Another Innovative Payment Solution from First Bank & Trust

Revel... Gratis... and now telSpace - the latest in cutting edge payment solutions from First Bank & Trust. Read all about the new mobile payments solution here. You can also fine coverage at Banknet 360 and Paymentsnews.

Customer Complaints in a Viral Online World

The Netbanker and Wesabe blogs are pointing out the risks consumer complaints create for banks in today's viral online world. The target this time in Wachovia, but it could just as easly be any bank.

Gone are the days where a complaint can be handled discreetly (or worse, haphazardly). Today, banks need to view customer service in a new light and customer contact people need to understand that even a perceived lack of service can catch like wildfire across the net, free for more customers (or potential customers) and the media to read.

Goodbye, Futon

A humorous look at the state of credit today from the Bank Lawyers Blog

http://www.banklawyersblog.com/3_bank_lawyers/2007/04/goodbye_futon.html

Credit Union Chartered on Cheyenne River Reservation

The National Credit Union Administration (NCUA) has approved a charter and low-income designation for CR Community First Federal Credit Union of Eagle Butte, South Dakota.

The credit union was chartered April 9, 2007, to serve the approximately 12,000 residents of the Cheyenne River Indian Reservation in Dewey and Ziebach Counties, SD. The credit union organizers worked with the Cheyenne River Sioux Tribal Council, the Cheyenne River Housing Authority, and NCUA staff to obtain the charter.

The low-income designation allows the credit union to accept nonmember deposits, and to qualify for loans and technical assistance from NCUA’s Community Development Revolving Loan Program.

Comments from FDIC Chairman Bair During ABA Telephone Briefing on Small Dollar Loans

Select Comments by FDIC Chairman Bair
ABA Telephone Briefing on Small Dollar Loans
March 29, 2007

“We have issued proposed guidelines, the comment period has ended now, to offer CRA credit to banks who are willing to offer responsibly priced small dollar credit products.” – Track 2, Disk 1

“We’re also encouraging direct deposit and offering a lower rate if people will use automatic deductions for the repayments. We think that can, again, it’ll help people who might not have a lot of discipline repaying loans. Those are features that will help them make sure that they repay their loans on time and avoid late fees. It also helps too with the credit risk.” – Track 3, Disk 1

“We want these products to be widely available.” -- Track 3, Disk 1

“We’d like to try to work with banks to see if can get more products along these lines offered.” – Track 3, Disk 1

“We do plan to finalize the Guidelines expressly providing for CRA credit.” – Track 3, Disk 1

“I think the credit risk of these products, there is a perception that it is higher than it is. And I think certainly, the consortium of Pennsylvania credit unions are offering basically the same product with some differences that the North Carolina State Employees Credit Union is offering with a much more diverse customer base. So far they feel that they are at least breaking even and I think they are actually going to be turning a profit and may actually be reducing the rate they are offering. They are currently at 18% now.” – Track 4, Disk 1

“If they [the North Carolina State Employees Credit Union] can turn a profit at 12%, you can’t tell me these banks can’t try to turn a profit at 36%.” – Track 4, Disk 1

“We want this [bank small dollar lending] to be broadly available.” – Track 4, Disk 1

“I have no doubt banks will make money. We just got to get them to try it.” – Track 5, Disk 1

“I think most banks already have lines of credit linked to checking accounts or they make small dollar installment loans. I think the products are already there. It’s just a matter of how broadly available they’re made. So, I in terms of developing infrastructure to offer the product, the products are already there.” -- Track 5, Disk 1

“I just think the start up costs should be that high.” – Track 5, Disk 1

“We’re trying to provide deposit incentives as well as CRA incentives for people to launch pilots so we can prove this to bankers.” -- Track 5, Disk 1

“We’re happy to give it the FDIC seal of approval if you’re below that [36% APR]. We’ve talked to a lot of consumer groups. I think the consumer groups will be happy with it too.” -- Track 5, Disk 1

Quotes from Others:

“All you would need to do is to when the examiners are conducing the CRA examination mention that you do make small dollar loans such as we’re talking about today, and they will consider those and they will consider those favorably.” -- Bob Mooney, Track 7, Disk 1

Ranking the Bank Regulatory Agencies - OCC in a Landslide

Geared toward a broad audience of job seekers, researchers, federal employees and government leaders, Best Places to Work draws on responses from more than 221,000 civil servants to produce detailed rankings of employee engagement across 283 federal agencies and subcomponents.

The Partnership for Public Service and American University’s Institute for the Study of Public Policy Implementation use data from the Office of Personnel Management’s Federal Human Capital Survey to rank agencies and subcomponents. Agencies and subcomponents are ranked on a Best Places to Work index score, which measures overall employee engagement. The Best Places to Work score is calculated both for the organization as a whole and also for specific demographic groups.

In addition to this employee engagement rating, agencies and subcomponents are also scored in 10 workplace environment (“best in class”) categories such as effective leadership, employee skills/mission match and work/life balance.

Best Places also offers a snapshot overview of each agency and subcomponent, trend data on changes since 2003 and 2005, tips and information for job seekers, and expert analysis of what the results mean.

OCC (Score 79.4)

FDIC (Score 59.5)

OTS (Score 53.4)

Zopa on its Way to the US

Zopa sent an email this week announcing its much anticipated launch in the U.S. The launch was been the subject of much anticipation. The email was not specific about the model. However, it is widely expected that it will need to differ from the model in the U.K. given the constraints associated with U.S. banking and securities laws and the patchwork of state laws.

The Open Source Credit Union blog has speculated that the model will involve a CU acting as a intermediary to some degree. A post at the Bankwatch blog hypothesizes that Zopa will be partnering with a credit union in every state.

Nonprime Borrowers Place Card Debt Before Mortgages

As evidence of their unique financial behaviors and the challenge it poses to portfolio risk analysts, a study by Experian reveals that nonprime borrowers are paying off their unsecured debt instead of their mortgage obligations.

Check out coverage at the Banknet 360 blog.

digg story

Kansas Credit Union Specializing in Payday Loan Alternatives Closed by NCUA

Bank regulators, the media, and community groups repeatedly taught credit unions as the poster children for offering payday loan alternatives. One credit union specializing in such loans has come upon tough times. On February 19, 2007, the NCUA announced that Kansas-based Communities United Credit Union was placed into conservatorship. The CU had negative net worth and was losing money thanks to significant defaults on its car title and payday loan alternatives portfolio.

Coverage:

http://www.cuna.org/newsnow/printer_version.php?story_id=30166

http://wichita.bizjournals.com/wichita/stories/2007/02/05/daily26.html

http://www2.ljworld.com/news/2007/feb/18/insolvent_credit_union_be_dissolved/?state_regional

Time is Right for Gratis!

Two great stories that supports the demand for the Gratis Card.

Aneace's Blog: Mega trend: Banks mass issue premium cards for more interchange revenue (but risk making merchants even angrier!)

http://itforfinancialservices.blogspot.com/2007/03/gratiscard-next-competitor-to-visa-and.html

Has the FDIC Read Their Own Information Security Guidelines?

The Truston Identity Theft Blog has a very interesting post on personal information requested on the FDIC website in an unsecure format. Perhaps a little agency refresher on their own Guidelines for Safeguarding Customer Information is warranted.

In 2005, the FDIC also experienced a breach whereby confidential personal information on former employees was comprimised. This lead to a special review by the FDIC's Inspector General, who reported that the agency "has experienced several breaches involving personal employee information."

Early Release of DOD's Military Lending Rules

The American Banker (subscription) has posted the latest draft of the proposed rules from the Department of Defense implementing the 36% annual percentage rate cap — including fees — on loans to military members and their dependents. The cap, sponsored by then-Sen. Jim Talent, R-Mo., and part of the Defense authorization bill enacted in October, it intended to thwart payday lending near military bases. Much discussion and debate to come I am sure.

Georgia Legislature Issues a Payday Loan Ceasefire

Read the Bank Lawyer's Blog coverage of the payday loan battle in Georgia. Revel continues to enjoy steady growth in Georgia as consumers continue to search for affordable payday alternatives.

More from FDIC Chairman Bair on Small Dollar Lending

The FDIC remains active in various initiatives to incent banks to offer affordable payday loan alternatives. Small dollar lending was the agenda topic at last Thursday's inaugural meeting of the Advisory Committee on Economic Inclusion and an ABA telephone briefing last Friday. Read Spokesman Review's coverage of last weeks activity at the FDIC.

Interesting Quote from FRB Chairman Bernanke on CRA and Nonbank Financial Service Providers

An interesting quote from Fed Chairman Bernanke in a speech to the Community Affairs Research Conference on March 30, 2007: "Nonbank institutions, such as payday lenders, check cashers, and remittance agents, are important sources of financial services in low- and moderate-income communities."

It seems rare to have a regulator single out payday lenders in a half-way positive light.

Finally, A Balanced Perspective on Small Dollar Lending

Cudos to Jennifer Tescher at CFSI for her realistic perspective on small dollar lending, and the limitations associated with the APR calculation. Read Jennifer's comment letter on the FDIC's Proposed Guidelines for Small Dollar Lending and her editorial in the American Banker that can be found on CFSI's website.

Jennifer's reputation as a balanced voice on the challenges associated with banking the underbanked is a refreshing change from other groups' repeatedly anti-bank rhetoric.

I also strongly urge everyone to attend CFSI's Underbanked Financial Services Forum in Dallas in June.

You Know Things Are Tough in the Subprime Mortgage Industry When...

Forget Wall Street, federal regulators, and Senator Dodd. Perhaps the best indicator of trouble in the subprime mortgage industry is .... baseball. As reported in SI, Ameriquest's well publicized troubles caught the attention of the Texas Rangers baseball team, who have apparently concluded that the former Ameriquest Field doesn't quite have the same ring to it.

Gratis. The Most Secure Card Out There?

Jaikumar Vijayan writes for ComputerWorld about GratisCard - saying that "when the company launches on April 1, it plans to introduce the nation's first completely anonymous credit card with no name or number and no physical data stored on the card itself.

The GratisCard is issued by First Bank & Trust, Brookings, SD.

Big Day for Social Lending Leaders

Propser and Zopa name new members of top management and Zopa announces that it has raised an additional $12.9 million. Check out Bankwatch blog for good coverage.

FDIC Advisory Committee on Economic Inclusion to Meet on Small Dollar Lending

The FDIC's new Advisory Committee on Economic Inclusion will meet on Wednesday, March 28 to discuss small dollar lending alternatives. The meeting is open to the public.

Three items of interest after looking at the agenda: (1) Prosper.com has been asked to present on the topic of P2P lending; (2) the only financial institutions presenting are credit unions; and (3) the FDIC is apparently looking at some sort of pilot program.

What the OCC Has Said About Prepaid Cards and CRA Credit

In a 2004 issue of Community Developments Online, the OCC discusses the application of the CRA's Community Development Service test to prepaid card programs.

Revel Card Issuer Also to Issue New GratisCard

As reported today in BusinessWeek and the Wall Street Journal, First Bank & Trust is the issuer of the new GratisCard, whose backers include Steve Case of AOL. FB&T has issued the GratisCards booked to date as part of the early tests with the Philadelphia 76ers and Philadelphia Flyers.

FB&T also issues the Revel Card and utilizes the GratisCard platform to deliver the Revel Advance feature.

Follow the Payments News coverage of Gratis.

What the FDIC Has Said About Prepaid Cards and Their Potential in Reaching the Underbanked

"The ability of banks to reach out to low- and moderate-income consumers with products such as low-cost debit accounts, remittance services and individual development accounts may receive favorable consideration during Community Reinvestment Act examinations.

The evolving and increasing use of stored value cards is important to the banking industry. The FDIC and others in the banking industry recognize the importance of these cards to all consumers, including the underbanked. These cards provide banks with an opportunity to reach underserved markets."

Source: Federal Register: August 8, 2005 (Volume 70, Number 151)

Welcome

Welcome to Banking the Underbanked. This site will be devoted to the exchange of ideas, examples, and information surrounding the challenges banks face in marketing and delivering products to the underbanked population in the United States.

The site is sponsored by Revel Card, an award-winning prepaid card program from Fishback Financial Corporation that toughts its "Bank on a Card" concept as it targets the underbanked demographic.

More to come soon.