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October 1, 2014

Nussle in The Hill vows CU tax status defense

WASHINGTON (10/1/14)--Credit Union National Association President/CEO Jim Nussle says that under his watch "the credit union tax exemption will be strongly and completely defended," in an op-ed published in The Hill Tuesday.

"I've done my share of reading and research in preparation for my new role at CUNA," writes Nussle, who started as head of CUNA on Sept. 22. "I know that banks and their lobbyists like to say credit unions are 'virtually indistinguishable' from banks and as such should not be exempt from paying federal corporate income taxes.

"But I've come to the conclusion that statement from bankers is just flat wrong.

"There is a strong and key distinguishing characteristic between credit unions and banks: Their beneficiaries," the former congressman from Iowa states.

Nussle notes a bank's beneficiaries are shareholders who expect as much profit to go to them as possible. At a credit union, the members--who own the credit union--are the beneficiaries.

Because of the cooperative ownership structure, any excess earnings of a credit union are redirected back to all members in the form of lower loan interest rates and higher savings yields.

"And credit unions deliver," Nussle declares. "The research that CUNA has shared with me shows credit union members in 2013 realized financial benefits of nearly $6 billion, just by saving at, borrowing from or acquiring other financial services from their credit unions, rather than from a bank."

Nussle, who served in Congress from 1991 to 2006, says he's no stranger to hearing bank complaints about credit unions' tax status and asking Congress to strike down the public policy that supports it.

He highlights the significance of the House Ways and Means Committee's decision earlier this year to leave the credit unions' tax status untouched while it hammered out a blueprint for tax reform that proposed removing more than 200 tax preferences, including some that apply to banks.

"As Rep. Denny Heck (D-Wash.) said at a recent Hill Forum: 'To keep coming to us and asking for that, waiting for it to happen, is a little bit akin to leaving the landing lights on for Amelia Earhart. Credit unions are not taxed the same as banks as a matter of policy,'" Nussle writes.

"Congress bestowed the tax exemption in 1934 based on credit unions' cooperative structure and mission to provide people with access to credit for provident purposes such as borrowing to buy a car, a home or to help finance a small business. The goal was to have credit unions compete with banks to ensure that consumers have access to affordable financial services." ReadMore

CUNA seeks White House action on cybersecurity

WASHINGTON (10/1/14)--The Credit Union National Association is asking President Barack Obama to establish a Cybersecurity Council that would report to the president and would be charged with "developing a comprehensive and timely approach to the range of issues associated with cybersecurity attacks on businesses and consumers in this country."
CUNA's new leader, President/CEO Jim Nussle, writes in a letter to the president, "We urge the administration to give this idea full consideration, coordinating with Congress, agencies that are already addressing aspects of cybersecurity including prudential regulators, and the private sector to establish it."
Nussle notes in his letter to Obama that most recent massive data breaches have taken place in systems operated by merchants, not financial institutions. 
"One important problem with current law is that, even when fault in a data breach lies with a merchant, credit unions and financial institutions are assigned many of the financial costs. 
"One job of the Cybersecurity Council should be to help align liability with responsibility for these breaches," Nussle writes, adding that such a system would give more incentives to all parties to "take cybersecurity seriously."
Nussle detailed another key credit union concern related to merchant data breaches: When credit unions reissue compromised cards, under current rules they are not required to reveal the reason for the reissuance, leaving the impression among many credit union members that it was the credit union that allowed the data to be compromised. ReadMore

68% of businesses unprepared to respond to data breach: Experian/Ponemon

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COSTA MESA, Calif. (10/1/14)--Recent high-profile data breaches at stores such as Home Depot and Target have brought the issue of cybersecurity front and center for many businesses. 

While many organizations are stepping up investment into security and response plans, however, a recent study by Experian in collaboration with the Ponemon Institute found that, despite a heightened awareness, executives aren't confident in their abilities to respond to a serious attack.

Nearly 70% of respondents said they feel unprepared to respond to a breach, the study found, while 78% haven't or don't regularly update their plans to evolve with changes in potential threats.

Further, 30% of respondents believe their data breach response plans would be ineffective.

The Ponemon/Experian survey was sent to 14,639 U.S. executives and 567 responded. Of the respondents, financial services executives comprised the largest segment at 19%, followed by healthcare and pharmaceuticals at 13% and public sector executives at 11%.

The Credit Union National Association continues to urge federal lawmakers to require merchants to comply with more stringent data security requirements.

Currently, CUNA's leaders say, merchants are not held to the same high security standards required of financial insitutions, despite the fact that the vast majority of breaches are occurring at merchants' stores. (See related story: CUNA seeks White House action on cybersecurity.)

"While more organizations have data breach preparedness on their radar and have developed a response plan, a majority of companies are not putting the support and resources behind having it truly be effective," said Michael Bruemmer, vice president of Experience Data Breach Resolution.

"A checklist response plan alone doesn't mean you're prepared," Bruemmer added. "There should be an incident response team in place that practices the plan, and ongoing investment from the C-suite to ensure technologies are up-to-date; external breach experts are secured; and selection of an identity protection product for affected customers is determined prior to an incident to ensure a quick and smooth response."

Encouragingly, however, executives do recognize what needs to happen to improve their organization's incident response protocols.

The study found that 70% of executives want more oversight and participation from board members, chairmen and CEOs for data breach preparedness, and 77% suggested that more "fire drills" to practice responses to data breaches would help them be more prepared.

"Compared to last year's study results, survey findings show encouraging signs that organizations are beginning to better prioritize data breach prevention, but more needs to be done," said Larry Ponemon, chairman/founder of the Ponemon Institute. ReadMore

Joint cybersecurity venture aims to ID, share info faster for FIs

NEW YORK (10/1/14)--A joint venture between the Financial Services Information Sharing and Analysis Center (FS-ISAC) and the Depository Trust and Clearing Corp. (DTCC) aims to provide financial institutions and other organizations the latest information on cyberattacks.

The joint venture, named Soltra, will deliver software automation and services that collect, distill and speed the transfer of threat intelligence from a myriad of sources to help safeguard against cyberattacks.

FS-ISAC was established in 1999 as a nonprofit initiative to share timely, relevant information about physical and cyber threats and incident information for the financial services sector. It has more than 4,500 organizations, including credit unions of all sizes.

The Credit Union National Association is continuing its work with FS-ISAC to help credit unions monitor and respond to cyberthreats, as well as share information.

DTCC provides simplified clearing, settling, asset servicing, data management and information services to financial markets.

The software itself is called Soltra Edge. Soltra CEO Mark Clancy said it can take organizations up to seven hours to manually piece together enough information from multiple sources to properly evaluate a cyberthreat.

"With Soltra Edge, one organization's incident becomes everyone's defense," Clancy said. The system will enable clients to send, receive and store cybersecurity threat intelligence in a streamlined and automated format, enabling these firms to deploy safeguards against a potential cyberattack, he added.

Bill Nelson, president of Soltra, said that intelligence sharing must occur at "network" speeds, especially for smaller organizations.

More information on Soltra will be made available to credit unions and other small financial institutions in the coming months. Soltra Edge is currently being tested and should be available later this year. ReadMore

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CUNA Mutual to sell its crop-protection business

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MADISON, Wis. (10/1/14)--CUNA Mutual Group announced Tuesday that it has reached an agreement to sell its crop insurance business, Ag Insurance Group (ProAg), to HCC Insurance Holdings Inc.

The transaction is expected to close in the first quarter of 2015, pending regulatory approval.

"This transaction allows our company to put even more focus on our core business lines serving consumers, credit unions, small plan advisors and other core customer groups," said Robert N. Trunzo, CUNA Mutual Group president/CEO. "It also ensures America's farmers can continue to count on ProAg for crop insurance coverage."

CUNA Mutual Group took over operation of ProAg in 2009, a deal which provided the cooperative insurance company with an opportunity to diversify during the fragile months following the economic downturn in 2008.

As its cornerstone business segments have seen strong growth of late, the transaction would allow CUNA Mutual to return its focus to those areas more central to the organization's long-term strategic plans.

The deal is contingent upon Houston-based HCC paying CUNA Mutual $110 million in cash, an amount that would be adjusted at closing.

Since 1926, ProAg has specialized in crop-protection products that help farmers grapple with losses resulting from natural causes such as drought, excessive moisture, hail, wind frost, insects and disease.

CUNA Mutual came on as ProAg's lead reinsurer and direct writer of crop insurance in 2006. In 2007, the insurance company bought a minority ownership in the crop insurance company, and in 2009 became the full owner. ReadMore

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CUs' card programs make the grade for schools

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MADISON, Wis. (10/1/14)--Credit unions support schools in many ways, such as providing financial literacy programs or in-school branches, but some use their card rewards programs to provide direct monetary benefits.
Redwood CU, a $2.38 billion-asset credit union in Santa Rosa, Calif., announced Monday that it will make a donation to SchoolsRule Marin for each credit or debit card transaction made by the credit union's Marin County members.
SchoolsRule funds literacy, technology and arts programs in the Marin County public school system. "SchoolsRule has a powerful reach in Marin County; every student benefits from the resources it provides," said Redwood CU President/CEO Brett Martinez. "This program is a great opportunity to further our support of education in partnership with our Marin County members--they can spend money all over the world, and these donations still come home."
Martinez estimates that the credit union's contributions will exceed $25,000 by the end of the first year of the partnership. Through the program, members will play a direct role to help programs that have been jeopardized by state budget cuts.
Each quarter in Odessa, Texas, Southwest 66 CU presents donations that have accumulated from the $85 million-asset credit union's affinity card program. Most recently, it donated $600 to Odessa High School ( Permian Basin Sept. 29). Each time a debit card with the Odessa High School Bronchos logo is swiped, the credit union sets aside money to be donated.
As part of its commitment to the community, the credit union offers these special debit cards that in turn support worthy organizations, according to President/CEO Sean Cahill.
The Spirit Cards from Texas Trust CU, Mansfield, Texas, with $846 million in assets, benefit high schools in six school districts. Members' use of the mascot-emblazoned cards--some designed by students--has resulted in more than $611,000 for local schools, according to the credit union's latest tally.
Up to 10 cents per signature-debit transaction can end up benefiting a school through the Extra Credit program at MIDFLORIDA CU, Lakeland, Fla. Elementary, middle and high schools within the $2 billion-asset credit union's service area are eligible, and the school administration must agree to the program. Funds accrue daily and are paid annually in early December.
As the school year kicked off, MIDFLORIDA encouraged members to promote the program by having a credit union representative explain the Extra Credit program at a school-related meeting or sending informational flyers home with students. "The more people who participate in the Extra Credit program, the more your school will earn," it noted. ReadMore

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White paper from CUNA Tech Council examines DDoS risk

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MADISON, Wis. (10/1/14)--A new white paper from the CUNA Technology Council, "DDoS Security: Risks, Actions, Threats and Solutions," examines the danger posed to credit unions by distributed denial of service attacks.
While all financial institutions face some risk of exposure to DDoS attacks, every credit union and every vendor relationship is unique. That's why it's important for each credit union to not only carefully examine its individual risks but also understand them, according to Jim Stickley, CEO at Stickley on Security.
"At this point, every credit union should assume they will be a target, at some point in time, of a DDoS attack," Stickley said. "The best step is to have a plan in place. You should be working with your network and security providers to ensure they have a defined plan in place and can handle this type of attack.
"In addition, every credit union should be conducting load testing against their online applications--especially applications that don't require log-in credentials to be accessed," Stickly added. "If a criminal can simply command an automated program to submit a form over and over, and that form is load-intensive, this can be a very simple way for a criminal to have numerous machines attack that single form until the site goes down."
Ron Dinwiddie, chief information officer at $850 million-asset Texas Trust CU in Mansfield, Texas, said implementing two other practices would be major steps in the right direction:

"These types of assessments and audits do cost money, but what's the cost--not only in hard dollars but also reputational--should you get attacked and aren't prepared? In many cases, the reputational 'hit' costs more than the hard dollars," Dinwiddie said.
Though credit unions may not be any more vulnerable to DDoS attacks than other companies, they'll be more vulnerable if they aren't prepared, he added. Credit unions should take steps to have a plan and services in place to deal with attacks when they do occur.
To download the white paper, use the resource links.

  • Conducting regular risk assessments; and
  • Hiring (or using qualified internal staff) a highly trained and respectable auditor to conduct an information technology security audit on a regular basis.

Investment provision bill heads to Mass. gov.

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MARLBOROUGH, Mass. (10/1/14)--A Massachusetts Credit Union League-backed bill updating permissible investments for state-chartered credit unions is headed to Gov. Deval Patrick for his signature.
During informal sessions Monday, both chambers of the Massachusetts General Court advanced House 3594, An Act Relative to the List of Legal Investments prepared by the Commissioner of Banks. The action marks the first substantive update to statutory investment provisions for credit unions in decades, according to the league's newsletter, Daily CU Scan (Sept. 30).
"This bill is another step forward in improving the operating environment for credit unions. We look forward to its final enactment," said league President Paul Gentile.
The bill streamlines the petition process for the Commissioner of Banks to add permissible investments available to state-chartered credit unions. The list, released by the Commissioner of Banks July 1 each year, defines investment funds, stocks, bonds, notes and other interest-bearing obligations eligible for investment by credit unions or other financial institutions.
House 3594 also updates criteria to add permissible investments; organizes the criteria into one location within Chapter 171; and adds certain "prudent person" investment authority, in which a credit union has adequate policies and procedures to minimize any credit, market, liquidity, operational, legal and reputational risks. ReadMore

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Fraud, theft, money laundering get CU employees banned from work

ALEXANDRIA, Va. (10/1/14)--Three individuals have been prohibited from participating in the affairs of any federally insured financial institution, the National Credit Union Administration announced Tuesday.

The individuals are:
  • Lisa Frace, former employee of Baker FCU, Phillipsburg, N.J., with $30 million in assets. Frace pleaded guilty to multiple charges of theft and forgery. She was sentenced to six months in prison, three years of probation and ordered to pay restitution in the amount of $68,387.74;

  • Anthony Raguz, a former employee of now-defunct St. Paul Croatian FCU, Eastlake, Ohio. Raguz pleaded guilty to the charges of bank fraud, money laundering and receipt of commissions or gifts for procuring loans. He was sentenced to 14 years in prison, three years of supervised release and ordered to pay more than $71.5 million in restitution; and

  • Melissa Shurina, a former employee of USX FCU, Cranberry Township, Pa., with $213 million in assets. Shurina was admitted into an accelerated rehabilitative disposition program for the charge of theft. She was placed on probation for a period of six months and ordered to complete 20 hours of community service and pay restitution.
Violation of a prohibition order is a felony offense punishable by imprisonment and a fine of up to $1 million.

Use the resource link below to access the NCUA's database of administrative orders. ReadMore

NCUA liquidates Republic Hose Employees FCU

ALEXANDRIA, Va. (10/1/14)--Republic Hose Employees FCU of Youngstown, Ohio, has been liquidated by the National Credit Union Administration, the agency announced Tuesday.

According to the NCUA, the decision was made to liquidate the credit union and discontinue operations after determining the credit union was insolvent and had no prospect for restoring viable operations.

Republic Hose Employees FCU served 455 members and had assets of $581,487, according to its most recent call report. It was chartered in 1940 and served the employees of Republic Hose Manufacturing Corp., Youngstown Steel Door Co. and their immediate family members.

Member deposits are federally insured by the National Credit Union Share Insurance Fund. The NCUA's Asset Management and Assistance Center will issue correspondence in the near future to individuals holding verified share accounts in the credit union.

Republic Hose Employees FCU is the eighth federally insured credit union liquidation in 2014. ReadMore

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