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ARLINGTON, Va.-For a number of years, NAFCU has presented a report to the Federal Reserve on the credit union situation and gained an audience with one or more of the board members. This year, NAFCU’s board and top officials met with Fed Vice Chairman Roger Ferguson on Dec. 15. Subjects at the forefront of the convoy’s mind included service to the underserved, simplifying disclosures, and showing the strength of the credit union system. NAFCU’s formal 2005 Credit Union Report for the Board of Governor of the Federal Reserve System is chock-full of lending and savings data, information on credit unions’ use of the Fed’s services and the impact of their regulations, and credit union’s service to the underserved. “We started with the low- to moderate-income and what credit unions are doing there. They were very interested in that, obviously,” NAFCU Senior Economist Jeff Taylor, who attended the meeting, commented. Much emphasis has been placed this year on credit union service to those of modest means. NAFCU stressed the addition of underserved areas to credit union fields of membership since the promulgation of the Credit Union Membership Access Act. According to Taylor, neither Ferguson nor other officials with the Fed asked about the documentation of these services. They did discuss the Home Mortgage Disclosure Act data, which showed credit union low-income minority loan approvals declining. However, the trade association pointed out that credit unions approved more, smaller real estate loans in comparison to banks and thrifts, as well as a higher percentage of real estate borrowers with income below $40,000 and grant fewer real estate loans charging three percentage points or more above Treasury’s benchmark. Taylor added that the Fed was “very impressed with the outreach that happened” after the hurricanes among credit unions and the regulators noted you would not see banks allowing other banks to share offices or participate in shared branching. Another subject that caught the attention of the Fed governor was the credit unions converting to mutual savings banks. ‘Taylor said the NAFCU officials explained their position. “We were saying NAFCU is not against credit unions converting. It’s more about transparency.” NAFCU supports a 20% minimum voter participation to change charters. NAFCU also included credit union-specific economic data in its report to the Fed. Loan growth is projected to be very strong for 2005, predicted to reach 10.5% by year-end though share growth was “the slowest in the past decade” at 4.5%. “Credit unions were challenged yet again this year with a flat yield curve, several bouts of natural disasters and a tightening of liquidity,” the report read. “Despite these challenges, credit unions maintained a small but steady market share, remained profitable and well capitalized, and continued to provide their members with high quality, low-cost products and services.” NAFCU’s report also noted the strength of the National Credit Union Share Insurance Fund. Specifically regarding the Fed’s impact on credit unions, NAFCU’s membership generally supports simplifying disclosures on open-end credit, which the regulator has recently sent a request for comment out on. In addition, credit unions continue to use Fed services with the most popular being automated clearinghouse processing and FedLine Web services. The services continue to receive fairly high ratings from the sampling of NAFCU members though some have fallen. Nearly all (97%) responded that Fed pricing is “somewhat competitive” to “very competitive.” Five years ago, Fed officials were not nearly as well-versed on credit unions and their issues, according to Taylor. “NAFCU meeting with them has really helped,” he said. It is not necessarily a lot, but some in the `Fed community’ are highlighting credit unions. He pointed out that the Philadelphia bank has established a credit union group and the Cleveland Fed is getting more involved. -

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