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Fury at banks sends windfall to credit unions

 
 
Reply Sun 23 Oct, 2011 12:07 pm
Fury at banks sends windfall to credit unions
Wednesday, October 19, 2011
By Charlotte Observer

CHARLOTTE — Charlotte-area credit unions have seen an increase in phone calls and new members in the last two weeks as people upset about new fees at big banks look for new places to park their money.
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Several credit unions have launched advertising campaigns promoting their fee-free offerings, hoping to capitalize on the wave of consumer discontent since Bank of America announced its $5 monthly debit card fee late last month.

"It's been wonderful," said Nicol Morris, chief operating officer of the Charlotte Metro Federal Credit Union, which has about 33,000 members.

She said the credit union saw a 350 percent increase in online account creation, along with a 90 percent increase in calls.

"They are extremely fed up with the continued talk about fees, whether it's in regard to checking or the debit card fee," she said.

Charlotte-based Bank of America is one of several large banks that have launched or tested new fees. The banks say the fees are necessary because of lost revenue from new federal regulations implemented as part of the Dodd-Frank financial reform law.

Banks still command the vast majority of assets and generally provide more services and products than credit unions.

Marketing an alternative

A petition at Change.org protesting the fees now has more than 225,000 signatures. Five Democrats in Congress said last week they're asking U.S. Attorney General Eric Holder to investigate the banks for possible collusion.

President Barack Obama has also spoken out against the fees.

Credit unions have been quick to market themselves as an alternative.

The first credit union in the U.S. was established in 1909, but the system is rooted in democratically governed German banking institutions that were formed in the mid-1800s, according to the National Credit Union Administration.

They became popular in the 1920s as an easier source of consumer credit, and they grew steadily from the 1940s through the 1960s, and rapidly in the 1970s as legislation insured deposits and allowed expanded services.

Unlike banks, credit unions are nonprofit organizations owned by their members. They generally offer lower rates and fees. A recent association survey showed that 80 percent of credit unions have free checking accounts.

About 93 million people are part of the country's roughly 7,500 credit unions.

"We want consumers to know they can fight back against big banks by saying no to more fees," said Bill Cheney, president of the Credit Union National Association trade group in a statement last week.

"They should give credit unions a close look and take advantage of credit unions' emphasis on service over profits, typically with fewer and lower fees overall."

Quick to respond

Locally and around the country, the marketing seems to be working.

Representatives at Lancaster, S.C.-based Founders Federal Credit Union have been opening accounts for people leaving big banks daily, said Nicki Nash, senior vice president for marketing and community relations.

The credit union has run newspaper ads and posted on social media sites, touting free checking and debit cards.

"We've gotten great response," Nash said. "They're very pleased, obviously. They're relieved that we're not looking to charge for that."

Charlotte-based First Legacy Credit Union is considering billboards and wrap-around ads on city buses, marketing director Nancy Stroud said. First Legacy has seen increased interest and landed new members to join its ranks of about 10,000 in Mecklenburg and surrounding counties.

Sharonview Federal Credit Union, based in Fort Mill, S.C., is taking a slightly different tack.

It is considering a campaign to convince members who have a savings account to move over other services from banks, said Bill Reynard, vice president of marketing.

While it's still too early for data on total deposits, Credit Union National Association spokesman Mark Wolff said those experiences have been mirrored around the country.

"The evidence that we do see certainly indicates that there's been a real surge of interest," he said.

The association's recently designed site, aSmarter Choice .org , which helps people find credit unions near them, has seen its Web traffic more than double, he said, and its Facebook page has gone from 1,100 "Likes" to more than 3,800.

Smaller banks have gotten in on the action as well.

Charlotte-based NewDominion bank has launched a marketing campaign for its free debit cards.

Fifth Third bank, which has the fourth-largest market share in the Charlotte area, announced last week it's extending hours for part of the week through the end of the month to make it easier for people to switch their accounts to the Cincinnati-based bank.

Hurdles for credit unions

Despite the preponderance of free checking accounts, credit unions still face sizable obstacles.

Credit unions maintain only a 6 percent market share of total assets between banks and credit unions, at about $917 billion versus $13.3 trillion at banks, according to the National Credit Union Administration and the FDIC.

One reason is that each credit union has different rules about who can join. Some are employer-based, and others are based on geography. The confusion leads people to believe that they can't join, Wolff said.

"There's a perception hurdle," Wolff said.

Banks, however, tend to have a wider range of products and services, along with more convenient locations and ATMs, said John Hall, spokesman for the American Bankers Association.

Despite their reputation, credit unions don't always have the better rates, Hall said.

Analysts generally agree that big banks such as Bank of America aren't likely to lose substantial market share. Still, smaller banks and credit unions stand to gain significantly.

"For Bank of America, losing thousands of customers is not a huge deal," said Claes Bell, who covers banking for research firm Bankrate.com. "For a smaller bank, picking them up can be huge."
 
roger
 
  3  
Reply Sun 23 Oct, 2011 04:16 pm
@BumbleBeeBoogie,
Aw, you just like credit unions because they call themselves "unions."
farmerman
 
  1  
Reply Sun 23 Oct, 2011 05:46 pm
@roger,
is money in credit union deposits protected by FDIC?
Lustig Andrei
 
  1  
Reply Sun 23 Oct, 2011 05:54 pm
@farmerman,
Good question. I don't know. But this anti-bank pro-credit union movement isn't anything new. Couple of years ago, having just moved to Hawaii, I was looking to open a small checking account at a local bank for running expenses because there are no Bank of America (where I had been banking)offices on this island. Quite a number of people advised me to consider doing so witha credit union rather than a full-service bank. No longer recall what the big advantages were supposed to be as I didn't follow their advice.
0 Replies
 
CalamityJane
 
  2  
Reply Sun 23 Oct, 2011 05:58 pm
@farmerman,
Not by FDIC, they have their own insurance

http://www.ncua.gov/resources/shareinsurancetoolkit.aspx

Quote:
Share accounts in federally insured credit unions are insured up to the Standard Maximum Share Insurance Amount (SMSIA), $250,000.
Mame
 
  3  
Reply Mon 24 Oct, 2011 04:31 pm
"The banks say the fees are necessary because of lost revenue from new federal regulations implemented as part of the Dodd-Frank financial reform law."

Why should the ordinary Joe be responsible for paying for reforms as a result of greedy-guts in a system they had nothing to do with?
farmerman
 
  1  
Reply Mon 24 Oct, 2011 04:35 pm
@CalamityJane,
Thanks CJ , Im moving some caqsh to Sun Credit Union or Farmers
0 Replies
 
DrewDad
 
  1  
Reply Mon 24 Oct, 2011 04:47 pm
@roger,
Credit Unions generally offer better terms to individuals than banks do.

You see to be down-in-the-mouth about anything that might help out normal people. What's up with that?
thack45
 
  1  
Reply Mon 24 Oct, 2011 04:54 pm
@Mame,
Mame wrote:

"The banks say the fees are necessary because of lost revenue from new federal regulations implemented as part of the Dodd-Frank financial reform law."
Who do they think would sympathize with this argument? This looks like a good example of the archaic mentalities of failing companies pretending they don't have enough money.
0 Replies
 
roger
 
  4  
Reply Mon 24 Oct, 2011 10:42 pm
@DrewDad,
What the god damn hell did I say about credit unions to inspire that little pearl? Can you explain, or would your rather not?
DrewDad
 
  0  
Reply Tue 25 Oct, 2011 03:18 am
@roger,
roger wrote:

What the god damn hell

You make a sarcastic comment about Credit Unions using the work "union," like it's a curse word, then you come out actually cursing.

I can't imagine whatever gives me the idea you're a bit grumpy.
Linkat
 
  2  
Reply Tue 25 Oct, 2011 07:14 am
@Mame,
I agree in a way, but I also do not think the average Joe realizes how much money such extensive regulations end up costing the banks and other financial institutions. A good reputable financial institution does not need these types of extreme regulations - the problem being that there are some companies that do not care about their reputation.

I know this because each time a new extensive regulation occurs - in my job - we end having to get a new process implemented, typically including expensive systems upgrades, changes and quite often a complete new software package. What ends up happening as a result, it costs the company more money to do this - in order to stay in business, the company either has to find a way to cut costs (possibly resulting in laying off people - not to mention with the new regulation there is now more work to monitor this new process, produce new reports and/or new filings with appropriate government bodies). So the end user - ends up either paying for it financially or end up having a lower quality product - just the thing these regulations are trying to avoid.

So the companies that are reputable end up getting screwed by the few.
Linkat
 
  1  
Reply Tue 25 Oct, 2011 07:19 am
On the flip side of this - news reports are saying that the majority of people pulling their money out of BOA - are those making over $75k, not the "poor". Just the group of individuals that the banks typically make the most money from.

I have a BOA account - not that I particually like them - we ended up getting this account as when we had a business, if we moved our personal account to them, they would not charge for our business account. Our personal account, we currently meet certain criteau where we are not charged additional fees - although I do have to monitor it closely because it is so easy to end up doing some small thing, where you end up having some fee charged to you.

I plan on moving my account at some point to a local community bank (which I had before and loved). I want to wait until we hopefully sell and move in order to set up with a bank close by.
0 Replies
 
parados
 
  1  
Reply Tue 25 Oct, 2011 07:19 am
@Linkat,
Why are credit unions a lower quality product?
Linkat
 
  2  
Reply Tue 25 Oct, 2011 07:29 am
@parados,
I am not taking about credit unions - I am saying - that the more rules you implement which would result in higher costs to the company, and if the company decides to rather than increase fees cut costs, you could end up with a lower quality product.

Nothing at all with credit unions. I work in the financial industry, but not at a bank.
0 Replies
 
Mame
 
  1  
Reply Tue 25 Oct, 2011 07:34 am
@Linkat,
From what I understood of that whole mortgage fiasco, it's because they weren't regulated that it was allowed to happen. The regulations are now in place because of what happened, and that had nothing to do with the ordinary Joe who is already taxed to death. We've had to pay banking fees for years - I am completely opposed to them. You want to use my money, then charge me for keeping in your bank? Uh uh. Where's the logic in that?

I've used a credit union for years - probably 30 - and they are not inferior in any way. All our business is done through a credit union. No problems at all. I have saved a minimum of $8.95/month on debit fees, I pay nothing for cheques, I have no trouble getting money orders or foreign money, and I get great rates.

Also, my credit union takes a picture of you and when you swipe your card or even just go in (say you lost your card), your picture comes up, so you don't need ID. I don't understand why banks haven't adopted this.

They also seem to be friendlier than banks. I moved to a new town a few years ago, set up an account at a local credit union and a week or so later my bank manager called me to ask if I was settling in okay. Never heard of a bank doing that.

Linkat
 
  2  
Reply Tue 25 Oct, 2011 07:46 am
@Mame,
Yes - I am not disagreeing with some of the bank fees - although you do have to realize if you keep under $x dollars in the bank, the bank cannot use that money. They have to have a certain amount in reserves for obvious reasons. Some of the changes to bank regulations are not just fees to the bank, but increased requirements to hold more in reserves. So if you keep only $100 on average in their bank, it may actually cost them money overall. In processing checks, maintaining records and books, systems costs, etc.

Being larger, it isn't cost effective for them to keep those smaller accounts without charging fees and if the smaller accounts leave no big deal, they don't generate the kind of money they are looking for per account. They make money on the larger accounts. The funny thing is with these increase fees - the larger accounts are leaving in even a higher amount than the smaller accounts. Seems people are just more pissed at the nickle and diming.

The credit unions, have a different take - whereas the smaller accounts is where their niche market is. I agree, I prefer the smaller banks with the personal attention. We still have my kids accounts at the community bank and I love going in there. The larger banks typically you are paying for convience.

As far as the mortgage fiasco - that is a whole different animal - the take on that was the government (Barney Frank for one) thought every one should own a home no matter whether they could afford it or not. They loosened the normal restrictions and changed the way mortgages were package for investing by financial institutions. Now the opposite is happening you have to sign your first born in order to get a loan - so now we are overregulated. This is also not the type of regulation I am talking about that costs companies more money.
BumbleBeeBoogie
 
  1  
Reply Tue 25 Oct, 2011 09:11 am
@Linkat,
I've belonged to a cooperative credit union since 1954. I've also been a member of the board of directors.

Credit Unions are the best options. They are controlled by the membership.

BBB
0 Replies
 
Cycloptichorn
 
  1  
Reply Tue 25 Oct, 2011 09:22 am
@Linkat,
Linkat wrote:

As far as the mortgage fiasco - that is a whole different animal - the take on that was the government (Barney Frank for one) thought every one should own a home no matter whether they could afford it or not. They loosened the normal restrictions and changed the way mortgages were package for investing by financial institutions. Now the opposite is happening you have to sign your first born in order to get a loan - so now we are overregulated. This is also not the type of regulation I am talking about that costs companies more money.


Uh, I feel I have to disagree with every single thing you wrote in this paragraph. It paints a false picture of how the 'mortgage fiasco' came about by ignoring several key facts (and trying to pin it on Barney Frank? C'mon). I also would challenge the idea that we are now 'overregulated.'

Cycloptichorn
Linkat
 
  2  
Reply Tue 25 Oct, 2011 09:33 am
@Cycloptichorn,
Go ahead and challenge - I gave BF as an example - not as the whole picture - but he lead the availability for the de-regulation of mortgages. His philosphy, although his heart may have been in the right place, was doomed. Of course, those selling mortgages are also responsibile, however, they were given the green light and those directly selling are rewarded with compensation with each sale. It was set up to be disaster.

Wouldn't have happened if the government didn't first de-regulate the mortgage industry - it just snowballed after that.

And yes it is now so overregulated that an average person cannot get a loan. For example, there are people currently paying for their mortgage that cannot re-finance to lower amounts. If they can currently pay for their higher monthly mortgage, then why the h*ll cannot they afford to pay a lower amount.

Seems a bit over the top and a bit overregulated if some one that is paying $2k now and has been and has never been late with a payment, all of a sudden cannot pay $1,500?
 

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