Posted on Wed, May 12, 2010 @ 09:26 PM
As credit unions are well aware, Regulation Z’s new open-end lending rules under the Truth-in-Lending Act take effect July 1, 2010. Regulation Z establishes (among other things) uniform methods for disclosing credit terms. There is a lot of confusion among credit unions regarding the rules’ effect on multifeatured credit plans.
Under the old rules, credit unions were allowed to provide open-end disclosures to all subaccounts under their plans, regardless of whether it was a revolving line of credit or a closed-end subaccount, such as a vehicle loan underwritten by the credit union.
In 2007, the Federal Reserve Board began its periodic review of the open-end rules. Through that process, it learned how credit unions’ multifeatured plans work. The board said it could understand why Regulation Z was interpreted to allow open-end disclosures on closed-end subaccounts. But it also stated that it never intended the rules to be applied that way and closed the loophole when issuing its final rule in January 2009. The board emphasized that the Truth in Lending Act and Regulation Z have distinctly different rules for open-end and closed-end credit. It ruled that under a multifeatured plan, open-end advances must receive open-end disclosures and closed-end advances must receive closed-end disclosures.
To distinguish between open-end and closed-end subaccounts for disclosure purposes, the board looked at whether a credit union underwrites the advance. Open-end credit such as revolving lines of credit and credit cards must be "revolving and replenishing." If the extension of credit is not revolving and replenishing, it is considered closed-end under Regulation Z.
With revolving and replenishing accounts, creditors establish a credit limit up to which the consumer may take advances without having to requalify each time. Because this supply of credit can be virtually unending, creditors are allowed to verify credit information periodically to ensure that the member still qualifies for the terms of the account. If the member’s creditworthiness deteriorates, the credit union can manage its risk by suspending the line, raising the current annual percentage rate or lowering the credit limit. This process is called verification.
Underwriting occurs when credit verification is conducted as a condition of granting a consumer’s request for a specific advance under the plan. An example is when a member requests a $25,000 advance for a vehicle loan, and the credit union checks the member’s credit before approving the request. In such a case, the subaccount is closed-end and the member must receive closed-end disclosures.
It is important to note that credit unions may continue to underwrite their revolving subaccounts under Regulation Z. When subaccounts continue to meet the revolving and replenishing criteria for open-end credit, the credit union can check the member’s credit rating when first establishing the account and again when they raise the credit limit. The new rules are not concerned with these traditionally open-end revolving accounts.
Multifeatured plans are still allowed under Regulation Z. The Federal Reserve Board did not intend to change the underlying nature of the plans or change the way credit unions underwrite their loans. Rather, the change in the rules is disclosure-driven. The board simply states that closed-end disclosures must be given for closed-end subaccounts.
The board did reject what it termed a hybrid approach. This approach was a proposal received during the rulemaking process that combined open-end and closed-end disclosures in tabular format which could be provided seven days after the loan was closed. In rejecting this approach, the board said the open-end and closed-end rules cannot be combined in that way. Rather, open-end disclosures must be provided with open-end subaccounts and closed-end disclosures with closed-end accounts.
Regulation Z does not require closed-end disclosures to be signed by the member nor does the advance receipt containing the "Fed Box" need to be signed. It only requires that the disclosures be provided in a form the consumer can keep, either in writing or electronically. That means credit unions can retain their single-signature plans.
Credit unions can provide the closed-end Fed Box disclosures on the member’s advance receipt. Regulation Z requires that closed-end disclosures be provided at or before consummation, which when the member becomes obligated on the advance and the funds are disbursed. As long as members receive the advance receipt with the Fed Box disclosures at or before receipt of the funds, the Regulation Z requirements are satisfied.
The new rules require credit unions to change their disclosures but do not require them to change their underwriting practices. As long as credit unions provide the closed-end disclosures at or before fund dispersal, they may continue to underwrite as they always have.
Posted on Fri, Apr 23, 2010 @ 11:28 PM
By Peter Ostrow
CRM Buyer
04/23/10 5:00 AM PT
Reducing the duration of the average lead-to-win timeframe is a top consideration for sales teams looking to recover quickly from the damage done by the recession. Deploying electronic signature capture tools can contribute to this goal. Used properly, such tools can reduce the wasteful paperwork that drags down both the seller and the customer.
As sales organizations endeavor to escape the constricted economy of the 2009 recession, one of their most significant barriers is stagnant progress regarding bringing their sales cycle under control.
Recent Aberdeen research published for "Inside Sales Enablement: Let Them Drink Coffee!" (Dec. 2009) reveals that not only did under-performing companies see a year-over-year increase in their sales cycle of 12 percent, but even the Best-in-Class, or top 20 percent of performers among over 500 companies surveyed, experienced a slight (1 percent) lengthening of their own lead-to-win timeframe.
As top-performing selling teams continue searching for ways to reduce this window, as well as to increase their win/loss "batting average," the use of electronic signature capture tools holds potential promise for better sales team performance in 2010.
Aberdeen research conducted in March, 2010, for the pending benchmark study, "Automating Lead-To-Win: Shrinking the Sales Cycle and Focusing Closers on Sealing More Deals" (May, 2010), of 441 corporate sales teams included 67 companies currently deploying electronic signature capture technology, and early indicators are that these organizations are realizing concrete performance advantages over other survey respondents.
Figure 1: Year-over-year sales performance improvement of electronic signature users versus other companies
Deconstructing Successful Use of Electronic Signatures
As Figure 1 details, a series of key performance indicators (KPIs) that Aberdeen tracks among survey respondents provides insight into how electronic signature-friendly sales organizations are improving their results. This graph shows that by an average delta of 36 percent, more of these companies showed year-over-year improvement in the following metrics, when compared to all other organizations.
These same top performers realize an average 6 percent annual increase in the net client value of their customers, compared to 2 percent and 9 percent decreases for the other maturity classes; this validates the importance of focusing on customer renewals by electronic signature users, who support their customers' efficiency by avoiding time-consuming paper trails and providing online signing functionality.
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Proposal quality: Among the full 441 survey respondents for the Lead-to-Win research, the Best-in-Class reveal an average time-to-signature -- the average amount of time that transpires between the point where a contract is requested, and the time when the signature is received -- of 23 days, compared with 37 days for other companies. This 61 percent differential can certainly be impacted by a sales team's efforts to reduce the number of contract or proposal iterations that are produced both internally and in customer-facing form, by working harder, and smarter, to avoid creating documents that include errors. One of the tenets of electronic signature products indeed focuses on ensuring that the physical location and timing of required contractual signatures are clearer to the buyer when using electronic rather than hard-copy versions.
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Shorter sales cycles: With an overall average sales cycle of 4.5 months, survey respondents clearly need plenty of time to close their deals, which are typically sized in the US$250,000 to $300,000 range. Users of electronic signatures have been more successful than other companies in reducing these cycle times on a year-over-year basis, ostensibly because they create an easier, online experience for their prospects and customers to "seal the deal" rather than relying on printed matter shipped by email, fax or courier to receive the final agreement as confirmed by the buyer's signature. As indicated above, the time-to-signature gains achieved by using the technology in the "last mile" of the decision-making journey helps reduce the time associated with final barriers to closing business.
Posted on Thu, Mar 18, 2010 @ 09:00 AM
By Thom Patterson, CNN
(CNN) -- In the front offices of the trend-spotting network and online magazine TrendHunter.com, there are 15 workers wrangling 35,000 worldwide contributors -- but you'd be hard-pressed to find one filing cabinet.
Trend Hunter is a paperless office.
Founder Jeremy Gutsche tells a story about how an accountant had finally put together all the numbers on a project and offered to send a paper report on his work. When Gutsche asked for an electronic copy instead, the accountant "just started looking at me, laughing."
According to Gutsche, the accountant asked, "These are your most important financial performance records -- don't you think you should have a hard copy?" "I said, 'I really don't know what I would do with it.'"
"Buy a filing cabinet," said the accountant.
The exchange goes to the heart of a cultural divide that may explain why businesses continue to print, copy and fax more than a trillion pages of office paper each year, according to the market research firm InfoTrends.
The dream of the paperless office started way back in 1975, when BusinessWeek magazine predicted "a collection of ... office terminals linked to each other and to electronic filing cabinets."
"It will change our daily life," said one bold technology expert quoted in the article. Said another expert: "By 1990, most record handling will be electronic."
Twenty years after that unmet deadline, a national survey found that businesses have chosen to use paper printouts to archive 62 percent of important documents.
The survey of 882 companies, released in February by the content management association AIIM, indicates that most businesses believe paper documents are needed for legal reasons.
So what happened? Where is this streamlined office of the future, free of clutter and file cabinets, that was promised back in the '70s?
By the mid-1990s, the nation was actually moving in the opposite direction.
More and more workstation computers and printers contributed to a big jump in office paper consumption well into the 2000s, according to industry experts.
Before taking a hit from the recession, the estimated number of office pages printed, copied and faxed annually in the U.S. peaked in 2007 at more than 1.019 trillion, according to InfoTrends, a Massachusetts-based market research and consulting firm.
InfoTrends analyst John Shane blamed the nation's love of office printing and copying on convenience.
Many people can't bring themselves to let go of the convenience of a printed hard copy, said Shane. For some, printed paper may be more portable, and easier to read in a cramped airliner seat than reading on a laptop. Some people may find paper more comfortable and preferable to read during a meeting, instead of reading a document on a tiny smart-phone display.
"Most of what people print now is for temporary read-and-discard purposes and for transactions," said Shane. "People like to read paper. Then they throw it away. Then they may want to read it and throw it away again. That behavior needs to change if we're really going to see a paperless office."
There are plenty of motivating factors that would push managers to adopt the idea of a paperless office. Cost saving is one. Paperless-office advocates say they save the cost of paper, envelopes, postage, couriers, printers, copiers and, of course, filing cabinets.
The idea of helping the environment also might push a change in behavior, Shane said.
That's the motivation behind Gutsche's paperless office, his second such system after going through the shift with his previous employer, Capital One.
Three major factors will drive the paperless office movement, says Gutsche: ecological, technological and generational.
"The world's getting more obsessed with eco," said Gutsche, in this case the idea of saving paper and conserving trees. "Eventually it's going to get to a point where it's going to seem awkward when you see someone having something printed."
The paper industry argues that recycling paper and managed tree growth make using paper cheaper and easier on the environment than the cost of recycling computer components.
The technology is available to give even home-based businesses the option of going paperless.
Scanners for electronically storing documents are getting smaller and more affordable. "You get back from a conference -- you drop off 15 business cards into a little scanner and it places them all digitally," said Gutsche.
Portable computer tablets, such as Apple's upcoming iPad, are also part of the equipment of a paperless office. "As soon as I switched to a tablet PC, that eliminated the need to be walking around with a pad of paper to meetings," said Gutsche. "I can write things down immediately on the tablet."
When he's giving someone feedback on a document -- whether it's on a PowerPoint Deck or in Microsoft Word -- it's much more tedious to mark it up on a keyboard, Gutsche said. "But if you use a tablet, you're drawing right on it, so there's no real shift from what you're doing."
Next-generation e-readers and tablets have spurred interest in the prospect of a paperless magazine market.
For home offices, popular tech blogger Chris Pirillo recommends using a Web-based billing and payment system such as Freshbooks to eliminate paper created in the invoice process.
Kevin McNeil, CEO of Ontario-based Gore Mutual Insurance, said acceptance of the company's paperless office system in 2002 was "a generational thing."
More than half of his approximately 280 employees are under 35, he said.
Younger people -- especially those young enough to have grown up with home computers -- have adapted very quickly, McNeil said. Older workers took longer, but everybody was on board within six months.
"Everyone saw the benefits of being able to take care of their work faster, but young people don't want to deal with old technology. They paid more attention."
As a result, the workflow has gone from sometimes waiting days to retrieve records that were archived off site, to accessing the same files in two or three seconds -- saving time, creating efficiency and improving customer service, McNeil said.
An initial outlay of hundreds of thousands of dollars was well worth it, he said. "For every dollar that we spent on it, we saved that dollar plus another 85 cents."
Gutsche said the shift to reject all paper has already started, but Shane is more cautious in his predictions.
Although Shane does see offices in the near future reducing their printing and copying, he says, "I wouldn't call it the paperless office -- that's not going to happen for ages. But the less-paper office is coming."
By the way, that filing cabinet TrendHunter.com's accountant suggested? According to Gutsche, "it's still empty."
Posted on Mon, May 25, 2009 @ 10:50 AM
As credit unions are well aware, Regulation Z’s new open-end lending rules under the Truth-in-Lending Act take effect July 1, 2010. Regulation Z establishes (among other things) uniform methods for disclosing credit terms. There is a lot of confusion among credit unions regarding the rules’ effect on multifeatured credit plans.
Under the old rules, credit unions were allowed to provide open-end disclosures to all subaccounts under their plans, regardless of whether it was a revolving line of credit or a closed-end subaccount, such as a vehicle loan underwritten by the credit union.
In 2007, the Federal Reserve Board began its periodic review of the open-end rules. Through that process, it learned how credit unions’ multifeatured plans work. The board said it could understand why Regulation Z was interpreted to allow open-end disclosures on closed-end subaccounts. But it also stated that it never intended the rules to be applied that way and closed the loophole when issuing its final rule in January 2009. The board emphasized that the Truth in Lending Act and Regulation Z have distinctly different rules for open-end and closed-end credit. It ruled that under a multifeatured plan, open-end advances must receive open-end disclosures and closed-end advances must receive closed-end disclosures.
To distinguish between open-end and closed-end subaccounts for disclosure purposes, the board looked at whether a credit union underwrites the advance. Open-end credit such as revolving lines of credit and credit cards must be "revolving and replenishing." If the extension of credit is not revolving and replenishing, it is considered closed-end under Regulation Z.
With revolving and replenishing accounts, creditors establish a credit limit up to which the consumer may take advances without having to requalify each time. Because this supply of credit can be virtually unending, creditors are allowed to verify credit information periodically to ensure that the member still qualifies for the terms of the account. If the member’s creditworthiness deteriorates, the credit union can manage its risk by suspending the line, raising the current annual percentage rate or lowering the credit limit. This process is called verification.
Underwriting occurs when credit verification is conducted as a condition of granting a consumer’s request for a specific advance under the plan. An example is when a member requests a $25,000 advance for a vehicle loan, and the credit union checks the member’s credit before approving the request. In such a case, the subaccount is closed-end and the member must receive closed-end disclosures.
It is important to note that credit unions may continue to underwrite their revolving subaccounts under Regulation Z. When subaccounts continue to meet the revolving and replenishing criteria for open-end credit, the credit union can check the member’s credit rating when first establishing the account and again when they raise the credit limit. The new rules are not concerned with these traditionally open-end revolving accounts.
Multifeatured plans are still allowed under Regulation Z. The Federal Reserve Board did not intend to change the underlying nature of the plans or change the way credit unions underwrite their loans. Rather, the change in the rules is disclosure-driven. The board simply states that closed-end disclosures must be given for closed-end subaccounts.
The board did reject what it termed a hybrid approach. This approach was a proposal received during the rulemaking process that combined open-end and closed-end disclosures in tabular format which could be provided seven days after the loan was closed. In rejecting this approach, the board said the open-end and closed-end rules cannot be combined in that way. Rather, open-end disclosures must be provided with open-end subaccounts and closed-end disclosures with closed-end accounts.
Regulation Z does not require closed-end disclosures to be signed by the member nor does the advance receipt containing the "Fed Box" need to be signed. It only requires that the disclosures be provided in a form the consumer can keep, either in writing or electronically. That means credit unions can retain their single-signature plans.
Credit unions can provide the closed-end Fed Box disclosures on the member’s advance receipt. Regulation Z requires that closed-end disclosures be provided at or before consummation, which when the member becomes obligated on the advance and the funds are disbursed. As long as members receive the advance receipt with the Fed Box disclosures at or before receipt of the funds, the Regulation Z requirements are satisfied.
The new rules require credit unions to change their disclosures but do not require them to change their underwriting practices. As long as credit unions provide the closed-end disclosures at or before fund dispersal, they may continue to underwrite as they always have.