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The Magazine of the League of Southeastern Credit Unions

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PATENT TROLLS

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Message from the President This year we hit the ground running at full speed with our advocacy efforts. We had the Alabama Credit Union Association State Governmental Affairs Conference in February; the CUNA GAC a few weeks later with more than 150 attendees from Alabama and Florida; and we’ll finish up with the Florida Credit Union Association State Governmental Affairs Conference at the end of March. These are three excellent events that have been paying off for credit unions in the first quarter. During the CUNA GAC, we learned the credit tax exemption was preserved after Ways and Means Committee Chairman Dave Camp (R-MI) released his tax reform language. This was a good credit union victory. Our two states made more than 126,000 lawmaker contacts during the “Don’t Tax My Credit Union” initiative which included the delivery of more than 85,000 postcards to our federal delegation. In fact, the postcards came up quite a few times during our CUNA GAC Hill visits. You definitely made an impression! Following the CUNA GAC, the U.S. House passed The Consumer Financial Protection Safety and Soundness Improvement Act (H.R. 3193). The act provides greater authority to the Financial Stability Oversight Council (FSOC) to stay or set aside rules by the CFPB if they would have an adverse impact on the safe and sound operations of financial institutions. We emphasized this bill and the need to rein in the CFPB in our Hill meetings. The House members responded by passing this legislation that same week. This should also be seen as a victory for credit unions. The update to the Alabama State Credit Union Act is progressing nicely during this legislative session in Montgomery. It provides a much needed update to the State Act that will provide limited liability for directors serving on credit union boards, as well as necessary expense reimbursement for directors and allows credit unions to provide reasonable life, accident, and similar insurance protection. It also provides civil penalties for the fraudulent use to the term “credit union.” At our Alabama Credit Union Association State GAC, we had 52 state lawmakers attend our legislative reception, and all of those conversations helped set the stage to get this legislation passed. It’s been quite some time since pro-credit union legislation has been passed in Alabama, and I assure you it won’t be the last either. In Florida, we also have an aggressive state agenda that we are pushing. It includes public deposits, data security, and youth financial literacy. From the first few weeks of session, we are encouraged on a few fronts. We have also been included in conversations about other legislation that we have not been included in previous years. You can see the progress we have made in both states. It’s exciting to see our profile being raised in both state capitols. Each example above could not have been done without your help. I can’t emphasize enough how traveling to Washington, D.C. for the CUNA GAC and Hike the Hill makes a difference. We are seeing progress on our federal agenda, and we have clear victories for credit unions. It’s been awhile since we could say that, but we can now. This is an election year so let’s continue to show our strength through the next three quarters by participating in LSCU’s Get Out The Vote efforts (GOTV) to elect credit union friendly candidates to state and federal office.

During the CUNA GAC, we learned the credit tax exemption was preserved after Ways and Means Committee Chairman Dave Camp (R-MI) released his tax reform language. This was a good credit union victory.

Patrick La Pine, CCE, CUDE President & CEO League of Southeastern Credit Unions

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Table of Contents Editor Amy Jowers Contributors Bill Berg Jay Brady Drew Breakspear Mike Bridges Natalie Edwards Tamra Fairbrother Andrew Gonzalez Kevin Lytle Michael Ogden Jeff Rendel Jared Ross Laura Lee Vann Blake Westbrook Adena Whitman

T N E M E G N I R F PATENT IN

Congressman Bradley Byrne

Design & Production Perry Albrigo, Pomegranate Studio Representative Travis Cummings Letters to the editor may be submitted at submissions@lscu.coop.

Connect with us!

President’s Message

Trends 4 Patent Trolling Defendants have spent $29 billion in costs fighting “patent trolls,” a 400-percent increase from 2005. Patent trolling has become so prevalent that a number of states are looking at legislation, similar to Alabama’s S.B. 121, to try to curb the damage to small businesses. Corporate America Credit Union CEO Pete Pritts says it must be taken seriously.

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For those that think the mobile wallet is just a fling that will never lead to anything serious and for those who believe they have plenty of time to prepare before making a lasting commitment to the mobile wallet, think again. Payment systems, such as Square, Google Wallet, Apple Passbook, Isis, PayPal, and many others, are already up and running and chomping at the bit for customers of financial institutions.

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Mobile Wallets

Advocacy 8 Our “Target” – Data Breach Legislation 10 PAC Fundraising in Election Year is Doubly Important 11 Overview of CFPB’s New Mortgage Lending Rules – Part 2 12 How to Prepare for Your OFR Exam

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LSCU Legislator Profile 14 Representative Travis Cummings 16 Congressman Bradley Byrne Cooperative Initiatives 18 Why DE? Three credit union professionals share their Credit Union Development (DE) experience 22 YPG: Professional Development and Passion Abound

Education 24 Upcoming Learning Opportunities 26 Finding a Way for Employee Professional Development

League News 27 League News

Communications 28 How to Build a Social Media Policy

Industry 30 Ten Ideas for a Culture of Innovation

LEVERAGE 32 Identity Theft Protection and Credit Union Philosophy 34 Debit Cards, A Historical Perspective…What You Need to Know and Why!

LSCU Directory

HIGHLIGHTS 4 | TRENDS Patent trolling is increasing and should be taken seriously.

8 | ADVOCACY Steps Congress and state legislatures can and should take to protect us from data breaches.

18 | COOPERATIVE INITIATIVES Credit union professionals share their Credit Union Development (DE) experience.

24 | EDUCATION “Find a way” to take advantage of professional development opportunities at the league.

28 | COMMUNICATIONS Learn how to put a social media policy in place for your credit union.

30 | INDUSTRY Jeff Rendel provides ten ideas for a culture of innovation to make doing business a little better.

2010, 2011, & 2012

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TREND

G N I L L O R T T N E T PA Fear. That’s the first emotion that Corporate America Credit Union CEO Pete Pritts said he felt when he received a letter stating that his company was using an illegal patent. The letter was on official letterhead and stated that Corporate America owed licensing rights and fees. This was the first time in Pritts’ 27-year career that he was facing a problem with a patent. His next thought was “how much is this going to cost us?” Corporate America Credit Union was a victim of what is called “patent trolling” or “patent assertion entity (PAE).” This is where a person or a company enforces patent rights on a company

That takes considerable time, effort, and can even cost you financially,” said Pritts. There’s the crux of one of the major problems with “patent trolling.” Often, the victim of the “patent troll” has to seek legal counsel to make sure the claim is false or put their members on the back burner while they investigate the claim. According to a Congressional Research Service report from April, 2013, defendants have spent $29 billion in costs fighting “patent trolls.” This is a 400-percent increase from 2005. Another study suggested that 62 percent of patent lawsuits were actually brought on from “patent trolling.” “Patent trolling” has become so prevalent that a number of states are looking at legislation, similar to Alabama’s, to try to curb the damage

By Mike Bridges,

vice president,

CUNA and state leagues would like to see stronger user protections since technology is improving at a rapid pace. While many credit unions try to do their due diligence with a vendor, when they receive a “patent troll” communication, it can be difficult to get all of the necessary information from the vendor because they feel pressure to respond right away. Many times a small business might give in just to have the situation go away. In early February, the League brought a few credit unions together with Rep. Phil Williams (R-Monrovia) during the Alabama Credit Union Association State Governmental Affairs Conference. Rep. Williams is backing Sen. Orr’s “patent trolling” bill and a real champion of the legislation. When Corporate America’s Pritts

“Trolls talk to each other. They know which compa and you won’t be targeted as much as those that r for licensing fees but doesn’t manufacture products or supply services related to the patent. Alabama State Sen. Arthur Orr (R-Decatur) calls it “legal extortion.” Sen. Orr is sponsoring a bill in the Alabama Senate, S.B. 121, which would hold those conducting the trolling accountable and allow the state attorney general to investigate and prosecute. Pritts says accountability is necessary because the initial contact from the troller looks legitimate. “You have to take it seriously. Your first thought is to set it aside, but you have to investigate to make sure that it is a false claim.

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to small businesses. The U.S. Congress is currently considering at least twelve pieces of legislation that will help smaller companies as they fight what amounts to a frivolous lawsuit. One of those bills, H.R. 2024, End Anonymous Patents Act, was introduced by Rep. Ted Deutch (D-FL). CUNA Assistant General Counsel Robin Cook told Inside Counsel that small businesses like credit unions are the most at risk. “They are not well-equipped to deal with the case. They might not have an in-house lawyer or a patent expert available. They don’t know how to react,” said Cook.

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told him about his two instances of “patent trolling,” Rep. Williams asked him about the steps he took to respond to the trollers. Pritts said that conversation was “the highlight of the conference for him and well worth the conference price.” For his part, Rep. Williams told him that Alabama is poised to take action to alleviate this type of scam. Pritts and Corporate America are a good example of “patent trolling” since it has happened to them twice. The second time also came in the form of an official looking letter from a law firm. It pertained to a CUSO that Corporate

, LSCU

Communications

Patent trolling legislation is gaining steam across the country: Vermont passed legislation in 2013, the first in America.

Oregon passed legislation in 2014, becoming the second state with a law.

America owned. The letter stated that a certain type of transaction was taking place with an illegal patent. “The most important thing I learned the second time was to investigate the claim thoroughly. We had to hire a lawyer, but we put together a well-written response and sent it to the lawyer’s office. It’s been six months and

Maine introduced legislation.

Alabama introduced legislation.

Many state attorney generals are more aggressively going after “patent trolls.”

Credit unions are encouraged to take all patent inquiries seriously, but don’t panic. Contact your chapter or the LSCU for help. You might be surprised at how many of your peers have already gone through the process and are willing to help you. The LSCU is always ready to help. In many cases it’s a lot like standing up to a bully.

anies are not easy marks. Call their bluff roll over,” Cook told Inside Counsel. nothing has come back to us,” said Pritts. Help is on the way for small businesses, it’s just slow going. The Congressional Research Service report states that Congress instructed the Government Accountability Office to study the costs, benefits, and consequences of litigation by “non-practicing entities” and “patent assertion entities” and report back with findings and recommendations on how to “minimize any negative impact” of such litigation by September, 2012; however, the study has not yet been released.

“Trolls talk to each other. They know which companies are not easy marks. Call their bluff and you won’t be targeted as much as those that roll over,” Cook told Inside Counsel.

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TREND

MOBILE WALLETS:

A Hand-in-Glove Fit for Credit Union Goals By Natalie Edwards, communications coordinator, LSCU Banking has had a long string of high profile relationships. It seems that every decade or two a new love affair comes along that completely alters the banking cosmos. In the 1970s, it was automated teller machines, better known as ATMs. Then, in the 1980s debit cards made their mark. And, of course, in the 1990s, it was the Internet which

to the mobile wallet, think again. It did not take long for consumers to embrace online payments. As the Financial Brand put it, consumers went from “I’ll never buy anything online” to “I prefer shopping at Amazon” in less than ten years. Mobile wallets have the power to take off in half that time. After all, there are now nearly as many mobile phones on the planet as there are people. Credit unions have a history of being slow to acknowledge the relationships of banking’s past

All metaphors aside, as Javelin analyst Mary Monahan put it, “This credit unions to win-or-lose.” And the stakes are not marginal. The became the gateway to mobile banking in the new millennium. So what’s next? Unquestionably, the next big thing to rock the world of banking will be mobile wallets. “Money” and “mobile” have already started their courtship, and they are well on their way to becoming banking’s “it” couple. Just look back at their first five years together. Mobile banking has completely taken off. Many consumers use the cameras on their smartphones to deposit checks and pay bills. Other consumers use mobile Facebook apps for common, casual payments, such as reimbursing a friend for lunch or paying the babysitter. And there are some who already use phones to maintain loyalty cards and make purchases at brick-and-mortar retailers. For those that think the mobile wallet is just a fling that will never lead to anything serious and for those who believe they have plenty of time to prepare before making a lasting commitment

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for many justifiable reasons. But credit unions simply cannot afford to delay in this instance. All metaphors aside, as Javelin analyst Mary Monahan put it, “This is a fight for credit unions to win-or-lose.” And the stakes are not marginal. They are huge. One of the biggest differences between mobile wallets and previous banking innovations is that credit unions are not just competing with banks in the world of mobile commerce. Payment systems, such as Square, Google Wallet, Apple Passbook, Isis, PayPal, and many others, are already up and running and chomping at the bit for customers of financial institutions. As Rick Cranston, director of business and product development at Mountain West Credit Union Association, explained, “Paypal gains one million plus new users per month. Square

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s is a fight for ey are huge.

conquered two million micro-merchants in their first two years.” This, according to Mark Fischer, CEO of Inspire Commerce, is why credit unions need to consider a change in how they view the new micro-merchant payment space. “It’s not that any single firm is ‘the’ threat today. The issue is the larger payments movement. Technology is moving towards an electronic value exchange that is mobile, point of sale, and e-commerce.” Just as we cannot imagine a surviving credit union without a website, internet, and electronic integration, soon we will not imagine a viable credit union without mobile technology. And credit unions, Fischer says, need to take a lesson from their “new” rivals, such as PayPal, and look to provide meaningful solutions on both sides of the transaction. Fisher adds that, starting now, credit unions need to make a mental shift from thinking about their job exclusively as issuers to realizing that a transaction requires two people. In an electronic world all of their members will also need to be paid, so credit unions need to learn about acquiring. He recommends getting out there and learning the skill set of what it means to support, not just the paying party in a transaction, but the receiving party as well. Fisher explains “When we see things like PayPal saying that they are an ‘ATM in your pocket,’ clearly they are gunning to become that touch-point for the financial industry. And if credit unions do not get involved and do not start playing and offering meaningful solutions to their members, as well as think about what is lacking in the industry and stepping up to bat, they are going to become nothing more than a curated database.” So where do credit unions begin? One credit union-centered solution is CU Wallet.

Founded by Paul Fiore, Kirk Drake, and Richard Crone, CU Wallet seeks to provide a mobile wallet application that also maintains control of member data. CU Wallet does not aim to build infrastructure itself, but to partner with a company that has experience with credit unions and can bring that experience to mobile banking. Because credit unions have about 90 million members nationally, Fiore believes “credit unions have the critical mass to drive a successful (mobile) wallet.” What CU Wallet demonstrates is that the best way for credit unions to embrace mobile wallets is through collaboration. Whether through CU Wallet or another solution, by working together, credit unions can use the collective size to create a way to build traction with merchants, meet the immediate demands of their members, and provide solutions that prospective members are looking for. And, by working together, credit unions can increase their mobile wallet volume to obtain better pricing for members. Mobile wallets fit hand-in-glove with credit union goals. The purpose of a mobile wallet is to make a consumer’s life and financial expenses more personal and relevant. They avoid the nuisance of a thick billfold or searching through a purse to engage in a transaction, making a purchase, refund or savings with nothing more than a swipe. And, working together to get the best price for mobile wallets, credit unions will provide the next step in technology at the reasonable rates that members have come to expect and prospective members are looking for.

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ADVOCACY

Our “Target” – Data Breach Legislation By Jared Ross, senior vice president, Association Services, LSCU The letter I received was not quite that short or to the point as the letter below, but it was basically telling me that because I had shopped at Target during the holidays, I needed a new card. Certainly many of you received a similar letter from your credit union. A few days later I received my new check card and spent a couple of hours remembering which bills I had automatically debited on this card. Of course I forgot a few and the “we cannot process your card” emails came a few days later. This is the world we now live in. Our information is out there for the taking with very little for us to do about it as cardholders. However, there are steps Congress and our state legislatures can and should take to protect us. At the League, we are working to ensure the credit union voice is heard in the debate about

We have called on Congress to look at this issue and asked that a retailer share the burden by reimbursing a financial institution for their loss. The retailers do not have to reimburse the consumers or the financial institutions. They are not even held to the same high standards of protecting data to which financial institutions are held. Another ask of Congress is to review this and demand that retailers take the same precautions in protecting sensitive information that credit unions, banks, and other financial institutions are required. While a uniform federal law on data security would be a huge step forward in protecting consumers from data breach, many state legislatures are beginning to take steps toward

the esult of r a s a e for ised pologiz mprom a o c e n W e . e days ve b may ha n a few i d r u a o c y r o ed t t you red, be issu you tha l l i Dear Ja m w r o d ns. f r n questio new ca ing to i y t A i n . r a c w n e I e v , r u ha rget We a us if yo ch at Ta l l a a e c r b e t s Plea recen nience. e v n o c n the i

how to protect consumers from data breaches and what should be done when a breach does occur. The League, along with CUNA, has called on Congress to act, asking the Senate Finance and House Financial Services committees to hold hearings on the Target data breach. The Target breach affected more than 100 million people, making it one of the largest data breaches in history. It is estimated that this breach cost credit unions around $30 million. That estimate is before we factor in any of the fraud losses that would occur if compromised cards are used for purchases. When a breach happens, not only do credit unions have to make the consumer whole on fraud losses, they must notify members and reissue cards–all at the credit union’s expense. The merchant, in this case, Target, is left with nothing more than reputational loss. Anyone who drives by their local Target today will see this reputational loss is not hurting their business one bit. But the dollars a credit union spends as a result of a breach affect the services they can offer their members. It affects their ability to hire new talent, retain excellent talent, and operate within their budgets.

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changing their data security laws. In Florida, a committee bill has been filed by the House Civil Justice Subcommittee, chaired by Rep. Larry Metz (R-Groveland). The bill, CJS 14-04, would strengthen laws regarding data breach notification. This bill creates the Florida Information Protection Act of 2014 and requires notice of a breach be given to the attorney general’s office and affected residents no later than 30 days from when a suspected breach occurs. The bill does allow for exceptions in the case of a state or federal legal investigation. The bill also requires businesses and governmental entities to take all reasonable measures to dispose of sensitive personal information. While this bill does not provide a remedy for a financial institution to recoup their losses after paying back consumers who were affected, it is a good first step in strengthening the state’s breach notification laws. Currently, there is no data security legislation introduced in Alabama. The League will continue to follow the progress of data breach legislation at the state and federal level. Hackers are getting smarter and more aggressive, and it is time that lawmakers take proactive steps to protect consumers from these types of attacks.

ADVOCACY

PAC Fundraising in Election Year is

T N A T R O P M I Y DOUBL By Blake Westbrook and Andrew Gonzalez, grassroots & political action coordinators, LSCU

Political action fundraising is important to any company that runs successful advocacy campaigns. Credit unions have one of the most successful political action committees (PAC) in the country. Goals are set by CUNA and passed down to state leagues and then to credit unions. During an election year, like 2014, it cannot be stressed enough how important it is for everyone to get involved in PAC fundraising. Many times a PAC check is the first step in building a relationship with a candidate. With Alabama and Florida having major federal and state elections this year, it is a tremendous opportunity for credit unions to jump into PAC fundraising.

Why is candidate giving so important? The LSCU gets asked quite a bit, “Why is candidate giving so important?” The cost of elections has skyrocketed in the past decade. In the 2000 presidential race, the two candidates raised just under $300 million combined. In 2012, the two candidates raised more than a billion. The average price of admission to Congress is now more than a million dollars. In Alabama and Florida, candidates will spend hundreds of thousands of dollars to win seats in each state’s legislature. Lawmakers in Washington, Montgomery, and Tallahassee rely on the generosity of their supporters to get elected. In turn, when credit-union-backed candidates are elected, this support pays dividends during the legislative process.

Taking PAC fundraising to the next level It is easy for credit unions to begin a PAC fundraising program or to enhance what they are already doing. In 2013, Community South Credit Union, based in Chipley, FL, began a payroll deduction program for the LSCU Federal PAC (FEDPAC). After its first year running the program, the credit union raised 412 percent of its FEDPAC goal. Community South President/CEO Jan Page says one simple program opened the doors to her credit union staff being able to feel connected to the process. “Community South wanted employees to be more involved in the political issues that affect the credit union industry. Educating

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employees regarding the issues was part of that involvement, contributing to the PAC was another part. Payroll deductions provided an easy way for employees to contribute and be involved,” said Page. Some credit unions have chosen to incentivize payroll deduction with a jeans day or special PAC luncheon for contributors. These special promotions help to improve PAC fundraising for the credit union, and they can add up. Family Security Credit Union, based in Decatur, AL, is a strong PAC contributor that is creative. In 2013, Family Security was the highest FEDPAC fundraising credit union by raising more than $9,000. Family Security CEO Shane Nobbley sees the urgency in fundraising this year. “While PAC fundraising requires focus each and every year to maintain excitement and commitment from credit union staff, an election year is a wonderful opportunity to encourage participation. By proactively sharing information concerning PAC support given to credit union friendly candidates, both existing and prospective donors can see how everyone making a small contribution makes a real difference in the political process,” said Nobbley.

Budget Your Contribution Credit unions are encouraged to budget for a corporate donation to the PACs as well. Corporate donations are a way state-chartered credit unions can contribute to the LSCU’s state PACs. Federally charted credit unions can contribute corporately to the CU-Vote Defense Fund to meet their state PAC goals. In Alabama, corporate limits are tied to the amount of elections which means that in this election year the limit is a substantial number. In Florida, there are no limits to the amount that can be given corporately to the PAC. Leading up to the November elections, credit unions will be asked to take part in legislative nights, legislative meet and greets, and host legislators. These are all pieces of the advocacy picture but, strong PAC fundraising should be the driving force of the program. If your credit union does not take part in PAC fundraising and would like to do so, contact a member of the LSCU & Affiliates Governmental Affairs staff. For more ideas and information about PAC fundraising, check out the LSCU PAC Fundraising Guide posted on www.lscu.coop/ Governmental-Affairs/LSCU-PACs.

ADVOCACY

Overview of CFPB’s New Mortgage Lending Rules – Part 2 By Bill Berg, vice president, Compliance Training & Information, LSCU In our last issue of Signal Magazine, in Part 1 of the New Mortgage Lending Rule, I discussed higher priced mortgages and appraisal requirements for them. In this article, Part 2, I will discuss The Dodd-Frank Act’s Ability-to-Repay (ATR) requirements for virtually all closed-end mortgage loans and requirements for Qualified Mortgages (QMs). The ATR/QM rule applies to almost all closed-end consumer credit transactions secured by a dwelling. Credit unions must make a reasonable, good-faith determination that a member has the ability to repay a covered mortgage loan. A credit union must consider these underwriting standards when making an ATR determination: 1. Current or reasonably expected income or assets 2. Current employment status 3. Monthly mortgage payment for the covered mortgage loan 4. Monthly payments on simultaneous loans secured by the same property 5. Monthly payments for property taxes and insurance you require the member to buy, and other costs related to the property such as homeowners association fees or ground rent 6. Debts, alimony, and child support obligations 7. Monthly debt-to-income ratio or residual income 8. Credit history Credit unions may not make a loan to a member if they do not make a reasonable,

good-faith determination that the member has the ability to repay the loan. So, if a credit union underwrites loans with nontraditional features, such as interest-only or negative-amortization periods, a member’s ability to repay the loan after the initial period must be considered. There must be verification of the information you rely on to make the ATR determination using reasonably reliable thirdparty records and retain evidence complied with the ATR/QM rule for a minimum of three years after consummation. If members have trouble repaying covered loans originated by the credit union, they could claim the credit union failed to make a reasonable, good-faith determination of their ability to repay before the loan was made. If a member proves this claim in court, the credit union could be liable for, among other things, up to three years of finance charges and fees the member paid, as well as the members’ legal fees. After three years, members may bring ATR claims only as a defense to foreclosure as part of setoff or recoupment claims.

Different Types of QMs There are four types of QMs: general, temporary, small creditor, and balloonpayment. Of the four types of QMs, general and temporary QMs, can be originated by all creditors. small creditor and balloon-payment QMs can only be originated by small creditors. Most credit unions meet the two criteria necessary to qualify as small creditors. To be eligible to originate a small creditor QM, a credit union must have: 1. Maintained assets below $2.028 billion at the end of the last calendar year 2. Originated no more than 500 first-

lien closed-end residential mortgages (including mortgages originated by any affiliates of your credit union) that are subject to ATR requirements in the preceding calendar year If the credit union meets the two criteria to qualify as a small creditor, it can originate all four types of QMs. (See sidebar for QM definitions.) This article, along with Part 1, was designed to give credit unions an overview of the major new requirements of mortgage lending. However, there are other requirements (beyond the scope of these articles) that may need to be addressed to successfully do mortgage lending.

Balloon-Payment QM: A small creditor meeting the asset and origination limits outlined earlier can originate QMs with a balloon feature until Jan. 10, 2016. After this date, your credit union may originate a Balloon-Payment QM only if you still meet the asset size and origination limitations, and you operate predominately in a rural or underserved area. Temporary QM: Certain loans that originated during a transitional period that are eligible for purchase or guarantee by Fannie Mae or Freddie Mac or for insurance or guarantee by certain federal agencies. General QM: A broad category intended for all creditors with requirements that apply to all four types of QMs: no negative amortization, no interest-only payments, no loan terms in excess of 30 years, and limitations on points and fees. They may not have balloon payment features. Small Creditor QM: Small Creditor QMs may not have balloon payment features. Also, in order for the loan to be a Small Creditor QM, the loan must not be subject to a forward commitment, and you must follow the first two bullet points for a General QM and consider the member’s DTI’s ratio or residual income.

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ADVOCACY

How to Prepare for Your OFR Exam By Drew J. Breakspear, commissioner, Florida Office of Financial Regulation Credit unions provide individuals and local businesses with the competitive financial services they need. As a state regulator, the Florida Office of Financial Regulation (OFR) has a unique interest in credit unions, and we understand the needs of Floridians who do business in our state. As partners in providing smart, efficient, and effective regulation of the financial services industry, here are a few simple tips in preparing for your next OFR examination. These friendly suggestions are designed to provide insight and help breakdown the multifaceted examination process.

Selecting the date:

These friendly suggestions are designed to provide insight and help breakdown the multifaceted examination process. Preparing for loan review:

Offer sufficient work space:

In most cases, the pre-examination package will include a list of loans to be reviewed. The list may include various types of loans and loan files to be made available onsite. If selected loan files are only available on optical imaging, it is helpful if an adequate number of terminals are available to the examiners for their review. Paper copies of loan documents are also acceptable.

Although the size of the examination team will vary for each credit union, it is helpful for the credit union to provide sufficient work space for the examiners. As I mentioned above, we want to work with you in a swift, efficient manner, maximizing the productivity of both teams.

Cooperation:

A letter will be sent to your credit union with a predetermined date for the exam and the anticipated number of examiners expected on site. In some instances, the OFR recognizes that an examination may need to be rescheduled. However, it is the responsibility of the credit union to provide sufficient notification to the OFR requesting a new examination date.

The overall goal of the examination is to determine compliance with applicable laws and regulations and ascertain whether the credit union is financially stable and operating in a safe and sound manner. Our objective is to work with the credit unionâ&#x20AC;&#x2122;s board and senior management to address problems and identify solutions. Cooperation is an essential ingredient for this working relationship.

Completing the pre-examination package:

Provide examination contact information:

We will send your credit union a preexamination package that includes a list of items that needs to be provided to the OFR staff once the exam begins. It is helpful to have these items available immediately upon arrival of the OFR team. If you have questions regarding the requested items, your staff should contact the examination team for clarification. A complete package will help us maximize productivity once we are onsite, resulting in a swift efficient examination.

We will begin the exam with a brief meeting with credit union management and staff. The purpose of this meeting is to introduce the examination team to your staff and exchange appropriate contact information in case either team has questions about the examination. We strive to perform the examination with minimal disruption and the sharing of examinersâ&#x20AC;&#x2122; necessary contacts will help the process run smoothly.

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For more information about the OFR, visit www.FLOFR.com.

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LSCU Legislator Profile

Represenative Travis Cummings Rep. Cummings currently represents Florida House District 18, which includes the majority of Clay County residents. He currently serves as one of four House Majority Deputy Whips and is a member of the following committees: Business & Professional Regulation Subcommittee, Economic Affairs, Government Operations Subcommittee, Health & Human Services, the Select Committee on Patient Protection and Affordable Care Act (PPACA), the Select Committee on Health Care Workforce Innovation, and serves as the vice chair of the Justice Appropriations Subcommittee. In 2012, the Florida Credit Union Political Action Committee (CUPAC) board of trustees endorsed Rep. Cummings.

What it is about politics that interested you enough to run for the Florida House of Representatives? I served in local government elected office for 10 years, which provided great experience and the opportunity to give back to my community. As a small business owner with a very young family, the Florida Legislature allows me to make more significant impacts for both families and businesses throughout our state. In your eyes, what are some of the biggest issues facing Floridians as we move toward the 2014 Legislative Session? On the opening of our 60-day session for 2014, we had the opportunity to pass the Florida GI Bill which, in my opinion, will make us the most military-friendly state. Moving forward, passing legislation that tightens our sexual predator laws to best protect our children will be at the forefront due to tragic incidents of the past. Pension reform, healthcare scope of practice, and telemedicine should be heavily discussed and debated as well. There will continue to be legislation introduced that promotes less regulation and more opportunities for job creation. Most

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importantly, significant tax cuts are likely to be passed by the end of session. Last session you cosponsored a bill to amend Floridaâ&#x20AC;&#x2122;s public deposits law and allow credit unions to serve as qualified public depositories. Why do you feel this is important legislation? I firmly believe that free market competition drives our economy and affords our residents better access and lower costs to products and services. As a taxpayer, I also want to ensure that government has provided all the options available to conduct business in the most efficient and affordable manner. What role do you see credit unions playing in the financial services industry and in particular, Floridaâ&#x20AC;&#x2122;s economy? As a credit union member, I have seen first-hand the level of customer service, attractive loan programs, and other valuable financial services that have helped my family personally and with my business. Whether it is purchasing a vehicle with ultra-competitive financing terms, saving for my childrenâ&#x20AC;&#x2122;s college, or utilizing the

Rep. Travis W. Cummings (R-Orange Park) debates a measure on the House floor

robust business banking services, I continue to witness the benefits of credit unions. It is amazing to hear of the thousands of Floridians that credit unions employ, who in turn are taking great care of the financial wellbeing of a far greater number of our residents. How important do you feel the role of grassroots advocacy is in the legislative process? What advice would you give to grassroots advocates when contacting their elected officials? Credit unions are entrenched in their respective areas more than they know. In NE Florida, they are very active and devoted in serving both their members and their communities. It cannot be overemphasized regarding the importance of building rapport with your local, state, and federal elected officials and their staff members. Let them hear from you, not just about the challenges you face but also, about the good you are doing in your industry, as well as in your community.

Can you describe your experience working with the LSCU Governmental Affairs team during your time in the Legislature? The LSCU team is clearly in the top tier of government affairs professionals that I have encountered. Jared, Andy, and Jennifer are very visible and accessible both in Tallahassee and in our home districts. Furthermore, I have found them to be very well-respected amongst my fellow legislators in the House and Senate. They have figured out that their best resources and tools lie in their members who are best positioned to advocate for their interests. It is a pleasure to work with the LSCU team.

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LSCU Legislator Profile

Congressman Bradley Byrne In December 2013, Congressman Bradley Byrne won a special election to represent Alabama’s 1st Congressional District in the U.S. House of Representatives. Byrne served as a member of the Alabama State Board of Education. He was a member of the Alabama Senate representing District 32 from 2003 to 2007. In 2007, Byrne was appointed by the Alabama State Board of Education as chancellor of the Alabama Department of Postsecondary Education to serve as the chief executive officer of Alabama’s two-year college system. Byrne has practiced law in Mobile for more than 30 years, always active in the local community in various service organizations. He was born and raised in Mobile, just a few miles from the site where his great-great-great grandfather, Gerald Byrne, settled in the 1780’s. Why did you become interested in public service and politics in particular; and what led you to run for Congress? My family has deep roots in Southwest Alabama, going back to the 1700s. I am passionate about who we are as a community and where we’re going. I felt the call to public service because I care about how Southwest Alabama and our country will look when we hand it off to the next generation. As you begin your first year as congressman, what are the most pressing issues for this Congress and future ones? What are your top priorities? This is an exciting time to be in Southwest Alabama – new businesses are continuing to recognize our great potential as a community for growth and opportunity, and are continuing to invest here. Supporting existing jobs, like those at Airbus and Austal, and identifying new opportunities for development will be a key priority of mine as a congressman. I also believe at the national level we have pressing issues like our national debt and healthcare system that will define what the next generation’s America

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will look like. We need to do a better job with responsible governance so our kids have a better chance to be successful than we did. Credit unions are facing an alarming increase in regulatory burden throughout Alabama and across the United States. What do you feel is Congress’ role in helping alleviate the regulatory burden and decreasing the red tape of credit unions in Alabama? This is a recurring problem under this administration across all industries, but particularly in the case of credit unions. There’s no question that we should have rules that protect the system from abuse, but they need to be fair and workable. Government needs to realize that businesses have an incentive to cooperate up to a reasonable point – but there must be a balance. That’s why I supported passage of H.R. 3193, the Consumer Financial Protection and Soundness Improvement Act of 2013, which reforms

the executive structure of the CFPB and provides Congress with the proper oversight of this regulatory body. I believe Congress can and should play a role in relaying the concerns of industries like yours who feel the real-world consequences of decisions made by this administration. I want to work together with my colleagues to promote legislation that eases this regulatory burden to a more sensible level, allowing for job creation and economic growth. What role do you see for credit unions in serving the people of Alabama and how do you see them as part of the continued economic recovery in Alabama? Credit unions will play a vital role in the continued economic recovery in Alabama and across our country â&#x20AC;&#x201C; thatâ&#x20AC;&#x2122;s why we need to continue promoting policies that make sense for the industry, rather than dampening investment and growth. Credit unions often build lasting personal relationships with their customers and provide financial stability to families in times of need. Many Alabamians felt especially thankful for their credit union partners during the financial downturn in 2008. I look forward to working together with your industry to promote policies that will put Americans back to work. If you could give one piece of advice to grassroots advocates for credit unions, what would it be? Make your voice heard through Congress, directly to the administration or to local elected officials. Tell your story. I am always looking to hear directly from those on the front lines whose livelihoods are affected by the decisions made in Washington, to inform policy debate and make government work better. If we can create more of a constructive dialogue and cut through the political echo chamber, I believe the country as a whole will benefit.

Representatives from Army Aviation Center FCU, Mobile Educators, Alabama Credit Union, and New Horizons Credit Union meet with Congressman Byrne (center) during Hill visits during the 2014 CUNA Governmental Affairs Conference in Washington, D.C.

With the recent announcements of major industries locating in Alabama, Airbus in the Mobile area as an example, what are your thoughts on Alabama continuing to become a major contributor to the global business market? Alabama has done a great job of throwing its doors wide open to the business community and promoting policies that invite continued investment in our communities. Just this month, Remington decided it would relocate to Alabama for a variety of reasons, but mainly because of our business-friendly attitude. I believe our state and particularly Southwest Alabama is a great model for other areas to emulate. As our communityâ&#x20AC;&#x2122;s representative, I am looking for every opportunity to facilitate job growth and economic development, and I anticipate we will continue to see more good news about jobs coming to our community. n

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INITIATIVES

Why DE?

Three credit union professionals share their Credit Union Development (DE) experience By Adena Whitman, senior member relations consultant, Cooperative Initiatives, LSCU You may have heard some of your peers talking about being a “DE” or “Being the best class ever!” Both these phrases are in reference to the Credit Union Development Educator (CUDE) certification being offered by the National Credit Union Foundation (NCUF). Designed to give both long-time credit union professionals, as well as newbies an awareness of the history and philosophy of the movement, the week-long seminar also sheds light onto the ties our industry has within the wider world of cooperatives. Essentially, DE Training provides handson critical lessons in cooperative principles and credit union philosophy while incorporating the challenges credit unions face today. During the week-long program, participants are involved in group exercises, field trips, discussions with speakers from around the credit union system, and team projects which propose solutions for

Lisa Brown, CEO, Tallahassee-Leon Federal Credit Union 18

credit unions to help alleviate or eliminate challenging situations. So, rather than telling you second-hand about the program, we interviewed new and not-so-new DEs to get their perspectives on the program and how it has affected their careers and credit union philosophy. We reached out to Lisa Brown, CEO, Tallahassee-Leon Federal Credit Union, who just graduated from the Winter 2014 DE class; Shirley Senn, vice president, ALM, Corporate America Federal Credit Union, who graduated in May of 2013; and John Deese, CEO, PBC Credit Union, who has been a DE for more than 24 years. Q: What was your expectation of DE when you were told (or decided) to go to the class? Did you receive any feedback or input from co-workers or friends in the credit union industry? Lisa Brown: I had been trying to dedicate the resources to attend DE for many years. I had many long-time career friends that recommended that I attend, but they

Shirley Senn, vice president, ALM, Corporate America Federal Credit Union

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John Deese, CEO, PBC Credit Union

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provided very little specific information about the course. Shirley Senn: My expectations were ones of excitement because I knew this experience would change my life and the approach I took to involving myself in social and economic development. Co-workers indicated that it would be life-changing and that there would be a life-defining moment that only you would know when it happened. John Deese: The DE program had just started so there were very few people that were actually DEs and even fewer who knew the program even existed. My only expectation was that I was going to embark on a journey that would enlighten my world but I didn’t know just how powerful that journey would be. Q: What did you like about the workshop? Did it exceed those initial expectations? Lisa Brown: Initially I expected to simply study the history and philosophy of the credit union movement along with making some new business contacts. I completely underestimated the power of people in the learning process! I had self-studied the history and philosophy of credit unions while working on my CCUE designation. This course took the concepts so much further! The relationships that developed were amazing. Shirley Senn: I enjoyed the teambuilding exercises as they helped us in learning to trust each even though we had not met prior. John Deese: The workshop was incredible because in those days it focused more on international development and opened our eyes to a world that most of us didn’t

even know existed. I remember during the training being told that we would now realize there was an “international” section in newspapers that reported on world events. After I returned home, I remember sitting one morning reading the newspaper and realized how much information and knowledge I had missed most of my life. It was very powerful. Q: What exercise or session resonated the most with you? Lisa Brown: That’s a secret! :-) Shirley Senn: The poverty life simulation resonated most for me. In this exercise we were able to put ourselves literally in the shoes of someone who must deal with poverty, welfare, and all of its issues every day. It made me realize that many of these individuals are no different than me, that the way our society treats those in poverty and low income is demoralizing. Most of these individuals simply want to be a productive member of society and have fallen on hard times. As credit unions, I think we have a responsibility to assist these individuals and help them reestablish self-worth and pride so they can become productive members of society. John Deese: I think the opportunity to work on projects related to developing issues were very rewarding. Q: What did you get most out of the class experience? Lisa Brown: The deep awareness of social issues, and how they relate to my credit union. Truly an inspiration! Shirley Senn: The class showed me that we have a responsibility to help others that traditional financial institutions won’t service. When individuals have jobs, an education, access to affordable financial services and most of all, are treated with dignity, these individuals become contributing members of society. It is a win-win situation for everyone. How does it benefit the credit union or the individual to deny them access

CU Philosophy in Action If your schedule will not allow you to take a week to participate in the CUDE program, consider the LSCU’s Credit Union Philosophy in Action Workshop. Scheduled for July 16-17 in Orlando, the Credit Union Philosophy in Action Workshop is modeled after the National Credit Union Foundation’s CUDE program. The two-day immersion program provides participants with a historical perspective on credit unions and cooperatives while focusing on how to implement the cooperative principles of credit unions in day-to-day work activities. The CU Philosophy in Action Workshop is designed for new credit union employees, as well as anyone who wants to be re-energized about helping members reach their financial goals. Lessons learned at the CU Philosophy in Action Workshop can be incorporated into employee orientation and training programs. For more information about the CU Philosophy in Action Workshop, contact Laura Vann, vice president, Cooperative Initiatives at 866.231.0545, ext. 2181 or laura.vann@lscu.coop.

“It broadened my horizons and made me more aware of the importance of helping people. I am a much stronger and better person today because of my DE experience. I feel it helped mold me as an executive so that I could be a better person and truly dedicated to helping our members and our employees.” — John Deese to affordable credit merely because of an unlucky circumstance? By working with these individuals, understanding their specific and unique needs, and assisting them to be productive members of society, we are not only giving back to society but also assisting credit unions’ financial viability. John Deese: I don’t know how you select the one thing that you get out of DE. But if I had to select just one thing it would be the awesome friendships that I made and the special bond that I have with those people 30

years later. I can honestly say that my best friends in the movement are the people that I met during the DE training. Q: How has the DE impacted or affected your career or life? If you are a new DE, what are your expectations with regard to how it might affect your career? Lisa Brown: After 20 years in the industry and plenty of educational opportunities, this experience was truly life-changing. The most important thing that I

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realized is that DE doesn’t change how I run my credit union... it is a strong reminder of WHY we do what we do. Shirley Senn: By taking the time to become a DE, I think I now have a responsibility to implement and teach others. The programs and its facets relating to financial empowerment have encouraged me to redirect some of my energy in becoming actively involved in causes and projects that are specific to helping the underserved. I feel like I have been now more exposed to the humanitarian roles that credit unions must embrace. John Deese: It broadened my horizons and made me more aware of the importance of helping people. I am a much stronger and better person today because of my DE experience. I feel it helped mold me as an executive so that I could be a better person and truly dedicated to helping our members and our employees. Q: What projects have resulted from your class attendance? Do you have plans for future projects? Lisa Brown: I am working with Sylvester Kadzola with MUSCCO in Malawi to look for ways to bring financial education to children in Malawi. Shirley Senn: My first project was to simply relate the cooperative principles to who we are as a credit union. I was amazed at how many credit union employees don’t even know about the cooperative principles. Second, I have begun volunteering through the military community to teach basic financial education to young service members and their families. It would be my desire to obtain a financial counseling certification to assist in this endeavor. Many of these military families are exposed to multiple financial choices, and I think they need to be aware of the credit unions in their community that support military families and their unique financial situations.

“My first project was to simply relate the cooperative principles to who we are as a credit union. I was amazed at how many credit union employees don’t even know about the cooperative principles.” — Shirley Senn John Deese: Since DE training I have done numerous outside projects including hosting a German exchange student that worked at my credit union for six months, and I’m now a godparent to his daughter. I have also been involved in exchanges with the Polish credit union movement. The great part about these experiences was that they were shared with my employees and my board, and I know that it was a great opportunity for them as well. Q: What would be your advice to anyone contemplating the DE class? Lisa Brown: Don’t even think twice... just do it! Shirley Senn: Do it! It will change your life and the vision you have for yourself personally. It has made me realize that we do need to give back to those that are less fortunate and that involvement in community is vital to this task. John Deese: GO FOR IT!!!! It will be the most important decision of your career because of the impact it has on your understanding of the world and the importance of credit unions. During the past several years it has been tough for all of us [in the industry]. I can honestly say that being a DE helped me to survive because I knew in my heart that our members need us and depend on us to help them achieve their dreams. DE is powerful because DE is the foundation of what makes credit unions unique.

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DE training is open to everyone — from new employees who need a credit union orientation to seasoned executives who just need to recharge and reinvigorate. Graduates: ■■ Acquire skills in credit union outreach initiatives, problem solving, technical assistance, team building, and public presentations. ■■ Earn certification as Credit Union Development Educators (CUDEs). They join a networking group including more than 1,000 graduates across America and 30 other countries. ■■ Realize that local issues are indeed global – and that credit unions grow stronger by working cooperatively. ■■ Return to their jobs with new understanding of how to promote cooperative principles and credit union values as distinct advantages in today’s competitive financial services marketplace. LSCU has committed to sending more staff through the CUDE program and already has seven graduates, with two more attending in 2014. For more information on the CUDE program, contact the LSCU Cooperative Initiatives department or visit the National Credit Union Foundation website at www.ncuf.coop.

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INITIATIVES

YPG: Professional Development and Passion Abound By Laura Vann, vice president, Cooperative Initiatives, LSCU

The LSCU launched the Young Professionals Group (YPG) in 2012, and, in less than two years, the group has grown to almost 100 registered participants. There are active groups in multiple chapters, and participants report the program is meeting its established goals of improved industry awareness, increased knowledge exchange and professional development, and strengthening the collaborative spirit of young credit union professionals. ”Any LSCU affiliated credit union or CUSO employee under the age of 40 is eligible to participate in the LSCU Young Professionals Group,” said April N. Ales, member relations consultant at LSCU & Affiliates and the coordinator of the program. “The Young Professionals (YP) program is structured as a stand-alone group with geographic groups as sub-sets of the appropriate chapter,” Ales said. There is no fee to participate in the Young Professionals Group but events such as YP activities at the Southeast Credit Union Conference and Expo do have registration fees. “For the YP day of education at the Southeastern Credit Union Conference & Expo, we try to focus on professional development, as well as information on the history of credit unions and how credit unions fit into the cooperative structure,” said Ales. “This year, the education sessions will focus on living the seven cooperative principles and utilizing the Biz Kid$ program for financial education outreach. Biz Kid$ is an Emmy Award-winning public television series about kids, money, and business.” Ales said the face-to-face educational events are supported by meet-ups at the chapter level. “We also hold quarterly webinars to bring all of the YP participants together. With future

A Magazine of the League of Southeastern Credit Unions

The LSCU YPG (Young Professionals Group) at the LSCU’s annual convention. Back row left to right: Scott Callison, Alex Aspura, Mike Molaka, Marcus Cowan, Tyler Beck, and David Moscinski. Front row left to right: Patricia Benitez, Ana Calvo, Jamie Roberts, Tasha Coates, and Meghan Stork.

webinars, we plan to have an educational component, as well as a discussion about best practices. The participants also have the opportunity to continue to build a broader network by interacting with their peers from both states.” Professional development scholarships for selected LSCU events are available from the Southeastern Credit Union Foundation. As participants in the YPG share details about their involvement with the program, the value of networking with peers is mentioned again and again. The participants also noted a new passion for credit unions and the credit union movement. Several commented that they now think of their work at a credit union as a career and not just a job. “Since taking on a leadership role with the LSCU YP Tampa group, my professional development has been directly impacted,” said Scott Callison, service center manager at Suncoast Credit Union. “I have met over 100 young professionals throughout Alabama and

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Florida over the past year and a half. I was invited to the LSCU chapter leaders retreat in 2013 and was given the opportunity to share what the Tampa YPG was Scott Callison doing and our vision going forward.” Callison said leaders at Suncoast Credit Union have expressed their appreciation for the effort he has put into the YP Tampa group. Meghan Storck, assistant vice president at Jax Metro Credit Union in Jacksonville, said her involvement with the LSCU YP group and the Cooperative Trust, a Meghan Storck national group of young credit union professionals coordinated by the Filene Research Institute, has

pushed her professional development to a whole new level. “Two years ago, being in the credit union world was a job. Now it’s a passion and a life-long career. “It’s pretty awesome to be able to network with others close to my age. I would not be where I am today if it wasn’t for being asked to join the YP group. The YP group led me to the Cooperative Trust, and both have been life changing,” said Storck. Remi Lukosiunas, financial analyst at PBC Credit Union in West Palm Beach, said his involvement has allowed him to learn what the credit union Remi Lukosiunas industry is all about and has provided him with excellent networking opportunities. He said the YP program and the Cooperative Trust have connected him with credit union professionals from all around the country and even the world. “The knowledge and support from these groups took my professional development to a whole new level. Crash the GAC 2014 is a perfect example of how the LSCU YP Group and the Cooperative Trust have enhanced my development as a credit union professional,” Lukosiunas said. “During the conference, I met so many people and learned so much about the legislative and regulatory issues facing the credit union industry. The support that I have received from these two groups is simply unbelievable.” Kyndle Huey, assistant vice president, marketing/communications at America’s First Federal Credit Union in Birmingham, also participated in Crash the GAC 2014. “Crashing the GAC really helped open my eyes to issues in credit union advocacy,” Huey said. “I have worked in a credit union for over eight years now and have been a member almost all my life, but after Crashing the GAC, I have an even better understanding of credit unions issues and why we consider ourselves not just an industry, but a movement, ” she said.

America’s First FCU’s Kyndle Huey talks about her Crash the GAC experience for the LSCU from the GAC video.

“I believe we need more young leaders in the credit union movement and the Young Professionals Group and the Cooperative Trust give YPs the outlet to trade ideas and learn from one another. The connections that I have made through the YP group and Crash the GAC have already proven to be invaluable,” said Huey. “I walked away from the Crash the GAC with not only a network of other credit union professionals, but also some lifelong friends.” Melissa Reeves, marketing manager at eCO Credit Union in Birmingham, said her initial involvement was the Biz Kid$ YP Workshop in November. “The content was perfect for some of the goals of eCO Credit Union. Attending the workshop helped spark more interest in the Young Professionals Group. I enjoyed networking with other young professionals and collaborating on ideas,” she said. “Talking with other young credit union employees also helps fuel my passion for the credit union movement,” added Reeves. For Ryan O’Connor, assistant vice president, marketing at Envision Credit Union in Tallahassee, his reason for getting involved was to build a network after he Ryan O’Connor relocated from Maine. “I was a little apprehensive about the process but since I was part of the overall credit union movement previously, I wanted to leverage the chapter and other League initiatives. Also, most credit union folks I know under 40 are passionate, ambitious,

and ready to make a difference at their credit union.” O’Connor serves as liaison to the Tallahassee Chapter and said the YP group has encouraged him to think both inside and outside of his organization. “Internally, I’ve been able to strengthen relationships with young professionals at my credit union by sharing information about the YPG initiative. This personal communication has led to a more effective working relationship with peers. Externally, I’ve been able to reach out to area credit union leaders and advocate for the benefits of the YPG initiative to their younger staff. Thus, the program has given me exposure to leaders in addition to young professional colleagues.” He thinks the most important reason for young professionals to get involved is to collaborate with other credit unions. “For too long, credit unions have viewed other credit unions as their main competitors in the market and have developed strategies that limit collaboration among staff,” O’Connor said. “Although this information is true for the most part, the ‘Don’t Tax My Credit Union’ initiative has proved that over 90 percent of all financial assets across the nation are not held at credit unions. As young professionals in the industry, we are charged with changing the competitive paradigm and building a culture of collaboration with our peers. Only after this is achieved, we can take the largest bite out of overall market share as one collaborative group.” For information on how to get involved with the LSCU Young Professionals Group, contact April N. Ales or any member of the Cooperative Initiatives team. Participants are asked to complete an application form, available on the LSCU website, www.lscu.coop, under Cooperative Initiatives on the Young Professionals Group page. The LSCU Young Professionals also have a Facebook group page (LSCU YP) and a LinkedIn group (LSCU Young Professionals Group).

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EDUCATION

Upcoming Learning Opportunities Check out the learning opportunities for 2014 and mark your calendars. More details on each event can be found online at www.lscu.coop. Click the Education tab then Events Calendar.

April 2014

July 2014

October 2014

LSCU Spring Regulatory Compliance Update Seminar, Tallahassee, FL

13-16

Southeast Regional Director’s Conference | Savannah, GA

7-8

LSCU Collections & Bankruptcy School, Birmingham, AL

LSCU Spring Regulatory Compliance Update Seminar, Birmingham, AL

LSCU Bank Secrecy Act Workshops, Mobile, AL

21-22

LSCU Lending School, Birmingham, AL

TBD

LSCU Bank Secrecy Act Workshops, Huntsville, AL

NFCDCUs Community Development Workshop, Location TBD

LSCU Disaster Recovery Conference, Mobile LSCU Disaster Recovery Conference, Jacksonville, FL

LSCU Credit Union Philosophy in Action Workshop, Orlando, FL

August 2014

May 2014 6-7

16-17

3-6

Southeastern Supervisory Committee Conference, Point Clear, AL

20-22

Southeastern Credit Union Managers Association (SCUMA) Annual Meeting, Destin, FL

LSCU OFAC & Bank Secrecy Act School, Birmingham, AL

June 2014 6-13

Southeast CUNA Management School, Athens, GA

11-14

Southeast Credit Union Conference & Expo, Orlando, FL

28-2

America’s Credit Union Conference, San Francisco, CA

November 2014 4-7

Southeast Leadership Development Conference, Destin, FL

*Bolded listings denote workshops and conferences. Non-bolded listings denote webinars.

September 2014

LSCU Fall Regulatory Compliance Update Seminar, Tallahassee, FL

LSCU Fall Regulatory Compliance Update Seminar, Birmingham, AL

24-25

LSCU OFAC & Bank Secrecy Act School, Tallahassee, FL

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EDUCATION

Finding a Way for Employee Professional Development By Tamra Fairbrother, CMP, CMM, VP, training & events, Cornerstone Credit Union League In the New Year, people are focused on getting in shape physically, setting resolutions, and finetuning their budgets and financial goals, but how many times are forming this year’s plan for professional development and continuing education? Expanding your knowledge in your field ensures you continue to be competent in your profession. Some company cultures support the ideas of professional development; however, due to limited time, staff or financial resources, it may not be a top priority. Meanwhile, others ensure training and the ability to engage in conferences and webinars are available to their staff at all costs on a consistent basis. I very much appreciate the quote, “You can make an excuse or find a way.” Isn’t that true with anything? When the alarm sounds at 5 a.m. for boot camp, it’s always tempting to hit the snooze button. But when we are motivated to achieve a goal, we find a way to make it happen. We plan better by going to bed early or laying our clothes out the night before to be ready. The same is true for our career growth. Professional development must be an ongoing process. When an unexpected opening occurs at your credit union, will you be the most knowledgeable and well prepared for the position? Learning isn’t just for students in school. We should all be students and masers of learning in our lives. We should strive to hone those skills that will make us the top choice for a new promotion, stay up-to-date on trends and industry best practices to keep us relevant in our

In order to “find a way,” begin the year establishing your education plan. Decide which training offered through the League is important to you and block out your calendar. respective positions, and continue showing our value to the organization and our members. Sometimes the reasons for not taking advantage of professional development opportunities are valid. Limited manpower in the office can be a factor in the ability to attend every conference or seminar you desire. In order to “find a way,” begin the year establishing your education plan. Decide which training offered through the League is important to you and block out your calendar. If you work for a small credit union, I encourage you to do this as a team so you can support each other’s efforts and plan to back each other up. Ensure needed dollars are allocated in the budget, and take advantage of the early bird registration rates* offered for League seminars and conferences. And, remember that

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educational grants are available through the League foundation. ** Keep in mind that while face-to-face meetings are the best way to gain peerto-peer networking and connections, there is real value in supplementing that type of learning with online training. Webinars are an affordable way to expand your knowledge. Again, when it’s important, we always “find a way.” Take advantage of your membership with the League by attending educational and training events. You will be part of a peer-topeer network like none other. *Early bird registration rates are offered for all LSCU seminars and conferences **The Southeastern Credit Union Foundation offers scholarships to provide financial assistance to credit union staff, management, and officials to attend education events. For more information, visit www. supportourcucommunity.org/Purpose/Credit-UnionEducational-Scholarships.

NEWS

League News League News - Quail Hunt Raises More Than $9,000 for LSCU FEDPAC

Alabama Credit Union’s group of hunters pose for a picture after their hunt (l to r): Benson Bolling, VP, lending; Kyson Mauter, mortgage/consumer loan officer; Keith Swofford, marketing assistant; and Steve Swofford, president/CEO.

The LSCU held its second annual Credit Union Quail Hunt at Doublehead Resort in Town Creek, AL, on Jan. 24 and 25. Nearly 60 attendees hunted over two days and raised more than $9,000 for the LSCU FEDPAC. Half-day hunts were held in the morning and afternoon on Friday and Saturday with participants shooting sporting clays during their down time. Participants and sponsors also enjoyed the reception and dinner held at the resort’s lodge which was sponsored by LEVERAGE and CUNA Mutual Group. During lunch on Saturday a raffle was held for a Browning Maxus 12 gauge shotgun which was won by Jack Knight of Barfield, Murphy, Shank & Smith. Special thanks to LEVERAGE, CUNA Mutual, Listerhill Credit Union, New York Life, Vining Sparks, Barfield, Murphy, Shank & Smith, Print Resources, and Trimmier Kudulis Reisinger, as well as the Birmingham, Northeast, and Tuscaloosa Chapters for sponsoring the shotgun raffle.

Alabama Credit Union Association State GAC The Alabama Credit Union Association State Governmental Affairs Conference in Montgomery immersed attendees in many topics that will help credit unions on the legislative and regulatory front. It also helped attendees gain a greater understanding of the upcoming state and federal elections. Guest speaker Yellowhammer CEO Cliff Sims talked about how the state and federal elections could impact Alabama. If Republicans take the Senate this year, Alabama would arguably have the two most important senators with Sens. Richard Shelby (R) and Jeff Sessions (R). More than 50 lawmakers attended the legislative reception. For more than two hours, attendees spoke with their legislators. It was the perfect opportunity for credit unions to get to know their local lawmakers and begin talking about credit union issues. State Sen. Slade Blackwell (R-Mountain Brook) was honored as the LSCU State Lawmaker of the Year. Sen. Blackwell is the chairman of the Senate Banking Committee and the sponsor of the Alabama State Credit Union Act update bill. He praised the job credit unions do and said his first car loan came from a credit union. Credit unions were recognized for their PAC fundraising efforts with the PAC. Many succeeded their goal by leaps and bounds. The lawmaker visits revolved around the update to the Alabama State Credit Union Act, patent trolling, and public deposits. With

Rep. Steve Clouse talks to the Alabama State GAC attendees during Hill visits.

patent trolling being a relatively new issue, the League, along with a handful of credit unions, was able to meet with Rep. Phil Williams (R-Madison), the bill’s sponsor. Rep. Williams was excited to talk to the credit unions that have had first-hand experience with patent trolling, including Corporate America CU CEO Pete Pritts. All in all, credit unions left the State GAC with a greater sense of the hot issues in Alabama, the upcoming elections, and the importance of PAC fundraising

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COMMUNICATIONS

How to Build a Social Media Policy By Michael Ogden, media relations manager, CUNA Mutual Group

Too many social media policies in credit unions are born in the aftermath of a social media gaffe, as in, “We should have had a rule about letting Larry post our Facebook updates after midnight.” To put the social media policy’s place in your organization into perspective, compare it to your lending operation. Your lending policy documents the basic parameters for risk tolerance, loan types, reporting structure, compliance process, etc. On that foundation, you build lending strategies—indirect auto loan alliances, monthly direct mail campaigns, and the like—which are carried out in the day-today performance of your branch managers and lending staff. Your social media program can follow the same structure, more or less. Every credit union is different, but consider addressing these basic elements in your social media policy:

1. Ownership/authority Someone must take overall responsibility for your credit union’s social media activities. But in the social media sphere, that’s not as simple as it sounds. Effective social media is timely. It’s not a broadcast, it’s a conversation—and if you’re not an active participant, you probably won’t engage your target audience. Another danger for the social media tortoise: a rapid spread of misinformation while you’re carefully writing responses by committee and/or waiting for the green light from the executive suite. The upshot is, choose and train social media communicators you can trust and avoid management approval bottlenecks. Establish your point person(s) who will post and monitor material on each of your social media platforms, and backups to keep the conversation going during vacations.

2. Metrics How will you measure success? As with many types of public relations and marketing, measuring the full impact of social media isn’t possible. With some coaching in web analytics, however, you can set certain benchmarks that will help guide your strategy.

3. Tone Social media is a conversation, right? So be conversational if you want to be relevant. And be in tune with the platform. A credit union

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Facebook page might be like business casual; Khakis and docksiders. Twitter? Shorts and flip-flops. Although tone is certainly a strategy, it also belongs in the policy, so everyone involved understands that posts, tweets, videos, etc., will probably depart from the more formal business communication style of older media.

4. Compliance Your policy should establish when compliance is required, especially for any content relating to specific products. This material can be construed as advertising that requires disclosures. Contests are popular social media tools, but many are subject to specific rules. So your communicators should have an excellent working relationship with your compliance expert.

5. Continuous monitoring and follow-through Detail how often your social media accounts should be monitored. Responding to comments from outside your credit union is critical, especially (but not only!) when they’re negative. Show that you’re plugged in. It’s also important to cross-check information you receive and disseminate through social media. Encourage all employees to respond promptly when your social media person routes them a request for service or information. Immediate, accurate responses build a sense of community among social media users. You’ll have little choice but to review and adjust your social media policy at least annually, because chances are your audience will be using different media and technologies in different ways a year from now. Electrons are whacky like that. Contact Michael Ogden at Michael.Ogden@cunamutual.com.

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Insight. Oversight. Foresight.®

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INDUSTRY

Ten Ideas

for a Culture of Innovation By Jeff Rendel, CSP, president, Rising Above Enterprises

Introduce the topic of innovation and, often, thoughts and discussions result in a journey along the path of determining what the next groundbreaking, irreplaceable, home-run-hitting product or service is best for your members or processes. However, the largest part of the tangible worth of innovation (and its culture) lies in imitation (see “Defend Your Research: Imitation is More Valuable than Innovation,” Harvard Business Review, April 2010). For that reason, while dreaming up the next iPad (a much better version of the then and already existing tablet PC); don’t overlook making standing ways of doing business a little better, and a part of your common culture. Here’s how.

Anticipate and congratulate continuous innovation in all areas. Innovation isn’t restricted to products and services. Oftentimes, innovation is active and effective “behind the scenes.” If any staff member has an empirically-supported “better way of doing things around here” (stress ‘empirically-supported’), you need to hear about it. Relay this expectation to all of your colleagues. Welcome their comments. Hear their solutions. Implement the great ideas. Involve those who contribute. Champion those who participate.

Ask hard-hitting questions: What’s working, and what might work better? It’s easy to become self-satisfied, especially when the cash is flowing and the members are buying. Ultimately, your competition

figures out your lead and adds a wrinkle to your winning ways. Ask college football’s spread offenses. But, your members change, as do their expectations. What makes your member’s dealings with you easier, more effective, and of greater value? Does a small wrinkle in your delivery keep you winning?

Make certain that your most innovative minds are in direct contact with your members. Intuit has this “down pat” with their “Follow Me Home” program. In the early years, Scott Cook, Intuit’s founder, would hang around a Staples store and wait for someone to buy Quicken, the financial software. Cook would ask the new member if he could follow them home and watch as they installed and used Quicken. This was one of the keys in Intuit’s success because it allowed them to immediately improve a product. Intuit continues this practice today and so can you. Perhaps you construct a member council to gain a perspective on what’s working and what might work better? Or, you could involve front line sales

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and service staff members in innovation meetings to get their hands-on viewpoint. Either or other ways, learning what’s going on in the minds and practices of your members helps your business get better.

Don’t let one department hold sway. Innovation is an enterprise-wide function; it should encompass the entire enterprise. Say you create a team tasked with dreaming, designing, and determining innovative products, services, and processes. Chances are each innovation will affect sales, service, operations, technology, compliance, human resources, and more. Involve staff members from affected departments to determine the enterprise-wide effects of original ideas. If the only people discussing sales are from Sales, then Sales gets what Sales wants. Decisions moving forward may be the same; however including a comprehensive selection of professionals helps ensure the entire organization engages in your credit union’s progress.

Let them sort it out; be prepared to stomach a bit of bedlam. Here’s where your conflict management guide comes in handy. Tasked with an objective, diverse ideas for operative strategies will be presented. Some individuals may a have pet project, some may have an idea that’s working elsewhere, and some may believe the status quo is just fine. If the end result is progress, gaining agreement involves conflict. What is most important is finding common areas of agreement before moving forward. This involves gaining and capturing input and ideas. It involves prioritizing “musts” versus “mights” and determining if each idea meets the end objective. In the end, you want your conflicts to generate clarity, consensus, and commitment.

Pay and acknowledge for performance. This one’s easy: help the company move forward, get rewarded. It might be a cash bonus, mini vacation, public celebration, or personal time off. Whatever the reward is, the message is clear: take an active role in helping your credit union change for the better and you will benefit.

Invest resources in good ideas. Let’s say growth in new markets is your objective. Your innovative thinkers have determined that the most effective way to grow is via targeted acquisitions or mergers. This involves capital outlay – and it sure looks like a lot of money. How committed are you when the right idea involves a large sum? And how committed are your staff members when that best idea involves a new culture? If it is still the desirable idea, determine and invest enough resources (financial, human, systems) to ensure enterprise-wide acceptance, engagement, and success.

Don’t cold-shoulder the innovators. Innovation is oohs, ahhs, grins, and giggles until it means change. Then, it’s “your idea.” If the case for innovation has been made, then the innovators need championing. They need executive backing. They need managerial buy-in. They need staff commitment. This begins with leadership dedicated to a culture of innovation and displeased with a philosophy of contentment.

at a bad idea. While we do our best to make and implement once right decisions; markets, members, economics, and more change. A culture of innovation knows where resources are best deployed and seeks to keep them in the most effective, progressive programs.

Let your front line leaders help lead innovation. It may well be that only some front line leaders are part of your innovative thinkers; but, all of your front line will be a part of your implementation. Once an idea is ready to roll, ask your front line leaders how they might see it best working at their level. They will offer practical insights, feel a part of the innovation process, and help you get buy-in from those who implement. Innovation is more than a corporate value, core competency, or strategic objective. Innovation is: an essential element of corporate culture; a mandatory feature of professional performance; and, a vital component of day-by-day-create-andcompete measures. As swiftly as the world of business is shifting, your members are counting on you to design, develop, and deliver imaginative and resourceful products and services to better their lives and businesses. Contact Jeff at jeff.rendel@risingaboveenterprises, www.RisingAboveEnterprises, or 951.340.3770.

If the new idea isn’t working, kill it. There is no sense in throwing good money

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LEVERAGE

Identity Theft Protection and Credit Union Philosophy By Kevin Lytle, vice president, Innovation and Business Development, LEVERAGE Trust is key when an industry specializes in managing people’s money, and the trust that members feel towards their credit union expands into other areas of their lives. Credit union principles are founded in the philosophy of cooperation and its central values of equality, equity, and mutual self-help. Around the world, credit unions and other co-operatives foster human development and our common humanity; people working together to achieve a better life for themselves and their community. The financial industry is one of the most targeted when it comes to data theft; proactive identity protection and fraud detection mitigate the impact of these attacks quickly and easily. Security attacks on financial institutions are expected to increase by nearly 30 percent over the next two years. Security and protection become even more indispensable as more business is conducted online and financial transactions are completed online and through mobile devices. Let us take a look at some of the key findings from the “2013 Identity Fraud Report: Data Breaches Becoming a Treasure Trove for Fraudsters” by CSID:

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Identity fraud rose for the second consecutive year, affecting 5.26 percent of consumers and costing a total $20.9B Identity fraud affected 12.6 million consumers in 2012; an increase of one million consumers since 2011 The overall fraud resolution rate reached an all-time high of 92 percent this year, up significantly from 80 percent in 2007 Fraudsters pilfered $4.9B in 2012 from consumer accounts through takeover schemes – the incidence of which increased more than 50 percent from 0.36 percent of all consumers in 2011 to 0.6 percent in 2012 Credit cards (36 percent) and demand deposit accounts (33 percent) remain the top targets for takeover schemes in 2012 Existing card fraud victims were most likely to be notified by their respective financial institution (35 percent) — this was especially true of those whose existing credit card was misused (41 percent) compared with existing debit card (24 percent) Physical address change was the most frequent action taken by fraudsters in account takeovers at 55 percent For military consumers, identity theft was the number one complaint category A Magazine of the League of Southeastern Credit Unions

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Data Breaches ■■

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Consumers that were notified that their SSN was breached in a company data breach were nearly 14 times more likely to be victims of new account fraud than all other consumers Consumers who were victims of a data breach were more likely to be victims of fraud in 2012 (22.5 percent) than were similar consumers in 2011 (18.9 percent) Credit card numbers are the foremost target of data breach perpetrators at 40 percent

According to the Federal Trade Commission’s (FTC) Consumer Sentinel Network (CSN) Data Book, January – December 2013, CSN received more than two million complaints (excluding do-not-call) during calendar year 2013: 55-percent fraud complaints; 14-percent identity theft complaints; and 31-percent other types of complaints. Those in Florida, take note: Florida is the state with the highest per capita rate of reported fraud and other types of complaints to the CSN, followed by Nevada and Georgia. It is also the state with the highest per capita rate of reported identity theft complaints, followed by Georgia and California. While member education, regular and persuasive communications, and successful execution of product and service marketing are all critical in establishing the long-term bond with your members, don’t forget to look beyond traditional financial services. It just so happens that financial institutions are the number one place consumers look to purchase these services. According to Javelin Strategy & Research’s Market Rates Insight, 69 percent of credit union members would use lifestyle financial services, and 82 percent of consumers would be likely to buy identity theft services from their bank or credit union. The time is right for credit unions to add identity theft protection to their checking accounts and employ certified professionals to provide hands-on problem resolution in times of need. A robust security strategy for credit unions that also offers personal protection for members costs very little – or nothing at all – when applied across a large group. But the benefit to each member is huge – and easily recognizable as having monetary value. If you provide the right communication and training for staff and protect your member’s privacy by not requiring them to register for the service (it should be part of the account relationship), you can create a value exchange that will be widely accepted and welcomed by your members.

LEVERAGE

Debit Cards, A Historical Perspective… What You Need to Know and Why! By Jay Brady, VP, transactional services, LEVERAGE In spite of all the recent publicity regarding A recent study conducted compromises and the by the American Consumer concerns over card security and identity theft, Credit Counseling (ACCC) the use of debit and credit shows that 80 percent of cards has never been Americans use more prevalent. In fact, while most of us have been using debit cards for years, we are in the their debit card for midst of a cultural shift when it comes to this everyday purchases. payment method. Why? Let’s examine the history of debit cards. For most of the adult population, we can recall a time when we would write checks to pay our bills, cash to buy everyday items, credit cards for large purchases, and ATM cards to access cash. These ATM cards could only be used at certain ATM locations and not at merchant locations. By all accounts, this was the case for the majority of us prior to the early 1990s. Since then, the old “ATM” card has undergone a complete facelift and the payments to differentiate our brand from the bank down the street, and to industry has experienced a seismic shift in how we conduct our daily embrace the future or payments. For many credit unions, this may affairs. So why is this important to us? mean relying on external resources to provide some of the expertise The young adults of today have grown up in the world of debit necessary to accomplish these goals. LEVERAGE’s debit solution cards. Their use of cash—and for that matter, credit cards—is very allows credit unions to take advantage of one of the premier debit different than previous generations. A recent study conducted by the networks while also providing the necessary marketing tools to build American Consumer Credit Counseling (ACCC) shows that 80 percent various campaigns based on the member segmentation analysis. of Americans use their debit card for everyday purchases. This may not seem all that surprising until you hear that an astounding 100 percent of 18-24-year-olds use their debit card for everyday purchases. Additionally, 69 percent of respondents now say that they use their debit card when shopping for special occasions such as holidays, back to school, etc. So what should we do? Credit unions need to embrace this new environment and recognize that not only are debit cards here to stay, they are now the primary payment method used by our young adults. Strategies and promotions should be developed to support debit card usage,

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