Montana 1st CU Blog

Some of you will remember me whining (I do that sometimes) about having to compete with mega-banks now flush with cash courtesy of the US Government.  Well it seems the boys at the American Bankers Association have the same heart burn and have been lobbying congress for support of “the little guys”.

ABA Concern Over GMAC/Ally Bank Rates Attracts Attention

ABA’s May 27 letter to FDIC expressing concern about GMAC Bank/Ally Bank’s use of above-market interest rates to fund rapid asset and deposit growth while under significant financial stress — including $13.5 billion federal support of its capital position — is attracting attention. Several news outlets have covered both ABA’s letter and Ally Bank’s response, in which CEO Al de Molina boasted that “Ally Bank has capital well in excess of FDIC requirements and is better capitalized than many of your members.”

But ABA noted that much of GMAC/Ally’s capital comes from government support, which the bank is leveraging in a questionable manner to fuel its growth.

ABA also pointed out yesterday that when the FDIC recently authorized GMAC to issue up to $7.4 billion in guaranteed debt under FDIC’s Temporary Liquidity Guarantee Program, GMAC promised to develop a funding plan “with a focus on diversifying funding and deposit sources and reducing the bank’s overall cost of deposit funding” as part of the agreement.

Yet as of June 2, GMAC/Ally — which lost $122 million in 2008 and $133.5 million in this year’s first quarter — was offering annual percentage yields of 2.8 percent on one-year CDs that were more than double the national average of 1.2 percent, and six-month CDs with a 2.1 percent APY, far above the national average of 0.94 percent.

ABA continues to press for a solution, concerned that the bank, in which the government holds a controlling interest, is engaging in risky financial strategies that could harm both it and other industry members.

Normally I wouldn’t say this to bankers, but…You go boys!

Lawmakers have changed the way credit card companies operate recently.  I wanted to make you aware of the changes, not because Montana 1st is changing, but rather because you may have credit cards with other companies that are having to change their practices.

First, credit card issuers have to warn you 45 days in advance of a rate change.

Second, a card issuer can only increase your interest rate for non-payment after 60 days of delinquency.  In addition, once you have paid the issuer on-time for 6 consecutive months, your rate has to go back to the original interest rate.

Third, issues can no longer “double cycle bill”.  Meaning, card issuers cannot calculate interest over two billing cycles.

Fourth, card issuers cannot charge “over limit” fees unless you as the consumer have given them written consent to go over your limit at point-of-sale.

What does this do to/for you?  If you find yourself in credit stress…this is a great law.  However, if you pay your bill on time every month and don’t tend to have credit issues, you may find that your issuer starts charging an annual fee, increases your rates, or shortens your grace period.  So…like most changes, we will have to wait and see.

FYI, at Montana 1st there has never been an “over limit” fee, our grace period is still 30 days (unlike local competitors), we don’t use double billing cycles, and we still have a fixed rate!  OK…enough of the shameless plug.

Congratulations to all Americans!  GM has been delisted as a public company on the DOW (replaced by Cisco Systems) and the American Taxpayer now owns 60% of the new company.  Cause for celebration…I dunno?  If GM (under the governments watchful eye) is able to emerge from bankruptcy stronger and better positioned to compete…maybe?  BUT…as a friend of mine pointed out today, GM is not going to come back producing the $40,000 Chevy Volt.  So…what to do with GM now that they are mostly owned by the government?  Make cars for every American free of charge?  Not likely.  Use factory capacity to build “green” infrastructure (trains etc)?  Not likely again.  Only time will tell if the once iconic GM can pull itself up by the boot straps and be relevant in today’s world.

A side note, I recently had the opportunity to see T. Boone Pickens.  Boone was asked “are the big three ready and able to produce cars that run on natural gas”…his response surprised the crowd.  Boone responded “GM already has 19 models that run on natural gas, they just aren’t available in America.”  WHAT?  If you find this even remotely aggravating, read “Taken for a Ride” and “War on the Middle Class”, it might spur you to run for office.

PS-  I’m game to find out how closing 19 factories and moving the jobs to Mexico, and China is going to help the new owners (us).  I’m willing to guess our representatives in Washington are willing to tell us!

SALVAGE AND FLOOD TITLES

We get quite a few questions on salvage titles, so I thought some basic information might be helpful…

You’ll need to be especially wary of buying vehicles that have salvage or flood titles. While the prices on these vehicles may be enticing, the problems you might encounter after purchasing such a vehicle are not.

SALVAGE TITLE is usually given to a vehicle after it has received extensive damage due to a collision, vandalism, or a weather-related condition, and would cost more to repair than its market value.

A flood title is given, as the name implies, to a vehicle that has been severely damaged by a flood, or some other water-related situation.

REBUILT SALVAGE TITLE is issued to a vehicle that has been reconstructed or repaired enough that is it drivable. Be aware, though, that states have varying requirements for this type of title. Just because a vehicle has a rebuilt title does not mean that it’s completely safe to drive or that it won’t fall apart a block from where you bought it.

There are countless potential problems waiting in the wings for a SALVAGE OR REBUILT-SALVAGE-TITLED VEHICLE. The problems are connected with whatever caused the salvage title to be issued. If you’re willing to take the risk of buying a cheaper vehicle, knowing that expensive repair or safety issues may be lurking, or if you’re skilled at vehicle repairs, it might be worthwhile. If not, you’ll probably be better served buying another vehicle.

FLOOD-DAMAGED VEHICLES present their own unique set of problems, including possible electrical, computer, and wiring-system damage. This could also have an effect on airbag deployment and antilock brake performance. And, there are always the headaches of rust or mold.

TITLE BRANDS

A title brand is printed on the title as an informational message for the current and subsequent owners.

DECODING A MONTANA TITLE

http://www.doj.mt.gov/driving/forms/manuals/decodingvehicletitleregistration.pdf

Insure a Car with a Salvage Title?

It can be difficult. Cars with salvage titles generally have had serious defects – structural and mechanical. Might not be reliable and could be unsafe, which an insurance company would consider a risk. Don’t assume that your policy will cover a car with a salvaged title. Ask your carrier before assuming anything.

Regulations on salvage titles vary from state to state, so check with your local department of motor vehicles to learn how salvage titles can affect you.

MONTANA CODE ANNOTATED

Motor Vehicle Recycling and Disposal

http://data.opi.state.mt.us/bills/mca_toc/75_10_5.htm

OK…normally I don’t use our blog space for shameless product promotion, but I’m super excited about a new service we are offering!  Every member at Montana 1st is going to be automatically enrolled in an IDENTITY THEFT protection service.  Best part…it only cost $1.25 each month and covers three generations of your family!!!  I’ll give you a few details here, but if you have any questions, comments, concerns feel free to give us a call!!!

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The news gets better for CUs everyday lately.  Yesterday, Representative Paul Kanjorski of Pennsylvania introduced legislation to “re-capitalize” credit unions nationwide by increasing  the amount NCUA can borrow from the Treasury from 100 million dollars to 6 billion dollars.  The legislation would also allow NCUA to borrow up to 30 billion dollars in case of an “emergency”.

Next, Senator Tom Harkin of Iowa said that banks could “take a lesson” from credit unions.  “In remarks delivered on the Senate floor, Harkin said that larger credit card issuers and banks should be able to operate under potential federal interest rate restrictions, as credit unions have been able to thrive under similar rules without negatively impacting access to credit for credit union members.” GEE…do ya think?  It’s really nice to see that our representatives in government are finally starting to see what we all have known for oh so long!

It isn’t everyday that credit union employees in Montana get to hear both a NCUA board member and a CUNA Sr. Vice President.  Hyland focused her time on the corporate credit union stabilization while Hampel centered his “talk” on the economic situation.  I have to say, it seems that all we hear and read (or say, do, and publish) these days is something negative about the situation that we find ourselves in as a people.  With that said, both Hyland and Hampel were a breathe of fresh air, sent to refresh our faith in our country, our economy, and our industry.  

The central message:  We’re all in this together.

Ms. Hyland at one point questioned the philosophical strength of the credit union movement by pondering why credit unions wouldn’t want to actively prop up their peers. 

Mr. Hampel wanted attendees to remember that even with 10% of Americans unemployed, 90% are still in their jobs.  When our delinquency rates go to 2%, 98% of our loans are being paid on-time!

Kudos to the staff at the Montana Credit Union Network for their hard work in bring such high caliber speakers to our Annual Meeting!  And remember, “this to will come to pass”. 

You (and every other American) are probably tired of hearing about businesses, and banks that are “too big too fail”, bailouts, cramdowns, and stimulus packages!  Some of you may be SO disgusted that you have voiced your concerns to the proper “authorities”, no doubt, most of you have sat on the sidelines in silent protest.  What can a spin master call the next round of bailouts to make them more accepted by the masses?  Well if you are GMAC, you are no longer “too big to fail”, you are a “driver for consumer confidence”.  If you are a bureaucrat, GMAC is a great place to put all of GMAC’s debt while laundering some of Chrysler Financials’ bad debt as well.  Who is the chief investor in this scheme…well…you.

In an effort to consolidate the bad (and growing) debt of some auto makers’` financial subsidiaries, the government is trying to consolidate the two creating a “super lender”.  I’ll try not to get overly political here and ask basic questions:

So…if these companies aren’t “too big to fail” but are “drivers for consumer confidence”, are we going to “bailout”, excuse me, assist all “drivers of consumer confidence”?

What about Ford Motor Credit?  Aren’t they (and their investors) getting a bum deal?

Should we as a society reward the poor performers, or the folks doing what is right and prudent?

What about the banks that depend on these loans to “shore up” their balance sheets…Oh who am I kidding, they aren’t lending money anyway.

Then…what about the credit unions that depend on these loans to fund their operations?  How can we compete with multi-national banks that have received hundreds of billions of dollars in government funds? Further, how can we compete with auto lenders that are to receive upwards of 20 billion dollars in government funds?

Just food for thought…

Really…credit unions are misunderstood?  According to the LA Times we are:

LOS ANGELES (5/5/09)–Nonprofit cooperatives such as credit unions are the most misunderstood bargain in banking, according to a Los Angeles Times article.

Although credit unions offer higher rates for deposits, lower costs for loans and reduced fees for overdrafts and checking accounts, many consumers are confused about how to go about banking with one, the article said (May 3).

“Many consumers have an old-school notion that credit unions are always exclusive clubs, only open to employees of a single company, members of a particular church, union or profession. But with many credit unions that’s no longer the case,” the article continued.

To help consumers find a credit union, the article cited the locator tool on the Credit Union National Association’s consumer web page, www.creditunion.coop, as a resource.

The article’s author, Kathy Kristof, said she conducted a search of credit unions in 10 minutes and found five that could have accepted her, based on geography alone. Working as a teacher, engineer, broadcaster or public worker could yield access to a dozen credit unions or more, Kristof said.

Kristof also noted that deposit rates are 25% better at credit unions than at banks and six of the top 10 earning checking accounts offered through www.checkingfinder.com were credit union accounts.

First boring, now misunderstood…I think we need to start calling credit unions what they are:  Well-Managed, Community Oriented, READY AND WAITING!  Do yourself a favor go to your local credit union and find out “what’s in it for me?”

You can hardly open the newspaper these days without disparaging remarks about the financial condition of American homes, businesses, and well even banks.  With that said, credit unions nationally are safe, secure, and LENDING MONEY TO PEOPLE WHO NEED IT!!!  Nationally credit unions are well capitalized, in fact, due to regulation credit unions are by almost any definition OVER-capitalized.  Further, credit unions insured by the National Credit Union Administration (NCUA) have NEVER lost one penny on any member account!

Personal remark that will probably get me in trouble:  Why is the government putting VAST amounts of money, time, and energy behind subsidizing and industry that put us in this mess?  Shouldn’t we as a country support the people working hard to ensure the financial success of a country, not just a few stockholders?

OK, off the soapbox…but…if you find yourself in need of a loan, and or a better place than your mattress to stash cash…your credit union is still a viable (and perhaps the best) option.