CD Deals Summary
Fed Meeting: Another 25-bp Rate Hike - Strategies for Savers
Fed Meeting Preview and Deposit Rate Forecast - March 15, 2023
Silicon Valley Bank Is Shut Down - Second Largest Bank Failure in History
Valor Credit Union Adding Fee That Punishes Members with Prime Rate CDs
Update 2/18/2015: Good news! Valor Credit Union has decided not to implement this new CD fee. I received confirmation this afternoon from a Valor official. They will be notifying members with this letter.
Valor Credit Union (formerly Tobyhanna Federal Credit Union) has mailed a new fee schedule to its members that includes a 3% processing fee for additional deposits on CDs with terms over 60 months. The new fee takes effect on 3/17/2015. The Prime Rate Certificate is no longer available so this new fee can only affect existing Prime Rate Certificates. One of the features that made the Prime Rate Certificate attractive was the ability to make additional deposits. Once this new fee takes effect, add-on deposits will become very costly.
Thanks to the reader who found this change and alerted me. I contacted the credit union and confirmed the new fee is scheduled. Below is an excerpt of the email the reader received about the new fee from Valor Credit Union:
Thank you for inquiring about the Prime Rate CD and the new 3% processing fee. This is a newly-instituted fee that will apply to our CD products with a term of more than 60 months, including the Prime Rate CD.
There will be no fee assessed for deposits made to your Prime Rate CD before 3/17/15. Beginning on 3/17, any deposits into your Prime Rate CD would be charged this new 3% processing fee.
You may continue to add funds to the CD at any time, but each deposit after 3/17 will be subject to this fee.
According to the reader, the credit union only listed the new 3% processing fee in a new fee schedule that he received in the mail. The fee schedule listed around 40 various fees. Unless members look through the entire fee schedule, they can easily overlook this 3% processing fee. Many members with the Prime Rate Certificate will likely be shocked when they try to add money to it after 3/17/2015.
Valor Credit Union’s Prime Rate Certificate was unique in that it allowed additional deposits. Typically, CDs only allow one deposit when the CD is opened. The add-on deposit feature made the CD attractive and it helped to offset the CD’s downsides like a long 7-year term and a harsh early withdrawal penalty.
Valor Credit Union’s new 3% processing fee on additional deposits will essentially negate the benefit of making add-on deposits. The Prime Rate Certificate had an interest rate of 3%. Thus, it will take about a year for additional deposits to earn enough interest to cover the processing fee.
Valor Credit Union may claim that the original terms of the Prime Rate Certificate are being maintained since add-on deposits are still allowed. However, the new processing fee has a material impact on the Prime Rate Certificate’s value. It’s similar to the impact of increasing an early withdrawal penalty. If this fee had been specified to members before the CD was purchased, fewer members would have opened it.
This is another case of a credit union retroactively changing the terms of its CDs. It’s similar to the cases when Fort Knox Federal Credit Union and CEFCU increased their early withdrawal penalties on existing CDs. Both of these credit unions claimed that their member agreements gave them the right to change the fee schedule at any time. The only limitation is that they must notify members of the changes within 30 days of the changes taking effect.
Even if these credit unions believe that making these changes isn’t breaking any rules, the changes are sneaky and unfair in my opinion. I wonder what the Consumer Financial Protection Bureau (CFPB) would think. The following is an excerpt from the CFPB’s "about us" page describing their mission:
ensuring that consumers get the information they need to make the financial decisions they believe are best for themselves and their families—that prices are clear up front, that risks are visible, and that nothing is buried in fine print.
In my opinion, Valor members didn’t get the information they needed when they opened the CD. There was no indication that additional deposits would be charged a 3% fee. If a credit union can charge fees on deposits into a CD, what stops a credit union from adding a withdrawal fee when a CD matures?
I see this move as decidedly worse than changing the rules of early withdrawal penalties, especially when that early withdrawal possiblity was never promoted as a basic feature of the CD. This action adding the 3% fee for all intents and purposes is serving to negate the very feature of the CD that made it something to consider.
I do think this add-on feature was so fundamental to this CD that that action is very legally suspect -- and it it something that should be challenged.
This now should put Valor at the top of the list of dirty financial institutions, even ahead of Fort Knox CU, which changed it early withdrawal penalty; at least Fort Knox had not promoted the early withdrawal possibility as a basic feature of the CD.
Going to CFPB as a group may have some impacts; personally I do not think that we should take this stuff passively.
"Rate information: We use the average daily balance to calculate the dividends on this account. The floor rate for this certificate is 3.000% and the ceiling rate is 7.000%. Deposits can be made at any time."
That is the only information provided about deposits. There was no language indicating that Valor reserves the right to change the conditions or terms for deposits or fees after the account has been opened, either without notice or with a 30-day advance notice. If they do institute this 3% fee for new deposits I will file a complaint with the CFBP to propose they have violated the terms of the agreement. I encourage others to do the same.
Someone should also get the press coverage on this! Ken, any suggestions? Offer yourself for an interview???
Ever consider that these people know Banking 101? They knew they couldn't remove the deposit add feature. So they imposed a fee.
its actually quite smart....
Has anyone noticed, yet? We don't even have an apology!!!
You can close your CD at any point in time you want, however, if you decide to close your CD early or before the term ends, you will be in breach. As a result, they will rob you, er... I mean impose a penalty that is described in the contract you agreed to.
Don't make the mistake and think that I like these new terms. I don't and I feel that this is a, for lack of a better term, JERK thing to do. The only advise I can give to those who purchased this CD is add as much money as you can before the changes take place.
I will never put any money into a credit union or bank that pulls crap like this.
Current members of the credit union should complain fast and loud. Look what happened the TurboTax Deluxe. Two weeks later, out comes the apology.
Ken
I do heartily agree that we should not let this go unaddressed, and as 51hh and others have suggested, contacting CFPB may be an effective strategy.
It's ironic that the institutions which have acted dishonorably and unfairly by changing terms at will have been credit unions (looking at you NASA, Fort Knox, CEFCU et al. Move over so Valor can join you in the Financial Institution Hall of Shame). They apparently have forgotten that they are supposed to be not-for-profit organizations that exist to serve their members rather than to maximize corporate profits, and are in reality as greedy as the banks with which they compete.
At USCU back in the day, a grace period was given during which additions to the CD accounts were still permitted. In that aspect Valor is similar. I hope other similarities ensue, to wit:
A legal challenge was mounted against USCU and things ended up going very poorly for the credit union. In the end, the USCU president resigned in disgrace. The deceptive, dishonorable, clown in charge at Valor needs to meet a similar fate, and soon. At USCU the situation did not drag out over years. The guy there was gone in a matter of months.
I agree with voices here saying this CU no longer can be trusted. Because I am not smart enough to have foreseen this ridiculous deposit fee scheme/fraud, I realize I'm also not able to guess what these idiots will dream up next. It could literally be anything. I also avoid at all costs dealing with known criminals. You are entitled to your opinion. To me the people running Valor are crooks, plain and simple. Stay away. Stay as far away as you can.
Valor Credit Union management: WABOA!!
I'm sure USCU gave us a letter which described the changes, and members' options, in an open and forthright manner. This was unlike what Valor has done. I agree with you that Valor's "notice" was published in a sneaky and deceitful manner, intended to obscure the new "terms" by hiding them amongst many other changes. This is despicable.
Lots of of respect where respect is due where no one listens to their customers.
It's effective even if not legal fraud in my judgment.
What a now disreputable institution.
The only saving grace about the promotion was the ability to add to your existing deposit....now with the processing fee, it means you can't even do that....so call it what it is - a scam. The CU is not stupid, they know many of you were making deposits of the minimum amount, hoping to add more once interest rates goes up. Well, they sure pre-empted that didn't they?
They locked you in at a 3% rate, for 10 years, with no interest coming out. Now you can add more money without paying a fee, and they keep changing their name meaning some sort of ownership change. For a CU that only takes your money, without giving anything back means they are in trouble. Don't bank of collecting any interest after 10 years because they might now even be around that long.
Is this bad? Yes, of course Valor management is now revealed as disreputable. But everyone already knew about the interest payout terms. That was revealed up front . . no surprises. People not wanting those terms, like you, did not go in. Fine. There was no deceit regarding that aspect.
This latest change with the fee, of course, is another matter entirely. I doubt too many of us saw this coming. Imposition of a fee now is wrong and unfair. And the manner in which they have gone about notifying us is despicable.
Hence the reason why I always want to collect monthly interest from my CDs....I saw too many banks and CUs failing during the Great Recession....whereby having an account with anyone of them means having the terms and rates of your CDs nullified. Good luck on your 6 year wait, because I am not sure how cool your jets will be if this CU pull another trick.
If the CU goes belly up no big deal. I have been in three banks that failed with a LOT of my money inside. It's never a big issue. You just get your money back, with interest, assuming you remain withing the NCUA limits.
Your last point is your best, and I think you are right on that one. Any CU that will pull a stunt like this cannot be trusted. None of us can foresee what they will pull next. It could be anything. It is, indeed, unwise to do business with any organization known to be untrustworthy.
EIther way, 3% is an awesome rate.
Another issue I detest is the automatic CD renewal ploy. I wish the regulatory agencies would require a check box on every CD contract: AUTO RENEW AT NEW TERMS or CLOSE. Our PenFed paperwork stipulates: CLOSE TRANSFER TO ACCOUNT NO 1234567.
Maybe CFPB changed within a year or two, They are responsible and efficient from my perspectives. Just my input.
I would go through Valor first (that I did) all the way to their senior management (being highly critical on their act but with some politeness), then CFPB.
Customers are responsible for their own welfare and owe it to themselves to have a good fight.
It's funny, the old Tobyhanna was a trusted, respected, name. It was a pretty good outfit with a sterling reputation. The Valor name on the other hand is still very new, but it's already forever tarnished and soiled beyond redemption. Going forward, and for good reason, nobody will trust Valor.
This is an internet age, the internet has a really long memory, and years from now when people Google "Valor", all this bad behavior will spill out over and over again. It's just desserts in my view. No financial institution should pull this kind of stuff.
"Have you done your due diligence on the CU? What is its primary customer/membership base...is that an issue in the long/short term, e.g. will the "base" be open in x years? Are you physically "close" to a branch? Is the financial statement robust? Why is there a posting of an opening for a CFO...why is there a vacancy? What red flags are there? And, what is the "delta" in the rates from that otherwise available (after all that is all "you" are looking at!) or what is in your financial bucket list?
"Have fun! But spend/invest wisely!"
And...interest rates aren't everything!
Every contract imposes on each party an obligation of good faith and fair dealing. Particularly in a consumer setting involving a contract of adhesion, courts will carefully scrutinize a provision that purports to give one party unilateral right to alter the contract terms.
Here, as others have pointed out, the "add on" feature was very much a material term. It's different in only in degree from Valor saying, for example, that it would reduce the interest rate to 1% for the rest of the term, or make the term 20 years or 20 days.
Let's see if the CFPB actually has any clout. If they can't stop this – a pretty egregious case – it will be hard to take them seriously as an industry watchdog.
The CFP be should also be urged to act quickly, because Valor has now put us in a difficult position of making decisions before March 17.
i for one am proud of any bank or credit union that acts based on feedback. Kudos Valor!
https://help.consumerfinance.gov/app/bankaccountorservice/ask
The more complaints they receive over a short space of time, the better will be our chances for success. If we do not fight together on this, we will hang separately. Please file a complaint. It only takes several minutes.
Now you know what will happen, since we filed all these complaints, (which are merit less now) they'll be glorified by everyone as the ones who "listened to the people". Our strength in numbers when going to the CFPB will be diminished now that all of our complaints will be useless. It just gives them more ammunition to flight against more regulation and oversight.
And our credibility will be wasted away by not approaching this the right way.
My best guess is that they are out of balance with respect to funds on deposit and loan demand. That is, they do not have (or anticipate) sufficient loan demand to put the money to work at a high rate, but they are committed to paying an attractive rate on a significant amount of money. If you wonder what the person who calculated their potential exposure (at the high end: (# of Prime Rate certificates issued * 250000 insured balance) – total balance currently deposited in Prime Rate certificates) looked like immediately after, this is probably a fair likeness.
It boils down to the basics: if there is insufficient (current or anticipated) loan demand to put that money to work, they bleed money and risk survival of the institution. I suspect that Valor management was swamped by a tsunami of funds that poured into the credit union and did not act quickly enough to close the floodgates. Other institutions have tempered their risk when offering attractive CDs or other accounts by limiting the time it is available, by discontinuing it once a certain total is reached, or by limiting it to pre-existing customers. Valor, however, did none of those things. Like Bob Barker on “The Price is Right”, they said “Come on down!” and to their surprise, we all did.
So are they incompetent or evil? "Overwhelmed and not ready to play in the big leagues" might be a fairer assessment.
Too slow to detect a problem and take decisive action? Most definitely.
Am I willing to make additional deposits before 3/17? Absolutely not.
Doesn't quite work that way.
I would be willing to bet that if you ask them, they will deny having violated the terms of the CD, and instead claim it is a change in fees, which they are entitled to do. But a bad act is a bad act, and however they choose to spin it, the Internet has a long memory and this maneuver will not be forgotten.
Your example is about depositing money and then wanting to withdraw it without a penalty. The penalty for early withdrawal is known at the time you purchase the CD so that is not really in keeping with the situation at Valor.
This is more like someone who buys a membership to a gym and the membership comes with the promise of unlimited use of the facilities. "Great!" you think "I can work out before breakfast, at lunch, and stop by on my way home in the evening". But after some time has passed, you are informed that now there is a a fee for entering the building. You can still make all the visits you want, but you will have to pay at the front door each time.
However we choose to look at it, there is no denying that most of us who planned to use the add-on feature as a hedge against continued low rates have lost confidence and trust in the institution. What we each need to decide, depending on our own situation and circumstances, as well as other options which may be available to us, is whether we continue to trust the credit union and stick to the plan. The other decision we have to make as individuals is whether we will bring light to this offense by contacting CFPB, NCUA, and other credit union organizations. I definitely intend to do that.
Being a CSR at Valor this week has to be a nightmare. They are the people who are on the front lines, who have to explain and sell this change to irate customers and take a browbeating.
The individuals who were unprepared to manage the assets are insulated from the consequences of their actions and decisions, which means that it will be business as usual. They may be the only winners in this mess.
"What possibly could be the real difference is if the following scenario happened:
Suppose you paid taxes on 4 years of unpaid earnings and then Toby goes under. NCUA pays your insured principal amount but not the unpaid accrued interest earned that you have paid 4 years of taxes on. I really do not know that this would be the case, but I would have to get some kind of written verification that I would not lose the 4 years of accrued interest that I already paid income taxes on."
The 3% CD fee is near the bottom.
Also of concern is the $10 inactivity fee, EVERY SIX MONTHS, if your share account is inactive. That's just nuts!!!
Valor obviously is in deep doo doo.
This so-called "Valor" outfit is moving rapidly from bad to worse. The stuff they are pulling is outrageous, right across the board!! And it is all being done with malice of forethought. Some credit union! Credit unions are supposed to be on the side of members. Dealing with Valor is like dealing with one of the big money center banks!! Members do not know from what direction will come the next Valor attack on our wallets and on our well being.
https://help.consumerfinance.gov/app/bankaccountorservice/ask
Toby is dead. Valor lives. And clearly at Valor now, ANYTHING GOES!!!
That is a blatant, bald-face LIE. It does NOT "cost" them 3% to PROCESS a deposit.
(Remember, this fee is labelled as a "processing fee").
If it did, then it would be assessed for ALL deposit accounts (savings, checking, etc).
It is certainly not a "Processing" fee as Valor contends, and it certainly doesn't not cost Valor 3% to "Process" a deposit (which is DIFFERENT than having to pay 3% INTEREST)
I have mixed emotions. It makes me proud that people still have a voice in their CU's and now I feel bad for all the complaints filed. Maybe we should have just contacted them.
When you spoke with them, did they mention how they were going to communicate this new turn of events? They already sent out letters advising of the fee - will they be making a second mailing or updating the website?
I think it was a great first step, but I think people need to voice their concerns to a bank or credit union first and let them try to address it. Instead we (including I) went flying all over the place filing complaints before giving them an oppertunity to respond.
I'm glad to see Valor reversing course. Let's hope going forward everything will be above board, so that, as someone in an earlier post mentioned, anyone searching google for "Valor Credit Union", will be able to come across positive postings about the credit union, instead of them trying to pull stunts like this.
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Hello,
I had a word with your manager "Rich" about the 3% "processing fees" you added to process deposits into the "prime rate CDs", and subsequently eliminated. This gentleman gave me the excuse that because of overwhelming response to your CD you wanted to stop accepting additional deposits, and to discourage members you added this fees.
Please note that the "processing fees" ought to be something fair and balanced. It goes against common logic that to process a $100 deposit you will need $3 worth of processing efforts, but to process $1000 deposit you will need $30 worth of processing efforts. How exactly do you justify this to a common member such as myself?
In fact the deposit into Prime Rate CD that are made from checking account as a "transfer", it on par with a transfer from checking to saving and vice-versa. Which is (and ought to be) free.
I suspect Valor is getting lot of deposits, but is unable to make sufficient loans to keep up because of the terms of the Prime Rate CD that allow limitless deposits.
A wise management would have foreseen such a possibility right at the beginning, and would have placed some sort of an upper limit right at the get-go. I see that management of Valor is/was not wise enough for this, and failed to anticipate this. It is rather amusing to see that Valor is resorting silly tricks such as placing 3% "processing fees".
I have a request: Please stop acting in such a manner, that Valor now has become a laughingstock on the internet! I associate "Valor" with something very different than this sort of pathetic display of instituting the fees and then rescinding it.
Please let me what's your reaction to this message, and if your reaction is "No Comments" then be sure to sent such a response.
Thanks.
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I hope this ends here and stays out of the newspapers. I do not want to see Valor further tarnished. Such a thing would harm existing members. Damage was done to Valor by this unfortunate episode. It's time now for quiet reflection on the part of Valor management, for rebuilding of trust, and for healing.
The healing should involve removal of the un-trustworty / cowardly personnel involved in this debacle.
Ok, now that the 3% CD add-on fee is history how about addressing the $10/quarter share account inactivity fee imposed on CD holders who were forced to open a share account with Valor.
Lesson learned: (1) customers can fight against unfair treatment, but always with tact and without attacking the entity at issue (it is their unfair terms we are not happy with), calling names is not our style, (2) always bring it up through the management chain, then to BBB or CFPB, rendering the entity an opportunity to react, adjust, and accommodate, (3) no need for any mutual attack among ourselves, (4) address issues one at a time, (5) remember this example that customers will win only if we proactively fight for our rights.
Thanks again Ken and Francis for the early warning!
Cheers.
The trust that got lost because of such a cowardly act of discouraging the members to put additional money was won back merely because of removal of what was unjust to start with? Like I said ... Wow.
It takes an exceptionally unwise bunch of management personnel to put an offer out of limitless additional deposits. It takes an exceptionally cowardly bunch of management personnel to put in place the 3% fees.
Courageous and mature ???? ... What comes to mind is: "I trust Valor to do the right thing, after trying out a dirty trick, and losing!"
I'd personally love it if Valor Management simply did what other CU's and banks have done and do a change in terms and jack up that early withdrawal penalty to 7 years.
Others have done it....
Only saying hopefully we didn't awake a sleeping giant with this...you do know that Credit Unions can place a bylaw in place capping all deposits per member permanently. I'm just saying that who knows if they were ready to launch a better product and now they'll re-group with something more restrictive than a fee.
Peace.
Yesterday I submitted a formal complaint to the NCUA directly, the CFPB directly, as well as to a reporter for a major newspaper, detailing numerous points regarding what Valor was attempting to do. Here are three things to think about:
(1) This of course was not a processing fee of any kind. When I spoke to the Valor rep, he point blank told me the reason for the fee was to try to stop more deposits. Yet it is the institution's responsibility to assess its own risk, not the consumers.
(2) If Valor was so concerned about being exposed to too many deposits, then why, after discontinuing the Prime Reserve CD for a while, did they BRING BACK THE SAME CD PRODUCT AGAIN, as recent as DECEMBER 2014 (with the only change being a max cap of $100,000 for the 3%)? If Valor was really worried about possible exposure to too many deposits, then it is gross incompetance on the part of the institution itself to BRING BACK the same CD as recent as December, encouraging people to deposit up to $100,000 each.
(3) If it were to be ruled legal for an institution to impose a brand new, out-of-nowhere fee on a guaranteed time-deposit product like a CD (with a contract), then what are the limits?
Instead of a credit union truthfully saying "We're just going to ignore our own contract language" (allowing additional deposits), could an institution instead simply accomplish the same thing by -- in the middle of a CD's term -- instituting a "100% Processing Fee" on new deposits? What about if it was "99.5% Processing Fee?" Where is the limit? If a new "100% Processing Fee" out of nowhere on a time-deposit CD is deemed a legal end-run around contract language allowing additional deposits, than a CD's contract isn't worth the paper it's printed on. If it's not legal, then where is the limit? 100%? 99.5%? 3%? What's the difference?
I'm glad to hear they have rescinded this attempt to (illegally, I believe) pass any responsibility onto their customers. I'm not going to recall my formal complaints with the NCUA and CFPB, but will let them take their course just to be safe. Now that the issue has been resolved, such complaints should (going through the normal process) most likely close out relatively quickly.
One last thought is, this CD isn't a perfect CD. It has plenty of cons as well (money locked up for 7 years, interest rates most likely going up soon, a SEVERE EWP, a hard pull on your credit record upon joining the credit union, and having to remember to constantly do some activity every few months in your share savings account to avoid fees) but for myself, I felt the pros outweighed the cons. It is my responsibility to live up to my end of the deal, and Valor's to live up to their end of the deal. I'm glad they've finally stopped trying to unilaterally change the terms. I went though something like this before with another institution (so this wasn't the first time for me), and like with Valor now, the other institution had to then change back to the original terms as well. It reminds us all again, to always be vigilant.
This revisionist behavior is entirely unacceptable
- The product is fantastic.
- The interest rate is great.
- This product has been around for quite a long time. I've lived in NEPA my whole life and have seen Tobyhanna evolve from a tiny CU to a VERY competitive player in our area. My sister has been a life long member and her's is almost at maturity.
i got the new fees mailed to me and saw it. It was what it was; I thought at the time. Disappointing, but they added a fee for something. They tend to place fees for premium services, abusive transactions or to slow attention to a product or service. Sort of just like adding a fee for a checking account. While the Kasasa is a great free deal, (which I love) I'd imagine if a tsunami of money flooded in, we'd be seeing a fee to stop it. It's hard to argue with their rationale for it. I suppose I see it more as a financial cooperative than a place to get 3%. I'm thinking the sudden attention caught them off guard. I've only seen their local advertising so I don't know if their broadcasting this product all over the place or not.
I don't pretend to know why they did it, but it makes me truly trust them even more that they withdrew it. They obviously saw the reaction and are planning another route. Don't discount this Credit Union. They've got growing pains but are becoming a regional player.
Having been a member for a long time, I suppose I just know how they operate. They really do have a member-centric mentality. The branch manager once opened a branch on a Sunday night so I could get into my safe deposit box. It's just that kind of place.
They changed cousre from pure customer response. They didn't have to get sued or fought into something that they have all the money in the world to fight against.
this is why I love credit unions and now Valor. They actually care about their members and listen. Interst aside, I want a place that responds to their members.
This is relatively small Credit Union with 65 employees. There are probably eight to ten professional back office staff plus the CEO, CFO and three VPs. My point is that Valor’s institutional bandwidth to consider the pros / cons of issuing the Prime Rate Certificate is very thin.
The CEO of Valor, Sean Jelen is 33 years old. He came to Valor three years ago from a similar sized credit union where he was a COO and a staff manager. He’s clearly sharp and ambitious but hasn’t been in bank management long enough to have seen even a single yield curve cycle. In a credit union this size, I doubt its board has the industry knowledge / technical acumen to bird dog him when necessary.
He clearly wants to transform the credit union (Toby – Valor) and has probably done some good things for products and service. At the same time, I’m not looking for Steve Jobs to be running a credit union; my preference is a solid Main Street Banker (maybe a new age Jimmy Stewart).
Getting back to the Prime Rate Certificate, my take is Valor put this product to market to build their asset base to support one of Mr. Jelen’s initiatives, going strong into business banking. From pulling their financials, I can see the other loan category (where a business portfolio would sit) is up $19MM (33%) and is the driver of their year over year loan growth. While building the portfolio, their yield has seen a modest drop of 18bps and was at a decent 4.82% this past December.
To prudently grow lending portfolio, you need the deposits and that’s where the seven year CD comes in. It’s a very attractive rate and they’ve locked in the deposits with the draconian EWP along with a no interest payout until maturity. No problem for me, as it was disclosed up front. Their deposit to loan has been consistent across 2014 at 85%, once again a good sign.
The looming problem is what is their deposit yield exposure? I did a quick guesstimate on what they might have paid on interest:
· If 50% of the all other shares is in the 7 year CD ($10 MM) and they’ve been on the books three months on average, that’s $80K incremental interest expense that hit Valor in 2104.
· That’s less then 5% of FY14 net income and jumps to $320K for 2015 assuming no more add ons.
The size of the potential asset add on exposure is the crux of the matter, in terms of how much a credit union this size can absorb. My feeling is that $30 to $40 million in balance inflow in 2015 is viable since it the deposits wouldn’t all be on a full year. That’s increases full year interest expense for the seven year CD towards $1MM. Once over $40MM, the credit union will need to start looking at expense saves and if it doubles to $80MM that I think management is in hot seat.
I think Mr. Jelen has plans for the credit union and transformative programs cost money. More interest expense means less money for these programs. If I were the credit union, I would make an offer to the clients in the seven year CD that the EWP is waived for withdrawals made in a pre determined period. Sort of a do over and lets those customers who are appalled at the credit unions behavior here to exit and allows Valor to reduce the risk with potential asset on
Full disclosure: I opened prior to the seven year being capped at 100K and have made one add on for between 10 and 20K. I have a large CD maturing on 3/16 and was planning to make a decent five figure deposit with Valor. At this point, I’m on the fence on adding on, even with Mr. Jelen’s about face. I’ve got a question of trust with them and wouldn’t be surprised to see come up in the future.
One other point. I appreciate all the efforts of this community for protesting Valor’s actions in trying to impose an unacceptable, unethical modification to a CD. I plan to file a complaint with the NCUA, to get this issue on the record and encourage all
having a similar perspective on Valor’s actions to document their grievance.
You caused me to consider the possibility (only) Jelen could be a smarter 33 year old than we might otherwise think. You seem to be a thoughtful individual. Jelen has succeeded in injecting some measure of doubt into your personal decision prior to move funds to Valor in 2016. Perhaps your reaction is not a one off. Perhaps others also are now concerned regarding future movements of funds to Valor. That outcome is not all bad for Jelen. Just sayin'.
His cost: Valor has taken a serious trust hit for the present. Jelen, having now made amends (was that the plan all along?), might figure the passage of time will heal the trust issue.
His reward: He limits inflows owing to the lack of trust he created. He thereby saves the credit union, while retaining his job and avoiding entanglements with regulators. He also has foreclosed none of his options going forward should this loss of trust not be sufficient to limit inflows sufficiently, as hoped.
Again, naaaaa, I don't really think Jelen is sufficiently cerebral to have planned this all out in advance. It's a rather fanciful theory, IMO. But I also am aware some young people are quite smart and creative. This is 2015. Stranger things have happened.
Whether this entire episode was planned in advance or (most likely) not, Jelen has a win here and he will keep his job for sure. The guy is a player. I tip my cap to Mr. Jelen.
We won in the end, but his background tells me Valor has some big plans.
I can't exactly say that his motives in ending it were member-motivated or damage control, but after reading his bios; he's a pretty smart and calculated guy.
I'm with you that this isn't quite damage control and not quite member-motivated.
But in the end, I do appreciate that he ended the fee. I'm convinced he knows he could charge it, but I can't figure out his exact motive as to why...
It is remarkable to note that you are focusing on Jelen - at random of course! You know what they say: most muslim men show up at airport hours early because they are sure at "random" they will be flagged for extra security checking!
Anyways if this debacle - that of offering limitless additional deposits and subsequent application of 3% processing fess and subsequent cancellation of the said fees - was a planned operation by Jelen then looks like it has failed to generate much of trust in the outfit he is leading. I guess earning trust of the members ought to be one of the main focus of the CEO (considering that profit is not the motive for a credit union). - young/old smart/dumb/average however s/he may be.
OTOH, if this debacle is not planned by Jelen, but is just a mistake committed by the management of which he is the CEO, then I'd imagine the buck needs to stop at his desk. Therefore the courageous thing for him to do will be to consider turning over his desk to - let's say - a smarter person.
I don't know if you know, but you can bank with them in their lobby 24 hours a day, 7 days a week. The place is like a bank don't get me wrong, but totally not a bank (if that makes sense) in an Apple-esque sense. They've had this CD around FORVER. I've been a member for over 17 years.
I'll never know why they wanted this fee, but the real members of this credit union know this credit union and of a CEO that answers member calls and emails any day or night. I'll never find it anywhere else.
I know why he ended the fee; feedback, feedback, feedback. We're bombarded with requests for feedback from Toby. They constantly seek feedback. But I think it's from their day to day members, and not just CD members. We've had him for 3 years and the place has never been better.
I think there's a divide between the members that are tuned into them and those that want the rate. If you bank with them in their offices, the place (in a good way) is like a cult.
He restored my trust in not just Valor, but credit unions for his action. I'm wordless as he did it without any intervention. Coupling that with a quick response to feedback is a WOW.
Mr. Jelen: Well done as a great Credit Union leader.
>> But I think it's from their day to day members, and not just CD members. <<
I'm from California USA. Over here we do not have a class system for citizens, and neither for the members of a Credit Union.
Here we do not have second class citizens and first class citizens for the state/nation, and neither do we have any such thing like a "real member" and a "day-to-day member" and a "CD member" for Credit Unions. Over here each member of a credit union is just that - a member.
I. in turn will, be interested to know your standard of 'membership' in a credit union.
BTW in CA for criminals we have something like '3 strikes and you're out.
I consider the smartness of the CEO of the actions of the management s/he heads. If the actions are dumb I consider that as a reflection of the intellect of the CEO, or lack thereof because I'm a firm believer of "actions speaking louder than the words".
Actions:
1) Making a contract of limitless additional deposit (dumb)
2) Imposing a processing fees of 3% for additional deposits (dumber)
3) Rescinding the said processing fees, (dumbest)
These look like 3 strikes to me ... Wonder if the CEO is out ???
I took a look at the financials and this credit union is functioning way better in the last few years since he took over. He has turned the company completely around. It was losing money just a few years ago; however; in 2014 the company made more money than it ever has. The loan underwriting has almost kept paced with the deposit growth with a very low percentage of loan losses. The credit union is in a much stronger position now. So far, this CEO is practically a miracle worker.
Besides transforming the credit union into a profitable enterprise, he has listened to the members and is trying to accommodate them. Just let it go and be thankful that for once a financial institution actually did the right thing.
Our contracts are with the organization and CU Boards specify rates and terms and conditions, i.e. it was the one that ratified the recent actions!
Organizational culture issue! Changing the name does not make a new organization
If/when Valor tries new trick to put an end to additional deposits then will you transfer the Trust out of Valor once again? I take it that there is hardly any longevity or permanency for the trust you place or do not place.
(On the lighter side - if your spouse cheats on you, and then makes a commitment that the present affair has ended, then I am sure you'll start trusting your spouse again - until of course the next affair begins !!!)
I am sure Valor will find sufficient members who are naive, and willing to keep doing process of transfer-trust-out, and then transfer-trust-in, and out and then in, over and over.
Here once again is the link to the Valor fee schedule:
https://www.valorcu.org/feeschedule/valorcu_fee_schedule.pdf
As I write this, the 3% "processing" fee is still there.
Words are cheap. Either post a link to the new fee schedule or shut up.
My browser was loading the page from cache, even when I clicked on their home page link the browser did that. All I had to do was to click "reload" and the problem disappeared as the browser finally went out to the net for a fresh copy of the fee schedule. I agree with you now that the fee is gone. Need to dummy up. I should have thought of that cache problem earlier.
Thinking aloud more, this guy actually has a link to talk to him. He responds in minutes. And listens to feedback. I saw someone say he's 33. All I can think is that this guy has to have some very serious brains and brawn to have taken Valor to where it is. I took a look at their financials and the place was a sinking ship. But last year, they outperformed their peers by almost 3-4 times in most of their categories.
He doesn't just get my respect, he deserves it. Wish the guys that are twice his age running banks 10x the size of Valor would have the passion that he has.
In any case, the guy broke trust which most likely results in fewer add-on deposits from CD holders. From his point of view: problem solved. What was the problem, you ask? He failed to anticipate deposit levels, probably thought rates were going up, got trapped and decided to quietly fleece depositors to make it all better. This forum, however, ruled the day.
Add to the above that it is questionable to place trust in Valor today, in the wake of this fee debacle. Right now, much better alternatives exist for our CD funds.
- Valor's ceo sewed his oats on Wall Street in addition to a few very large banks in NYC when he was just a young pup. (Google)
- He worked under quite a few of the big names on Wall St. probably thanks to his entitled and politically-connected NYC family. (Google) Daddy was a Navy commander amd then a defense contractor and his grandfather made a fortune in NYC real estate and his massive funeral business in NY and NJ. (Google) He probably inherited millions.
- He abandoned NYC for Credit Unions and sort of dropped off the banking radar for a while and made a big name for himself at a huge NYC credit union. (Google)
i have to come to his defense in some respect. He left the land of Wall St easy money and chose the not for profit path. Some points to him there. Is he "quietly" turning Valor into a bank? Why??? He probably would have made a second fortune over and above his daddys money if he didn't move to credit unions if he stayed.
I give ive credit where it's due. Doesn't seem he's working for money. Def not working for free I guarantee. He grew up with a silver spoon in his ***. Yet, he left the family firm of making fortunes.
Strange guy to try to pin down, but it seems like a guy who's a very sharp character and knows exactly what he's doing. I bank with several credit unions and his education and background is rare. I hope for a college degree most of the times, but he's got quite the pedigree.
The boy might be a boy, but his background indicates to me he's no fool nor a tool for a bunch of incompetents.
**** a stupid CD fee, I'd bank on this guy IPO'ing the place. Worth a few bucks given a background like his in credit unions?? Really, a Wall St boy in scranton taking over what was a **** hole??? Cranking up the deposits? Maintaining profitability? Increasing his assets?? Numbers show a well run shop. Worth a shot.
I'm planting a few bucks to see if this NYC boy is going back his roots.
It it makes me think that there's more to this than meets a blind eye. A Harvard MBA, Wall St banker moves to Scranton PA to turn around a lazy and defunct credit union? This makes anyone with common sense wonder what's cooking at Valor. Could be a potential conversion. Doubt it though, haven't seen a CU to bank conversion in a while.
I think he got exactly what he wanted. Announce the fee, cast doubt in the minds of who would be putting more $ in and then he saves the day by retracting it. In the end, he wins big time either way. No flack from the members because he retracted the fee and no flack from the questionable legality of it. Truly a brilliant strategic maneuver, and now knowing his pedigree from Anonomous, a certainly plausible conclusion to this.
What at irks me is the focus on a highly restrictive, absurdly long-term CD rate. ANY novice investor could have obtained the total yield at maturity on this product in any well balanced large cap fund in 2014. And had their funds back in hand.
The other thing that irks me is irritating this CEO. Everything I'm seeing shows a pending IPO. He took a mutual public in the late 90s and made the depositors a bundle. It seems he's taking the first steps again toward that. Why would any reasonable investor **** with this?
I just wish people would look out further from a 3% rate and use their intelligence to see a possible bigger picture with someone who's not going to back down because of kickback.
All I'm saying is that the product offering, coupled with the background of their CEO lead me to believe that there's a chance for a very nice payday well over and above a BS 3% rate.
Dear Member,
I am writing to inform you that as of August 19, 2015 Sean Jelen is no longer President/CEO at Valor Credit Union. The Valor Board of Directors is actively searching for an interim CEO and we expect to be able to name that individual in a matter of days.
We do not anticipate any disruption whatsoever to our normal business operations, due to this organizational change. Since 1954, Valor Credit Union has served the good people of Northeastern Pennsylvania with pride and excellence. That commitment to our valued members is unwavering.
If you have any questions, please do not hesitate to contact us. Thank you for your continued business at Valor Credit Union.
Kara L. Badyrka Chair Board of Directors
I took a look at the NCUA call reports and noticed a $286,000 loss for the first 6 months of the year compared to $73,000 for the first quarter. Interestingly, the increase in income interest and fees increased far more rapidly than the interest expense from their deposits. So the prime certificates (although they increased by $3 million in the 2nd quarter) do not seem to be the problem. What does seem to be a problem is the increase in non-interest expense for the year, meaning their overhead, including salaries and office expense, has increased in excess of the growth of their net interest income. The new CEO will have to reduce overhead in order to stem the losses.
The other metric that may be a problematic is that the total amount of delinquent loans increased by $2 million or by 70% in the second quarter. I'm not sure how much of a problem this is as it only represents slightly more than 1% of all their loans
Valor CEO departs amid credit union's losses piling up "...in the middle of one of its worst years in recent memory".but at least the credit union eventually got its company car back (see this) from 10/3/15 - although in not too favorable circumstances for the former CEO.