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Data breach expenses barely negligible in retailers' financials

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NEW YORK (3/30/15)--A review of top merchants' financial statements found that the cost of data security breaches--while devastating to credit unions and consumers--barely makes a dent in their annual revenues.
Benjamin Dean, a fellow for Internet governance and cybersecurity at Columbia University's School of International and Public Affairs, examined 10-K reports filed by Sony, Target and Home Depot with the U.S. Securities and Exchange Commission.
Among his findings:
  • Target's 2013 breach affected 40 million credit and debit cards and 70 million personal information records. It reported the gross expenses were $252 million. Once the insurance reimbursements and tax deductions were accounted for, the net losses totaled $105 million--equivalent to 0.1% of 2014 sales;
  • In 2014, Home Depot had a breach that affected 56 million credit and debit card numbers and 53 million email addresses. The home improvement retailer incurred net expenses of $28 million after an insurance reimbursement of $15 million. Those expenses are less than 0.01% of Home Depot's 2014 sales; and
  • Sony reported the November 2014 hack into its computer systems--which exposed Social Security numbers and personal emails--would cost $44 million. However, estimates now put the impact at $15 million in investigation and remediation costs. These losses represent 0.9%-2% of Sony's total projected sales for 2014.
"It therefore does not make economic sense for companies like Home Depot to make large investments in information security. As a result, they do not," Dean wrote. "The insurance pay-outs and tax deductible breach-related expenses weaken the incentives even more."
Dean also cited CUNA's research that found the Home Depot breach cost credit unions $60 million.
Dean's article was picked up by FORTUNE , CBS MoneyWatch and The Wall Street Journal .
Target's announcement that it settled a consumer class-action lawsuit for $10 million does not mean financial institutions are being recompensed. The settlement only covers payments to consumers for damages they can prove.
"Credit unions continue to protect their members as a result of merchant data breaches--and there's no end in sight. It's high time for merchants to be held to the same standards as financial institutions to ensure all consumers' private information is protected," CUNA President/CEO Jim Nussle said after Target settled a $10 million consumer class-action lawsuit ( News Now March 20).
CUNA also signed on to a letter to Congress from financial services associations that suggested merchants look toward innovative security instead of increased usage of chip-and-PIN EMV cards--status quo security that does not protect consumer data ( News Now March 24).

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Ga. CU parity bill awaits signature from governor

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DULUTH, Ga. (3/30/15)--The Georgia Senate passed a bill supported by the Georgia Credit Union Affiliates (GCUA) earlier this month that would introduce parity between state-chartered and federally chartered credit unions. The bill now only awaits the signature of Gov. Nathan Deal.

"Putting state-chartered institutions on the same level playing field as federal institutions in this state will create a positive environment for those operating in Georgia," said Rep. Bruce Williamson (R-Monroe), who introduced the bill, HB 184.

Williamson, who noted GCUA for its support in helping to pass the bill, also said that HB 184 would help strengthen state-chartered credit unions and make Georgia a better place for business.

Since the bill was introduced in February, GCUA has acted as a resource for legislators to consult with on the proposed legislation.

In addition to adding parity for state-chartered credit unions, HB 184 would also outline how a bank could convert to a credit union; require out-of-state credit unions operating in Georgia to have federal insurance; and provide the Department of Banking and Finance the ability to conserve a troubled credit union.

Further, the bill would require that comprehensive audits of credit unions be performed by licensed, independent accountants or firms; set a minimum standard of conduct for directors by outlining impermissible actions; and provide credit unions the ability to pay the required amount to join the credit union on the members' behalf if they so choose.

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PCUA-based PLS bill introduced in Pa. House

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HARRISBURG, Pa. (3/30/15)--The power of prize-linked savings (PLS) accounts may soon continue its march across the country, as a bill was recently introduced in the Pennsylvania Legislature that would authorize credit unions to offer the innovative savings product to members.

House Bill 837, the Savings Promotion Raffle Authorization Act, was introduced by Rep. Rosemary Brown (R-Monroe), who has been working extensively with the Pennsylvania Credit Union Association (PCUA) and other stakeholders to develop the legislation ( Life is a Highway March 27).

Savings promotion raffles, or PLS accounts, encourage credit union members to save by incentivizing them with opportunities to win cash each time they put a set amount of money away each month.

While of course not every member who saves money wins a cash prize, they still will have built up their savings account and bolstered their savings habits.

"Studies indicate that consumers are not saving for their futures, and programs to promote savings are a win for all consumers," said Patrick Conway, PCUA president/CEO. "Credit unions work daily to better the lives of members, and this initiative is another avenue to assist them."

Eleven states have authorized credit unions to offer PLS accounts, including Connecticut, Indiana, Maine, Maryland, Michigan, Nebraska, New York, North Carolina, Rhode Island, Virginia and Washington.

Bills that would authorize credit unions to offer PLS accounts are also making their way through state legislatures in Oregon, Minnesota and New Jersey.

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Nussle visits America's CU Museum

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MANCHESTER, N.H. (3/30/15)--CUNA President/CEO Nussle returned to the roots of the credit union movement recently, visiting America's Credit Union Museum in Manchester, N.H., where the first credit union in the United States was housed.

Click to view larger image Jim Nussle, CUNA president/CEO, immerses himself in credit union history with Ron Covey, board member, America's Credit Union Museum, and president/CEO, St. Mary's Bank CU, Manchester, N.H., during a recent visit to America's Credit Union Museum. (America's Credit Union Museum Photo)
The museum's exhibits showcase the myriad ways credit unions have improved the lives of Americans across the country over the last century.

Its mission is to continue to share the history of credit unions for future generations through its one-of-a-kind experience that connects visitors to the cooperative philosophy of credit unions.

"It was an honor to see America's Credit Union Museum first hand and experience the storied history of the credit union movement," Nussle said. "I'm proud of the work credit unions have been doing for Americans for 100 years and look forward to what the next century holds."

Nussle also visited the building next door to the museum that will host the future CUNA Research Center. The space will accommodate a virtual "library" that will allow credit unions, consumers, the media, regulators and others to explore the colorful history of credit unions.

CUNA recently pledged $1 million to the museum's Legacy Capital Campaign that will help ensure the institution preserves the rich history of the credit union system for future generations.

The three-year campaign has a fundraising goal of $3.3 million that will be used to build out the new research center, create additional exhibit space and renovate portions of the existing building.

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Notre Dame FCU elevates nationwide fundraising campaign

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NOTRE DAME, Ind. (3/30/15)--Supporting Catholic parishes and schools nationwide is the goal of the new Elevate fundraising campaign from Notre Dame FCU.
In response to Pope Francis' call for new forms of economic cooperatives, the Notre Dame, Ind.-based credit union will apply the cooperative ideal to back the mission of Catholic parishes and schools.
"We know that finances for Catholic parishes and schools are tight," said Tom Gryp, Notre Dame FCU president/CEO, who added that the concept taps into the cooperative spirit of credit unions to raise money for initiatives nationwide.
The Elevate program will donate a percentage of eligible Notre Dame FCU credit products directly to the member's selected parish or school. Parish and school capital project loans and member business loans are also eligible for benefits through the Elevate program.
For example, if a family buys or refinances a vehicle for $20,000 with a loan through the Elevate program, Notre Dame FCU will make a $275 donation to the sponsoring parish or school.
Gryp also said the program won't be limited to Catholic entities. "Eventually, we will open up the Elevate program to any organization affiliated with Notre Dame FCU looking for a meaningful fundraising opportunity," he said.

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CU System briefs (3/30/15)

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  • TACOMA, Wash. (3/30/15)-- The boards of Port of Seattle FCU, Seatac, Wash., and Sound CU, Tacoma, Wash., unanimously approved a merger between the two credit unions . "Our members will enjoy an extensive branch network and access to technology like mobile check deposit that will make their banking lives easier," said George Bluhm, Port of Seattle FCU general manager. Sound CU will be the continuing credit union and will operate 23 branches throughout Pierce, Thurston, King and Snohomish counties. The merger is contingent upon approval from state and federal regulators and Port of Seattle FCU's membership  ...
  • COLCHESTER, Vt. (3/30/15)-- The Association of Vermont Credit Unions has announced a partnership with the New England College of Business (NECB) that offers Vermont credit union employees, volunteers and members a discount of 25% on the college's tuition rates ( NewsLines Express March 27). NECB is regionally accredited by the New England Association of Schools and Colleges and has been recognized by the U.S. Distance Learning Association and the U.S. Department of Education's College Affordability and Transparent Center. The Boston-based college offers degrees in business administration, digital marketing, international business, finance, business ethics and compliance, human resource management, and basic and intermediate accounting certificates ...

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