let a good idea wither on the vine.
- Passion – No good idea thrives without passion. In my experience, the more people are passionate about the success of an idea, the better chance that idea has.
- Exit strategy – Someone needs to be responsible for knowing when to call it quits. If an idea isn’t working, eventually you need to divorce yourself from it. Know how and when you will make that decision before embarking on each new idea relationship.
Filed under: Current Issues in Credit Unions, Uncategorized | Tags: CFPB, CUSOs, OFAC, Twitter
We had entirely too much fun this month with the editor of NAFCU’s Compliance Blog, Steve Van Beek and our producer Victor Frost. Among other things, we discussed: the CFPB; the fact that CUSOs are all the rage again; the ING OFAC settlement; finding out what your members want via Twitter and of course, Katherine Weber’s Big K Roundup.
Filed under: Uncategorized
By David S. Brown, Attorney
Social Media is creating quite the buzz these days. Haven’t you noticed everyone talking about it? Between Facebook’s IPO, LinkedIn’s recent security breach (I changed my password, did you?) and the never ending photos of the Kardashian sisters on Twitter, there have been thousands of articles written about social media in the last month alone. That’s why I was excited to pitch in when I was asked to research what credit union (“CU”) members were saying about their CUs on Twitter.
Here’s what I did. Over the last few weeks, I conducted numerous Twitter searches for the term “credit union”. Between May 27, 2012 and June 5, 2012, there were approximately 130 tweets which included my search term. I then studied the tweets, created a spreadsheet and analyzed the results in hopes that I could answer the age old question: “What do CU members want?” The results were a bit deflating. As it turns out, CU members don’t tweet about their CUs. In fact, more than 90% of all the tweets I analyzed were authored by industry professionals, marketing firms, industry journals or publications or third party news establishments. On top of that, the few tweets that did appear to be written by CU members, or potential CU members, were less than enlightening.
For instance, one CU member tweeted, “some little kid just walked into the credit union wearing a snorkel”. Another tweet read, “I am not making this up: My credit union in San Francisco now offers ‘bicycle loans’”. Only three tweets really caught my attention, because they were more on point with the goal of my study. The first read, “credit unions are no match for payday loans”. The second exclaimed, “credit unions care about your story and want to help you build credit, banks just care about credit score”. And the third indicated “credit unions have better rates than banks”.
Other than these three tweets, there wasn’t much explanation as to what CU members are looking for. A few Twitter users urged their followers to switch to CUs as a way to “get back at Big Banks”, but I wasn’t able to determine whether these users were CU members, or just activists ranting against banks. Another user simply tweeted, “I love credit unions!” In sum, I was unable to determine what CU members want as a whole by analyzing Twitter, because Twitter users simply don’t seem to be saying much about their CUs.
What I did find was a plethora of information about CUs that was written by industry professionals, marketing firms, news agencies, financial planners and CUs themselves. In fact, I now think Twitter is a great way for CUs to connect with and educate their members. For instance, CUs can send tweets to their members when they initiate new promotions. This informs and educates the member about the new option, but is much less evasive than some other forms of advertising. CUs can also use Twitter to educate their members about the differences between CUs and banks.
In addition to reaching members, Twitter also appears to be a great tool for CU professionals. The articles shared on the platform are voluminous and should help any CU professional to stay informed about CU news, trends and promotions. It can also be used to interact and keep in touch with suppliers, co-ops, and credit union support organizations.
In conclusion, Twitter does not offer an answer to the question “what do CU members want?” It does, however, offer CUs the ability to market their product to members and other followers. After all, it presents CUs with a nearly cost free way to stay in touch with those that are interested. Just don’t be surprised or depressed if they don’t tweet back! Twitter is also a good source of information for anyone looking to stay current on CU news and developments.
David S. Brown is an Associate in Commercial Collections, with a focus on the Commercial Banking, Commercial Business, Special Collections and Commercial/Agency Services Groups, based in the Cleveland office of Weltman, Weinberg & Reis Co., LPA. He can be reached at (216) 685-1062 or email@example.com.
Filed under: bank secrecy act, OFAC, Uncategorized | Tags: bsa, compliance, fines, jail, OFAC, PATRIOT, Patriot Act
Yesterday, I was catching up on the NAFCU Compliance Blog and I caught this gem: ING is going to pay the U.S. Treasury Department $619 million in settlement of alleged OFAC violations. While FinCEN says OFAC is not truly part of BSA, it’s hard to argue how financial institutions must deal with OFAC in much the same way as they deal with the PATRIOT Act and SAR and CTR requirements. Up until now, the largest BSA settlement that I knew of was Wachovia’s $110 million settlement with FinCEN.
When I teach BSA, I often describe the penalties associated with BSA - how they are cumulative and also increase every day for continuing non-compliance. This rapidly creates a crime with jail time far greater than that for murder. Thus, the entity accusing the financial institution of the particular violation, be it FinCEN, The Department of Justice or the U.S. Treasury Department, can simply ask the question: “Who wants to go to jail?” Naturally, no one wants this so the financial institutions, typically large banks, negotiate an agreement which results in the admission of no wrong-doing and the payment of a very large fine. Thus, no one goes to jail.
You can read the U.S. Treasury Department’s announcement and decide for yourself whether the allegations were worth a $619 million settlement. That’s really not my point. The intimidation methodology that the government has in place whereby it extracts large fines from financial institutions is unlikely to change.
The question, dear reader, is what would happen to a credit union in this context? Well we know what happened to Suffolk Federal Credit Union, and there have been others as well. I’m only aware of one credit union that actually had to pay a fine. The rest of them had to make painful and expensive changes but faced nothing like what ING or Wachovia had to deal with. Why is that? Money, of course. Most credit unions would vanish if they had to pay a million dollar fine. Credit unions have no access to capital from secondary markets. The members’ money is all they have. So if the government fines the credit union, it is simply punishing the members. Whether that means anything or not is a separate question, but if you want to be cynical, there’s simply not enough money there to punish without destroying. If the government destroys the credit union, no one wins and the government gets scrutiny as well.
We can debate the whole government conscripting financial institutions to do its financial monitoring work and then the harsh punishments given when these unwilling soldiers fail, but there is no point. There is zero desire in Washington for this modus operandi to change. Thus, the only thing that can be done is to comply with BSA, comply with the PATRIOT Act and comply with OFAC. I joke that compliance officers are special because they are the first people to go to jail. Actually it’s no joke at all. This stuff is serious as a heart attack and needs to be the number one compliance priority for credit unions. In comparison, while Reg Z may be harder and more burdensome, no one has ever gone to jail for a Truth-in-Lending violation.
By Marsha Makel, Attorney
On May 22, 2012, the Ohio House of Representatives passed Ohio House Bill 479 (HB 479). The main objective of the bill, authored by trust and estate planning attorneys, is to create legacy trusts in Ohio (also known as asset protection trusts). These legacy trusts are similar to those in Delaware and South Dakota. Currently, Ohio law does not allow for legacy trusts and the authors of the bill believe that allowing for the creation of these trusts will attract business owners to Ohio and create additional jobs.
Few Ohio citizens will be protected by these trusts since the trusts are expensive to create. The authors of HB 479 believe they had to also propose a provision that would benefit Ohioans that could otherwise not afford the legacy trust. Accordingly, this Bill proposed to change Ohio’s homestead exemption from $20,200 per person to a 100% homestead exemption. A 100% homestead exemption could greatly hinder any creditor’s ability to enforce judgment liens on real estate and will basically make judgment liens ineffective. Creditors would have one less collection tool to use in Ohio.
Our firm, as a part of the Ohio Creditors’ Attorney Association (OCAA), has been working hard to fight this radical change to the Ohio homestead exemption. We opposed HB 479 through testimony before the Ohio House of Representatives.
In the end, amendments were made to HB 479 before it passed the House on May 22, 2012. One amendment secured a complete exception for the State of Ohio and all of its political subdivisions from the homestead exemption, not only as to taxes but to any governmental debt owed. In addition, the 100% homestead exemption was amended to $500,000 per person. Although there was progress with the amendments, there is still work to be done.
In Ohio, home values average around $150,000. A homestead exemption of $500,000 essentially equates to a 100% homestead exemption for the majority of Ohioans. We plan on opposing this Bill once it is proposed to the Ohio Senate for their vote in the fall. The Ohio Senate was instrumental in changes to Ohio’s exemptions in 2008, which increased the $5,000 homestead exemption to $20,200 and provided for periodic increases based on the Consumer Price Index. In 2008, the Ohio Senate carefully examined the homestead exemption and made the necessary increases and provisions for future increases. Therefore, we are hopeful that once HB 479 is presented in the Ohio Senate, we can work with the Senate to reduce the $500,000 exemption significantly to the $20,200 range that the Senate approved in 2008.
We will be continuing our efforts with HB 479 and will keep you updated on any progress.
If you have any questions on this information, please contact Ms. Marsha D. Makel, Esq. Marsha is an Associate in the Compliance Department of the Columbus office of Weltman, Weinberg & Reis Co., L.P.A. and can be reached at (614) 857-4413 or via e-mail at firstname.lastname@example.org.
Filed under: Uncategorized
by Greg Anglewicz, Esq.
With the warm weather comes the need to tune up the lawn mower, service that grill, and clean-out those flower beds, in order to get ready for our summertime activities. But the rise in mercury is not just a harbinger of outdoor summer living. With the increase in temperatures, we see an increase in home sales and home remodeling, and with that, an increase in mortgage lending. Just as you sharpen that mower blade, spring is a great time to sharpen your real estate title skills.
Many mortgage title issues can be prevented with a little attention to detail and remembering some basic requirements of mortgage law. A quick review of some of these issues will get you primed for the mortgage lending season.
- Are you getting what you are paying for? One of the most important, but easiest to overlook aspects of mortgage lending is the fact that it is a real estate transaction. In exchange for the loan funds, the lender is getting an interest in real estate. Make sure you are getting (what you think you are getting) for your money. The simplest way to ensure this is to have a title company conduct a title exam to confirm that your borrower has, or will have, an interest in the property that you are taking as collateral. If your borrower has defective title, so do you. It is very important to take the time to review the title commitment and title report for exceptions to title. It is also important to make sure that you are actually dealing with real estate. Often manufactured housing and cottages built on a land lease are not real property and cannot be mortgaged. Having your borrower purchase a lender policy of title insurance (or a less expensive junior policy for a second mortgage) is always advisable, and is invaluable if a defect is later discovered.
- Is your borrower really your borrower? Whether the loan documents are being signed in your office or with the title company, it is very important to make sure that the person signing those papers is who you think they are. The best way to make sure of this is to check and make a copy of the borrower’s photo I.D. One should always make a copy of each signatory’s valid, government issued I.D. a part of the loan file. More importantly, look at the I.D. and the person sitting across from you. That person should match the photo on the I.D. and the name on the I.D. should match the names on the documents being signed. Nothing is more embarrassing than having a bankruptcy trustee challenge the validity of a mortgage based on the identity of the party signing, and finding that the copy of the I.D. in your loan file is not you borrower. It happens! One should however be mindful of some precautions that should be taken when obtaining a photo I.D. A picture tells a lot about a person, including whether they fall into a protected class under the Equal Credit Opportunity Act (Regulation B). A copy of the photo I.D. should not be a part of the loan application, or be provided to those underwriting the loan. In doing so, lenders can avoid the appearance of discrimination should the loan be denied for legitimate reasons. The I.D. should be gathered at closing. Its purpose is to confirm who is sitting before you and signing those documents. And by that point, the loan has already been approved. As always, it is best to have these practices in writing, should a regulator ever ask.
- Is your mortgage complete? A mortgage lacking necessary parties or proper acknowledgements is not going to secure your lien in the property. Make sure that all parties with an interest in the property are signing the mortgage. (This is another great reason to review the title commitment). In addition, some states grant a dower or homestead right to the spouse of a title owner. In these states, the spouses of the owners must also sign the mortgage and the document must clearly define the marital status of any owner and identify their spouse clearly. Just as important as including all required parties in the mortgage, is having those parties sign and making sure that they acknowledge their signatures in front of a notary public. The notary should certify, by name, each person who executed the mortgage, and fill out the acknowledgment completely, including state, county, city, date and the length of their term, as well as signing and affixing their seal.
- Did you record? A mortgage will provide little security in the property if it is not recorded. The executed and complete mortgage (be sure a full legal description of the property is included in the mortgage) needs to be recorded with the county recorder within the county where the property is located. Until the mortgage is recorded, it is not enforceable against third parties and your lien priority will not be established. The sooner you get the mortgage of record the better.
Keeping these four simple tips in mind will help prevent many of the most common title issues that may arise with mortgage lending, and should help keep you from getting burned.
Greg Anglewicz practices in Real Estate Default at Weltman, Weinberg & Reis Co., LPA as the supervising attorney of Thoroughbred Title Agency in the Cleveland office. He can be reached at 216.685.1137 and email@example.com.
Filed under: Fair Credit Reporting Act
By Tracy Schwotzer, Attorney
Consumer credit is an indispensible part of our society. The average consumer relies on credit each day, not only for the financing of a business, house or car, but also for everyday purchases like gas and groceries. In this country, these transactions would be difficult, if not impossible without the extension of credit to consumers, and the consumer report is a fundamental safeguard for businesses that extend credit.
Creditworthiness is used to determine whether a consumer qualifies for a loan, it determines the costs of insurance, and is often reviewed by potential employers. Moreover, consumer reports are an important tool businesses use to make sure they extend credit only to consumers likely to repay the debt. With the role that credit plays in our daily lives, the importance of a credit rating, either high or low, cannot be minimized. The flip side, the decision to lend credit, receives less public attention but is equally important to maintain our current system of lending.
The credit rating system was developed to investigate and evaluate the creditworthiness, credit standing, credit capacity, character and general reputation of consumers. This consumer credit information is acquired, maintained, and distributed by Consumer Reporting Agencies and is governed by the Fair Credit Reporting Act (FCRA). The FCRA was adopted as part of the Consumer Credit Protection Act and has the purpose to “ensure fair and accurate credit reporting, promote efficiency in the banking system, and protect consumer privacy.” However, the needs for consumer protection must be balanced with the needs of the credit industry to manage its risk.
Banks, credit unions and other credit lenders depend upon complete and accurate credit reporting in their lending decisions. “Inaccurate reports directly impair the efficiency of the banking system, and unfair credit reporting methods undermine the public confidence which is essential to the continued functioning of the banking system.”
Despite this importance, consumer reports are only a compilation of data and are not without errors, sometimes including inaccurate or outdated information. To protect consumers, the FCRA establishes procedures for correcting those errors. The most common route of challenging an item on a credit bureau is to dispute a specific item on the report. Disputed information that cannot be verified must be deleted from a file. However, a consumer reporting agency spokesman estimates that “at least a fifth” of the alleged “inaccuracies” being disputed are actually consumers attempting to have negative but accurate information removed from their report.
Manipulation of consumer reports has also become an important bargaining tool in negotiations with the creditor. A consumer may seek to have an account reported more favorably in exchange for repayment, or may request that the account be deleted upon settlement.
Removing negative information on an account, or deletion of the account as a condition for resolving pending litigation is not a settlement term to be taken lightly. The deletion of the negative information will obviously boost a consumer’s credit rating and make them more eligible for credit. While deletion of negative information may be a necessary tool in negotiating settlement of a dispute, the long-term cost to the industry as a whole is potentially devastating. Without accurate information, a consumer may receive an undeserved credit limit, the interest rate may not accurately reflect the credit risk involved, and the terms of lending may be more favorable than the terms that would be otherwise justified by the consumer’s actual credit history. By agreeing to deletion of negative information without a verifiable dispute, the lender has accomplished the short-term goal of resolving the dispute, but put the industry at an increased risk for flawed loans.
Finally, consumer reporting agencies are required to “follow reasonable procedures to assure maximum possible accuracy” of information on a report, and failure to do so is actionable. Thus, if more favorable reporting or routine deletion of otherwise negative information becomes commonplace in the industry, the consumer reporting agencies will be more wary of the information provided to them for fear of the liability for an inaccurate report.
Credit reports have recently been featured in the news and lenders will undoubtedly find themselves subject to increased regulations on how debts are reported. For more information, see J. Riepenhoff and M. Wagner’s series in The Columbus Dispatch.
Tracy Schwotzer is an associate of Consumer Collections located in the Cleveland office of Weltman, Weinberg & Reis Co., LPA. She can be reached at 216.685.1122 and firstname.lastname@example.org.
Comment: The Fair Credit Reporting Act: Fair for Consumers, Fair for Credit Reporting Agencies, 39 Sw. L. Rev. 395, 398, citing N.M. Stat. Sec 50-18-1 through -18-6 (1953).
 15 U.S.C. 1681(a).
 39 Sw. L. Rev. supra, 412, citing Safeco Ins. Co. of Am. v. Burr, 551 U.S. 47, 52 (2007).
 15 U.S.C. 1681(a)(1).
 Ripenhoff, J and Wagner, M. (2012, May 7) Credit Scars: Credit-reporting agencies’ failure to address damaging errors plaguing thousands of Americans prompts call for swift action. The Columbus Dispatch, p.1.
 15 U.S.C. 1681e(b).