CrossState Daily…03/13/23

Consumers Deposits are Safe at Credit Unions  

The collapse of Silicon Valley Bank (SVB) on Friday is the second largest failure of a financial institution in U.S. history. The bank was close and put under the control of the FDIC following a 48-hour bank run and capital crisis. While this was not a credit union failure, the news may still create consumer concerns in New Jersey, Pennsylvania, and nationally. CrossState has developed a few talking points for credit unions that may receive questions from credit union members or the public: 

• SVBwas a niche bank serving the technology industry, including tech start-ups, entrepreneurs, and venture capital firms. The bank was focused on a limited sector, which significantly increased its risk profile. Signature Bank was one of the main banks for cryptocurrency companies. Their banking business is completely different from that of a credit union. 
• Federally insured credit unions offer a safe place for credit union members to save money. These deposits are protected by the National Credit Union Share Insurance Fund and insured up to at least $250,000 per individual depositor – the same as any other federally insured financial institution (e.g. FDIC).  
• Credit union deposits in federally insured credit unions are safe and secure. All New Jersey and Pennsylvania credit unions are federally insured.   
• Credit unions are regularly examined by their financial regulator to ensure proper operational management and maintain the safety and soundness of members’ money within the institution.  
• Credit union members have never lost a penny of insured savings at a federally insured credit union. Credit unions insurance fund has the backing of the full faith and credit of the U.S. government.  
• Please visit MyCreditUnion.gov for more information about the National Credit Union Share Insurance Fund coverage for consumers.   

As seen in the most recent release from the NCUA’s Quarterly Data Summary Report, credit unions are in a strong financial position. If your members or employees have concerns regarding the safety and soundness of the credit union or its system, please assure them using the above talking points. If you have further questions or concerns, please contact and utilitze CrossState as a resource for both your members and staff. 

Consumers Should Be Alert to Cyberscams Related to the Silicon Valley Bank Failure   

Following the collapse and federal takeover of Silicon Valley Bank (SVB) on Friday, March 10, scam artists wasted no time preying on the bank’s customers. One in particular is an email scam that initially targeted customers of businesses that banked with SVB when news first broke of the institution’s financial struggles and has only increased in volume following the bank’s failure and takeover by the Federal Deposit Insurance Corporation. 

In the scam, fraudsters posing as companies that previously banked with SVB notify customers of those companies that because SVB cannot accept payments, they should wire future payments to a different bank. The fraudsters own the bank account that is provided in the new wire and payment instructions. The high visibility of the federal takeover makes these communications very convincing. The deceptive emails include details such as account numbers and names of individuals within the company that is purportedly making the wire instruction change. However, the wire transfer instructions included in the email are fraudulent and will direct funds to an account controlled by the scammers. 

Potential targets need to be vigilant, especially in the current environment, when receiving emails requesting wire transfers or changes to wire instructions. If you receive an email requesting a wire transfer or a change to wire instructions (involving SVB or any other financial institution), always verify the request by contacting the party requesting the change directly using a phone number obtained from a reliable source, such as the company’s official website or previous correspondence.  

Do NOT rely on telephone numbers or email addresses provided in the email that contains the wire change instructions. 

Don’t Forget to Sign Up for This Week’s Free Member Benefits Webinar 

How much do you know about your CrossState membership? Are you aware of the free software, tools, and information available to you? Perhaps you have used some of these tools in the past but forgot you have access to them. You and your team are invited to learn more about CrossState’s suite of benefits designed to help you reach your goals, receive affordable education and professional development, and expand your networks through collaboration opportunities. Learn how your credit union can take advantage of these free resources in the upcoming Member Benefit Webinar on March 15 at 2:00 p.m.   

During this webinar, meet CrossState’s new Member Engagement Consultant, Dominic DiFrancesco. Nick will be providing an overview and update on the Credit Union Chapter system.  Following Nick’s presentation, CrossState’s Advocacy Team will be providing an overview of the following resources:   

• CrossState’s Compliance Resources   
• Compliance Connection Weekly   
• Educational Events   

• CU Analyzer   
• InfoSight   
• CU PolicyPro   

Click here to register.  

If you would like to submit questions in advance of the webinar, please email compliance@crossstate.org.   

Thank you to CUNA Mutual Group for sponsoring this webinar.   

Shapiro Administration, Pennie® Prepared to Help Pennsylvanians Stay Covered Amid Upcoming Federal Changes to Medicaid, CHIP Renewals 

Pennsylvania Department of Human Services (DHS) Acting Secretary Dr. Val Arkoosh, Acting Insurance Commissioner Mike Humphreys, and Pennie® Director of External Affairs Chachi Angelo reminded Pennsylvanians of the upcoming end of pandemic flexibilities for Medicaid and CHIP coverage, and affirmed the Shapiro Administration’s commitment to helping Pennsylvanians stay covered when federal changes to Medicaid renewals take effect on April 1, 2023.  

Starting in 2020, the federal public health emergency in response to the COVID-19 pandemic allowed for individuals to continue to remain enrolled in Medicaid even if they became ineligible based on regular eligibility criteria, except in rare circumstances. This is also known as the Medicaid continuous coverage requirement. In December 2022, President Biden signed the Consolidated Appropriations Act of 2023 into law, which effectively ends the continuous coverage requirement on March 31, 2023. Beginning April 1, 2023, all Pennsylvanians must once again return to completing an annual renewal when it is due to maintain Medicaid or CHIP coverage.   

No one will lose Medicaid or CHIP coverage without an opportunity to renew their coverage or update their information. Renewals will be completed over 12 months, and renewals due in March 2023 will be the first affected by the end of continuous coverage. All Medicaid recipients will need to go through a renewal process around the time of their normal renewal date over that 12-month period to determine if they are still eligible for Medicaid.  

Pennie is Pennsylvania’s official health and dental coverage marketplace and the only place to get financial assistance to help lower the cost of high-quality coverage and care. Those losing Medicaid or CHIP coverage can apply for coverage through pennie.com, and some individuals will have their information securely transferred from Medicaid or CHIP for an easier enrollment process. Customers can simply call Pennie Customer Service at 1-844-844-8040 or find Pennie-certified pros at pennie.com/connect. Anyone who looked at options through the health insurance marketplace in years past should look again. Pennie is tailored to Pennsylvanians and now has more plan options, lower costs, and better coordination with the Medicaid and CHIP programs.  

If a person is found to be ineligible for their current coverage or does not complete their renewal on time, their Medicaid coverage will end. Pennsylvanians who are no longer eligible for Medicaid will be referred to other sources of affordable medical coverage like CHIP and Pennie®, so they have no lapse in quality, affordable health care.  

The Department of Human Services, along with Pennie® and other agencies across the Commonwealth, is undertaking an aggressive, multi-pronged outreach plan to inform Pennsylvanians of upcoming changes. Medicaid recipients have already begun receiving communications from DHS and will continue to receive mail, text, email, and phone calls to make certain they are aware of the federal action affecting their benefits. DHS is also planning coordinated broad public communications via social media, community stakeholders, and press channels to notify the public of this change for Medicaid recipients. This social media outreach – primarily for individuals to keep contact information up-to-date to receive information on time – has been ongoing for months.  

To learn more about Medicaid and CHIP renewals and access educational resources, visit www.dhs.pa.gov/phe. For more information on health insurance options available to Pennsylvanians, visit www.pa.gov/health-insurance.  

NJ CPA Survey Calls for Larger Business Tax Reduction in State Budget 

Nearly 60% of certified public accountants (CPAs) surveyed recently by the New Jersey Society of CPAs (NJCPA) said Gov. Phil Murphy’s proposed $53.1 billion budget for the 2024 fiscal year will leave the state’s economy worse over the long term. 

When asked about the proposed budget’s impact on the state economy, 31% of the more than 275 CPAs surveyed said it would make it “significantly worse” and 27% said it would make it “marginally worse,” according to the survey results released on Thursday. Another 22% said the economy would stay the same, and 20% thought it would improve either marginally (15%) or significantly (5%). 

Murphy’s proposed budget, which is the highest on record for the state, allows the temporary 2.5% corporation business tax (CBT) surcharge to sunset as scheduled on December 31. While that would cut the top rate from 11.5% to 9%, New Jersey would still have the fourth-highest corporate tax rate in the nation. 

When asked what impact certain actions could have on strengthening the business environment in New Jersey, survey respondents said an additional reduction in the corporate business tax would have the largest impact. This was followed by providing state aid to offset the upcoming $300 million unemployment insurance increase and providing property tax relief for businesses. 

The budget proposal includes no new taxes or tax increases, retains the $2 billion ANCHOR property tax relief program for homeowners and renters and doubles the state’s child tax credit. It calls for additional school funding, an expansion of universal preschool and an increase in income limits for seniors applying for a freeze on their property taxes. The proposed budget must be approved by the Legislature by June 30. 

Other actions that respondents called for, in addition to lowering the CBT and reducing unemployment payroll taxes, were reducing the number of state employees, reforming pension and health benefits for government employees and using only recurring revenues in the budget, which would exclude the one-time federal funds received during the COVID pandemic. They also cited the need for a new school funding formula, not centered on property taxes. 

National News 

U.S. Economy Adds 311,000 Jobs in February 

The U.S. economy added 311,000 jobs in February, the Labor Department said on Friday, continuing a hot hiring streak that has underpinned the country’s tight labor market. The unemployment rate edged up to 3.6%, still historically low. 

Employers continued to add workers to payrolls at a very quick pace, despite months of rising interest rates meant to cool that demand. 

The unemployment rate bumped up to 3.6% from 3.4%, as layoffs ticked up. The payrolls report showed that the economy added 504,000 jobs in January, 13,000 fewer than the originally reported figure. Meanwhile, gains were revised down in December: from 260,000 to 239,000. 

A run of government data from the beginning of the year pointed to evidence that the economy had picked up steam, with a strong bout of hiring and re-emerging inflation pressures. 

That’s despite aggressive moves from the Federal Reserve to slow the economy down in an effort to bring down inflation. Economists were looking to the February payrolls release as one report that could confirm whether that data was an anomaly. 

Fed chair Jerome Powell said last week the central bank could return to a larger size interest rate increase at its policy meeting later this month if other data pointed to re-heating economic activity. 

In February, average hourly earnings rose 0.2%. Over the year through February, hourly earnings are up 4.6%. Meanwhile, the share of people employed or searching for jobs (known as the labor force participation rate) bumped up to 62.5, compared to 62.4% in January. 

Customer Complaints and Surliness on the Rise, Survey Finds 

A new survey shows Americans are experiencing more product and service problems than ever before and have become steadily more belligerent when they complain. The National Customer Rage Survey estimates U.S. businesses are risking $887 billion in future revenue due to mediocre handling of customers’ complaints, up from $494 billion in 2020. 

The survey, which has been tracking consumer satisfaction over the complaint-handling process since 2003, broke new ground this year by also exploring customer uncivility, the growing phenomenon of rude, discourteous, and sometimes violent customer behavior. 

Findings include: 

• 74% of customers reported experiencing a product or service problem in the past year, more than doubling since 1976. 

• 56% of customers felt that the problem had wasted their time, 43% cited a loss of money (an average loss of $1,261), and 31% suffered emotional distress. 

• The level of “customer rage” is holding steady — 63%. 

• 43% of customers raised their voice to show displeasure, an increase from 35% in 2015. 

• 50% of customers use digital channels such as email, chat, and social media instead of the telephone to complain, up from 5% in 2013. In addition to complaining directly to the company, 32% also posted their problem on social media sites, more than twice as many as did in 2020. 

• Nearly 1 in 5 Americans (17%) have personally behaved uncivilly during the past year. 

The social contract about the norms for individually protesting businesses’ belief systems and values appears to be in flux. Americans disagree with “civil” and “uncivil” behaviors for expressing their value differences with a business. While 50% of Americans view less aggressive forms of behavior (such as yelling, ranting, arguing, giving ultimatums, and social media character assassination) as uncivil, the remaining 50% see these behaviors as either “civil” or as “depends on the circumstances.” 

This independent study of 1,000 respondents was conducted by Customer Care Measurement & Consulting (CCMC) in collaboration with the Center for Services Leadership, a research center within the W. P. Carey School of Business at Arizona State University.  

It is based on a survey conducted initially by the customer experience organization TARP for the White House in 1976. CCMC and the Center for Services Leadership have collaborated on the survey since 2003. 

Regulatory News 

NCUA Board Meets March 16, Set to Vote on Subordinated Debt Final Rule 

The NCUA Board will vote on a subordinated debt final rule at its March 16 meeting. The meeting will be streamed live on NCUA.gov and will begin at 10 a.m. ET.  The proposed rule is intended to extend the treatment of Emergency Capital Investment Program (ECIP) funds as regulatory capital to reflect the maximum permissible maturity of the note, and to eliminate the 20-year maximum maturity limit in favor of a more flexible test. 

CFPB Starting Mandated Review of Mortgage Loan Originator Rules 

The mortgage loan originator rules, part of the Truth in Lending Act’s Regulation Z, protect homebuyers from anti-competitive practices, like double-dealing or steering activities, that lead consumers into more expensive loans. 

The Consumer Financial Protection Bureau (CFPB) is requesting the public’s input  on the economic impact of the mortgage loan originator rules on small mortgage companies. The CFPB may use the feedback it receives to inform potential changes to the rules. The CFPB regularly conducts 10-year reviews of rules that have, or will have, a significant economic impact on small businesses. The mortgage loan originator rules are due for this standard review process. 

Mortgage loan originator rules 

The mortgage loan originator rules cover individuals or companies that are paid to arrange, negotiate, or obtain mortgage credit for their customers. Mortgage lending companies, mortgage brokers, and loan officers may be considered loan originators. The rules prohibit dual compensation and steering practices that do not benefit borrowers, as well as prohibit compensating loan originators based on the terms of a mortgage transaction. 

Before the rules, loan originators did not have to act in the best interests of clients. They could even be paid to steer homebuyers toward more expensive mortgages. For example, a loan originator acting as a mortgage broker could receive greater compensation from a lender for locking a homebuyer into a mortgage with a higher interest rate than the interest rate offered by another lender. 

What you should know 

Comments must be received on or before 45 days after the request for information is published in the Federal Register. 

FTC Seeks Public Comment on Franchisors Exerting Control Over Franchisees and Workers 

The Federal Trade Commission (FTC) is seeking comment on franchise agreements and franchisor business practices, including how franchisors may exert control over franchisees and their workers. 

In a franchise relationship, franchisees typically pay a fee in exchange for a business format or system developed by a franchisor, the right to use the franchisor’s trademark for a specific number of years, and assistance. Owning a franchise, however, comes with defined costs, franchisor controls, and contract terms. 

The FTC would like to know more about how franchisors may exert control over franchisees and their workers. Specifically, the FTC is interested in how franchisors disclose certain aspects and contractual terms of the franchise relationship, as well as the scope, application, and effect of those aspects and contractual terms.  

As part of the Request for Information, the FTC is asking franchisors, franchisees, current and past employees of franchisors and franchisees, government entities, economists, attorneys, academics, consumers, and other interested parties to weigh in on a wide array of issues that affect franchisees and their workers 

There’s Still Time to Register for the FedNow Service Virtual Town Hall 

Want to hear Federal Reserve leaders reveal progress updates and key development highlights in anticipation of the FedNow Service launch? Sign up for the virtual town hall on March 23 from 2 – 3 p.m. ET.  Register today. 

Newsmakers 

Corry Jamestown CU Co-Hosts Fraud BINGO 

Corry, PA — On March 8, Corry Jamestown Credit Union (CJCU) was able to co-host Fraud BINGO. This was a fun, interactive learning session that David Aitken from AARP presented. CJCU members and guests along with residents of Parkside at Corry, a local retirement home, attended the event.   

CJCU advertised this program in the newspaper, their lobby, online, and at Parkside. CJCU provided donuts. Parkside at Corry hosted the event in one of their meeting rooms and provided the coffee.  

Aitken called BINGO and presented the program in an easy and understandable way. Anyone who got a match had to read the writing that was on the block. Aitken expounded on the topic to create an informational, yet fun way to learn about fraud.  

No cash was involved, but there were prizes to be won. This was offered at no cost and open to the public. The program was so successful that the credit union is planning to do this again in the fall. At CJCU, they believe the old saying, “With knowledge comes power,” and this was a great opportunity to reach out to the community.