SAN FRANCISCO – The environment in which credit unions conduct their card business began to significantly change in 2005, but it remains unclear what the changes will likely mean. Both Visa USA and MasterCard announced that they would no longer be associations of card issuing financial institutions and would instead be corporations with independent boards of directors, more transparent governance structures and even have the ability to take itself public in an initial public offering of stock. This, in fact, is what MasterCard has announced it already plans to do in 2006, and while Visa has yet to take this step, the number one card brand has announced that it will initiate other changes which observers say are headed in the same direction. Visa revealed on Nov. 3 that the board restructuring to which it alluded earlier this year is a reality and announced the details. According to the plan, Visa's new board will have 17 seats, eight held by directors who will not be tied to any member financial institution and seven held by financial institution members. The two remaining seats will be held by Visa staff and will not vote. The current board has 16 directors, 14 of whom come from member financial institutions, one who is the CEO of Visa USA and one who is the CEO of Visa International. Under the current structure the two Visa CEOs are voting board members. The eight so-called independent directors will oversee core economic decisions such as pricing, member transaction processing and service fees and economic relationships. Financial institution directors will retain responsibility for control and disposition of assets, membership eligibility requirements and corporate governance, the card brand said. Analysts have widely commented that Visa needed to make this move in order to take the edge off of any future or current litigation regarding its business practices. William Valentine, spokesman for the card brand said an awareness of changing business climates also played into the change. Credit unions in the past have expressed doubt about whether the board changes will mean much too them and Moshe Orenbuch, a card industry analyst with Credit Suisse First Boston said they are likely right. "What you have to remember is that these directors will be directors of Visa and they are going to have a responsibility to Visa, not to their other affiliations," Orenbuch explained. "I think Visa considered that the former board could act in its best interest and that a new one will be able to do that too," he added, without having an additional litigation exposure. What seems almost certain is that the new Visa board will have to allow for more input from big debit issuers who may not also be big credit issuers. Debit has steadily risen as a percentage of Visa transactions and Orenbuch and other analyst have commented that board representation for debit issuers has not generally kept pace. [email protected] Australia Australian credit unions continued to win awards for top service over banks, but banks began to fight back by reversing earlier trends to close branches and reduce personal service. The New England Credit Union in Armidale, New South Wales beat out all the major banks and building societies to win Money Magazine's Best Personal Transaction Account award. Two other awards, Credit Union of the Year and Personal Lender of the Year awards were given by the same magazine to Savings & Loans Credit Union. The credit union has 24 branches throughout South Australia, Northern Territory, New South Wales and regional Victoria. Credit unions also beat out other financial institutions in a survey by the Australian Consumers' Association Choice Money and Rights magazine for customer satisfaction. Australia credit unions continued the trend to merge when the country's two largest credit unions, Australian National Credit Union and Credit Union Australia, approved a merger to go into effect on Jan. 1, 2006. Not only did credit unions merge, their supporting organizations merged. Australian Institute of Credit Union Managers (AICUM) and Australian Institute of Credit Union Directors (AICUD) formed the Australian Credit Union Institute (ACUI) following an overwhelming vote in favor of the move by both organizations: AICUD voted 209 to 2 in favor of the merger while only three members of AICUM protested. The change will go into effect Jan. 1, 2006. A program of courses and conferences for 2006 has already been announced Although most mergers in credit unions have been friendly, the unfriendly attempt of the Mackay Permanent Building Society (MPBS) to take over Capricornia Credit Union (CCU) of Rockhampton Queensland brought a number of legal hearings. CCU refused to turn over its member list which prompted MPBS to seek a ruling from the Australian Securities and Investment Commission. When CCU lost that ruling they appealed to the Administrative Appeals Tribunal, where they also lost. CCU, working with the Credit Union Services Corporation of Australia, Ltd. (CUSCAL), will file a new appeal, stating that it is unfair that they would be required to reveal their customer list. Nothing is expected until next year on the case. CUSCAL, which has undergone a major reorganization, over the past few years has regained its footing and announced a record after tax profit of AUS$14.5 (US$10.84) million, which was 38% above 2003-04 and 18% above budget forecast. At the same time they announced a reduction in cost to income ration from 90% to 85%. John Gilbert is the CEO who oversaw the transformation. Credit unions reached into their pockets to offer AUS$1 million (US$753,000) in aid to the tsunami victims. Some 3.6 million Australians belong to credit unions and have savings of Aus$29 (US$25 billion.) Great Britain Credit unions in England and Wales are fighting an uphill battle. Considered as for the poor only, the Association of British Credit Unions, Ltd. (ABCUL) is fighting to be both a source of relief for the "unbanked" as well as including the middle classes. ABCUL CEO Mark Lyonette was appointed to the Treasury Department's Financial Inclusion Task Force in January. In accepting the role he said, "Modern credit unions are already providing access to affordable credit, enabling people to build a savings stake in their community, and, often in partnership with other agencies, providing financial education and advice. We're also close to being able to offer basic bank accounts to credit union members. "I look forward to working with the other members of the taskforce to make sure investment from the Financial Inclusion Fund produces solutions to the problems of financial exclusion which are both sustainable and valued by the communities they serve." The task force launched a Web site www.financialinclusion-taskforce.org.uk.To fully attract new members some of the limitations on credit unions need to be eased and the Treasury Department is in the process of considering raising the interest rate on loans from 1% per month. The Financial Services Authority, credit unions' regulatory agency, is considering increasing the amount of money saved to 10,000 (US$17,400) or 1.5% of the total shareholding of the credit union. The last raise of the limit was in 1990 when it was increased to 5000 (US$ 8,700). Prime Minister Tony Blair was supportive of credit unions. He joined a credit union and also invited a number of credit union leaders to Number 10 Downing Street for a "Drinks party". The attendees included Rose Dorman, president of Dalmuir Credit Union and UK credit union pioneer; Capital CU CEO Marlene Shiels; StreetCred CU Manager John Wilson; Portsmouth Savers CU Manager Amanda Rose Dorman; Capital CU CEO Marlene Shiels; and others. ABCUL represents more than 400 credit unions with over 365,000 members across England, Scotland and Wales. Unlike in the United States, many banks help credit unions by offering shared facilities, training and donations of equipment and training. Canada The credit union message has reached the public according to a 2005 Synovate Customer Service Index which rated credit unions highest in: quality of service, values, information handling, products, interest rates and service charges. Some 8,000 people participated in the survey of which 1,000 were credit union members. "Credit union members appreciate the benefits of being owners, not just customers," said Joanne DeLaurentiis, president and chief executive officer of Credit Union Central of Canada (CUCU). De Laurentiis resigned in late November to become CEO and president of the Investment Funds Institute of Canada. Canadian credit unions announced that during the previous year they had contributed CND$24.6 (US$21.6) million in different community projects including scholarships and local economic development projects. The announcement was made on International Credit Union Day. Government smiled on credit unions with new and easier regulations. New Brunswick credit union members were given unlimited deposit insurance protection up from the previous CND$100,000 (US$86,242). The Ontario government announced proposals to streamline credit union regulations making it easier for credit unions to compete with other financial institutions. Ontario's 250 credit unions have $22 billion in assets across Ontario, a CND$1 (US$86 million) billion and employ 6,000 people. A credit union is the only lender in more than 40 communities in the province. The proposals are expected to be approved in December. Working with the Saskatchewan Government, SaskCentral, which represents Saskatchewan credit unions, created of the Entrepreneurial Foundation of Saskatchewan and the Saskatchewan Entrepreneurial Fund. The foundation provides advisory services and training to new start-up businesses. The fund will provide up to CND$1 (US$8.6) million for new businesses. Retail and farming are not included in the program. Ireland The Irish League of Credit Unions (ILCU) launched a one-stop phone-Internet service for its 532 credit unions. The services offered e-mail, broadband connection, spam-blocking, Web design and anti-virus protection. "The ILCU has negotiated this package as a benefit for its affiliated credit unions on a commission-free basis so that the level of service and pricing is extremely attractive" Liam O`Dwyer CEO said. ILCU lost a case from The Competition Authority brought before the High Court in October 2004. Twenty credit unions were unhappy that they had to buy their savings protection insurance through ILCU and went to the Authority. In 2005 ILCU decided to appeal, but according ILCU CEO Liam O'Dwyer, the case will not be heard until April in 2006. Although women have always played a major role in Irish credit unions at all levels, the first woman president of ILCU was elected in 2005, Anne O'Bryne. The Irish Financial Services Regulatory Authority rejected more lenient lending authority for credit unions. Regulator Brendan Logue termed many credit union personnel as "well meaning amateurs". ILCU CEO Liam O'Dwyer wrote a response printed in a major newspaper pointing out that the credit union movement has over 3,500 paid professionals. Although the movement is perceived to be full of aging volunteers, O'Dwyer pointed out that over 1,000 new and younger board members are elected annually. The movement also has several programs to attract the young and has formed a Youth Planning to Committee to get more people involved. ILCU represents 530 Irish Credit Unions. A second organization, The Credit Union Development Association, was formed in 2003 by 21 Irish Credit Unions. New Zealand Credit unions got a national boost on national television when Target, the consumer-watchdog television show on TV3 complained about bank fees. Guest Claire Matthews, a specialist in banking studies and author of books and papers on banking, said that credit unions and building societies (mutual banks specializing in mortgages) were better than banks. The major banks servicing New Zealand are all off-shore corporations. Another kudos came from Member of Parliament MP Hon Ruth Dyson, former New Zealand's Minister for Disability Issues. New Zealand credit unions were the first to install voice ATMs to help the blind. Dyson said, "Congratulations to the New Zealand Association of Credit Unions for providing voice-enabled ATMs nationwide." Those with seeing difficulties can plug headphones into the ATM and they will verbally be walked through transactions. The New Zealand Associations of Credit Union (NZACU) also came out against the trend for consumers to take on more and more debt. "Debt is profitable. How much marketing do you see coming from mainstream banks that encourage savings? Their advertising hammers home loans and financing options, not thrift. When you have profit driven shareholders to satisfy, the value of thrift falls by the wayside." Doug McLaren, NZACU CEO positioned credit unions differently from the banks, loan sharks and payday lenders that have helped debt levels to grow by 14.9% in 2004 to NZ$15.5 billion (US$11.11 billion). Africa In South Africa The National Credit Bill replaced the Usury and Credit Agreement Acts. The purpose of the new legislation was to promote an efficient credit market, guarantee consistent treatment for different credit products, encourage responsible borrowing and discourage reckless lending, provide a system to resolve disputes, and to create a debt restructuring system. The Savings and Credit Cooperative League of South Africa, which is trying to develop credit unions, felt the legislation was a definite a positive step. In Kenya Afya SACCO (African credit unions are called SACCOs) working with the World Council of Credit Unions began a three-step program for credit unions to help combat AIDS by training credit union staff in recognizing and counselling HIV/AIDs members. Middle East Iran and Afghanistan Iran reached out to the international community and joined the Association of Asian Confederation of Credit Union. Brian Branch and Bobby L. McVeigh of the World Council of Credit Unions met with the Iranian Ministry of Co-operatives to meet in Tehran, Iran. Branch noted, "Credit unions develop as the democratic expression of people seeking to help themselves in all environments around the world."