Red Flag, MFA Regulations - Starting to Sound Familiar?

The Red Flag regulations are 125-pages long, and identity thieves number in the tens-of-thousands, so credit unions are turning to technology to decipher the rules and deter the thieves. Sound familiar? Does Multifactor-Authentication come to mind? By Ron Daly.

It was eight days ago that the FTC extended the deadline on the Red Flag Compliance from November 2008 to May 1, 2009. For those who don't know/care, the Red Flag rules were created by a Joint Committee of financial regulation councils (FTC, CUNA, the Fed, etc.) as a means of deterring identity theft at banks, credit unions, auto dealers, lending houses and other agencies through which criminals could commit financial fraud.

 

It seems that few CUs are experts on Red Flag tools and rules. The Credit Union Journal found three CUs ready to talk about their various identity theft and fraud prevention solutions, which include automated customer identification programs; online behavior analysis; and risk-assessment and policy-development software. You can read about them  in the CUJournal Technology Report Red Flag Round Up online or in print in the October 27, 1008 issue of the Credit Union Journal.

  

It was eight days ago that the FTC extended the deadline on the Red Flag Compliance from November 2008 to May 1, 2009. For those who don't know/care, the Red Flag rules were created by a Joint Committee of financial regulation councils (FTC, CUNA, the Fed, etc.) as a means of deterring identity theft at banks, credit unions, auto dealers, lending houses and other agencies through which criminals could commit financial fraud.

 

With this act, financial institutions are required to provide a written program for dealing with fraud or identity theft. When creditors/FIs are presented with one of these occurrences, they are meant to employ their system and stop the fraud immediately.

  

Sound simple? Sure it does. Which means it isn't.

  

Another Limb Lopped off of the Branch

by Ron Daly

When you ask your average CU professional about their "gold level" members, you're probably going to get a pretty similar description all around: older people with plenty of money who stop in every so often to see what's shaking at their credit union. They've got time and they've got resources and the only thing they use the internet for is leisure. 

Does your CU have a lot of members who fit this profile? If so, lucky you. How many people between the ages of 18 and 30 do you see every day? 

Can you think of one? Can you name any of them? 

On Greed and Fear: How Credit Unions get the most out of the crisis.

by Ron Daly

Came across an article today written by Warren E. Buffett. Buffett knows money, I think that's safe to say. Read his very good article here.

Anyway, he said something in his op-ed piece that really stuck with me:

"A simple rule dictates my buying: Be fearful when others are greedy, and be greedy when others are fearful."

This was one of those things that, on the first read, was smart sounding. But reading it again gave me a clarity I hadn't expected. It made me think about our industry and how we SHOULD be looking at the opportunity presented.

Money to Lend...but we'd really like to have some of it back

by Ron Daly

Got my "change in terms" notice this week from Chase raising their credit card default rate. Miss a payment on their card and the rate jumps to 29.99%... period. I'm an ex-CFO so I get it. Financial institutions need to charge higher rates for  higher risks and by missing a payment you just jumped right into a high risk category. And there are going to be more people missing payments ahead.

In a recent post on CNBC "Mounting Layoffs: Why they're different this time" (click here) suggests that there are 27 states in recession. Fifteen states are close. Goes on to report that 3/4 of a million jobs have been lost since the beginning of the year, and expects unemployment to peak at 8 percent by the end of 2009 or early 2010.

In a recent CU Journal article "How CUs are Responding to the Financial Crisis" (page 1 10/20/08 edition and online here), the CUJ profiles CU responses to what some have called the greatest financial crisis since the Great Depression, ranging from blogs answering member questions to hiring financial counselors to media campaigns and more. 

Is the Butcher's Finger on the Scale?

by Ron Daly

(For more on the bailout, read the October 6 issue of the CU Journal; for the online version, click here.)

Wall Street versus Main Street. I'm not exactly up to speed on the minute details of the government bailout but something seems amiss. I've been thinking way, way back to my one and only Economics class in college on this whole "rescue" thing. While that Economics class was indeed my lowest grade ever received (C+), and the reason I became an Accountant 30 years ago, there is one principle that sticks in my mind. The principle that free markets eventually balance themselves. They might be bumpy and uncomfortable for a while, but they will eventually come back into balance when left alone. 

There is always risk and reward in any free market and I understand that. Take a risk and win, you win. Take a risk and lose, you lose. But come on... take a major risk and do something stupid with other peoples' money and we'll cover you? I understand the Government's move to restore confidence in the market. But is the plan tipping the scale so that it will take even longer for the free market principles to come back into balance? Maybe that was covered in Economics II?

 

There is now a line for the "free" money and temptation for some credit unions to get in line to get their share of the $800 billion being allocated. In the plan, the government is taking preferred stock positions in public companies in hopes of recovering the money somewhere down the road on the sale of that stock. We all know that credit unions do not have preferred stock and there is no such thing as a free lunch. So what are they going to ask for in exchange for the "rescue?"