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CU System briefs (01/13/2011)

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* CORINTH, N.Y. (1/14/11)--A former pastor and former credit union employee has been charged with the embezzlement of $400,000 from Corinth, N.Y.-based Hudson River Community, C.U. by writing duplicate checks while he was a human resources representative at the credit union. Jason J. LaPierre, 35, Hudson Falls, was charged with second degree grand larceny and first-degree falsifying business records. Police said he allegedly duplicated checks and deposited the money into his accounts. No members' accounts were affected (The Daily Gazette Jan. 13) … * BRISBANE, Queensland (1/14/11)--CU Australia, Australia's largest credit union, said four of its 78 branches in flooded Queensland remain closed. Members who need more than $500 in cash can go to a branch. The credit union imposed a $500 limit on cash withdrawals from its ATMs after the flooding occurred. Queensland was deluged with an "inland tsunami" last week. The credit union has suspended members' home and personal loan repayments for up to three months and will waive late fees (Sydney Morning Herald Jan. 13) … * SILVER SPRING, Md. (1/14/11)--The National Foundation for Credit Counseling (NFCC) marks its 60th anniversary during 2011. It will celebrate throughout the year, with a particular emphasis during April, Financial Literacy Month, and culminating in September at its Annual Leaders Conference in San Francisco. NFCC, the largest and longest-serving network of nonprofit, community-based counseling agencies in the U.S., is comprised of nearly 100 member agencies representing more than 800 locations throughout the U.S. and Puerto Rico. It has more than 3,000 certified credit counselors and more than 2,000 certified housing counselors. NFCC's agencies have helped roughly four million consumers annually with their financial concerns around debt, housing and bankruptcy …

CU-to-bank conversions declining

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MADISON, Wis. (1/14/11)--2010 was a year without a single credit union-to-bank conversion, and it arrived on the heels of two years in which only one such conversion per year occurred. News Now, sniffing a trend, decided to look closer and noted a decline in conversions since they peaked at eight conversions in 2001. Conversions of credit unions to mutual savings banks never were "in fashion," according to Credit Union National Association (CUNA) economists. "In the scheme of things, only a handful of credit unions have converted in the past 30 years," said Mike Schenk, vice president of economics and statistics at CUNA. Between 1995 and 2011 only 31 credit unions have converted. In the past 15 years, there were two "spikes" in conversions--one in 1998, which saw five credit unions convert to banks, and again in 2001, when eight converted. All other years have either three conversions a year (1999, 2000, 2004, 2006, and 2007), two conversions (in 2003), or one conversion (in 1995, 1996, 2002 and 2008 and 2009). Two previous years also saw zero conversions--in 1997 and 2005. Several factors have contributed to the 2010 zero-conversions figure and the low rate in the previous two years, and they all relate to the financial crisis that caused the recession. "'Bank' truly is a four-letter word in the current environment," Schenk told News Now. "Convincing members that for-profit banking provides a better model in the wake of the bank-induced calamity we just lived through would not only be very difficult but it has a high probability of being a career killer," he said. Credit unions facing costs related to the corporate credit union restructuring are in better shape than banks facing huge premiums for bailing out the Federal Deposit Insurance Corp. (FDIC)'s insurance fund. Schenk noted that the FDIC deposit insurance fund has a negative equity level and bankers will be paying hefty premiums to restore it to health. He added the expenses they incur to do this will greatly exceed those credit unions incur to pay for NPCU (natural person credit union) failures and corporate stabilization. "Combine that with taxation and it really makes no sense from a bottom-line perspective," Schenk added. A third factor includes what happens after a credit union converts to a mutual savings bank. "The subsequent conversion from a mutual savings bank to stock ownership now promises a relatively small possibility for personal enrichment because investor demand for bank stocks is low," Schenk said. "Furthermore, the specter of relatively low earnings, due in part to insurance premiums, in part to big regulatory changes, and in part to the bottom-line effect of possible market interest-rate increases will likely mean soft demand for bank stocks for quite some time into the future," he added. CUNA Chief Economist Bill Hampel noted two other factors possibly contributing to credit unions' lack of interest in becoming banks. "It’s not clear there is a receptive place for a converting credit union to go right now," he said. "For the past 15 years, the Office of Thrift Supervision (OTS) was very receptive to conversions considering they were responsible for an atrophying industry. [The] Dodd-Frank [financial reform legislation] closes OTS down, moving its responsibility to the Office of the Comptroller of the Currency (OCC), which is not in need of new institutions to regulate." Hampel also explained that "particularly in the last two years, OTS, OCC, and FDIC have been too busy dealing with the financial crisis to spend much energy on accepting new institutions." CUNA's assessment was backed up by a Utah-based credit union that tried to convert to a mutual savings bank charter in 2009 but decided not to. Beehive CU, based in Salt Lake City, said it decided to remain a credit union because of the turmoil in the economy and reluctance by federal regulators to approve a new bank charter in that environment. Because of that its board changed its mind about what was in the best interest of its members, its management said (News Now Jan. 22, 2009). Legislation in some states and changes in regulations have also tightened the conversion process. For example, in 2007, North Dakota and Massachusetts each passed laws specifying requirements for such a conversion (News Now Jan. 5, 2007 and April 17, 2007). On a federal level, the National Credit Union Administration made its regulations governing charter conversion requirements clearer. Also, several high profile conversions were pulled as a result of members' opposition to a conversion. Those battles resulted in the Principles for Credit Union Conversion, a policy adopted by leagues and credit unions to help educate members about their rights of disclosure and voting processes involved in conversions.

CUs prominent in Good Morn. Americas savings advice

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MADISON, Wis. (1/14/11)--Credit unions were given prominent mention as a good resource for consumers looking to refinance their home mortgages to obtain better interest rates or to procure auto loans in a recent segment of ABC’s Good Morning America. Show host Elisabeth Leamy gave advice on how to save on expenses one might otherwise consider nonnegotiable. The show’s consumer reporter has reported several savings makeover segments on Good Morning America that have featured credit unions in New York and New Jersey. She coordinated with the leagues in both cases and with the Credit Union National Association (CUNA) on the New Jersey segment. Leamy has been a past guest on CUNA’s Home & Family Finance Radio show (use the links for these segments). Her story segment also told consumers how to find a credit union. Use the link. With interest rates at historically low levels homeowners want to know if they are in a position to refinance, she said. “I argue that it’s worth refinancing if you can get half a point off your rate and if you will add no more than five years to the length of your mortgage and can still pay your closing costs off in five years or less--preferably much less,” Leamy said. “That’s my Refinancing Rule of 5s. Can’t get approved at a big bank? Try a credit union. Credit unions pay attention to your situation, not just your score.” The same holds true for car payments, she added. “If car payments are a burden and your vehicle is not too old and you are not underwater on the value, did you know you can refinance it?” Leamy said. “Yup. Once again, credit unions are the place to turn. They do more of these auto loan refinances than anybody else.” To read a transcript of the segment, use the link.

Wegner Awards dinner reservations due Jan. 28

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MADISON, Wis. (1/14/11)--The deadline to purchase tickets online for the 23rd Annual Herb Wegner Memorial Awards Dinner is Jan. 28. The Wegner Awards will be presented by the National Credit Union Foundation (NCUF) on Feb. 28 at the Grand Hyatt Washington during the Credit Union National Association’s (CUNA) 2011 Governmental Affairs Conference (GAC). Tickets can be obtained online or registrants can download a printable form, complete it offline and mail the completed form with payment to NCUF. Individual tickets for the three-course dinner are $225 each. Tables of 10 are $2,120. The estimated value of the tax-deductible portion of each ticket purchase price is $75. Members of the credit union movement and other affiliated organizations will have the opportunity to recognize award winners through a congratulatory message to be shown on video screens during dinner. The awards ceremony will celebrate three national honors:
* Lifetime Achievement--Rudy Hanley, president/ CEO, SchoolsFirst FCU, Santa Ana, Calif. Hanley has been described as a visionary, consensus builder, and a respected voice for all in the credit union industry. * Individual Achievement: Daniel A. “Dan” Mica, former president/CEO, CUNA. Mica helped preserve credit union access for millions of consumers, protected credit unions’ federal tax exemption, raised credit union political involvement to the highest levels, and more. * Outstanding Organization: National Youth Involvement Board (NYIB). For 38 years, the NYIB and its volunteer network of credit union youth advocates have consistently led the charge to bring financial education and understanding of credit unions to America’s young people.

Woman shot at CUs ATM in S.C.

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NORTH CHARLESTON, S.C. (1/14/11)--A 25-year-old woman was shot three times Wednesday during a holdup while using a drive-up ATM at South Carolina FCU, prompting area police to warn members/customers who use ATMs to be extra careful. This is at least the fourth time someone has been shot at a credit union ATM or drive-thru lane in the past month. The victim, Sade Williams, suffered serious but not life-threatening wounds, according to authorities (The State via Jan. 13). Williams told police that two men approached her while she was stopped at the ATM of a South Carolina FCU branch in North Charleston, S.C. at 1:14 a.m. Wednesday. One of the men shot her three times at point blank range with a silver revolver, she said. It is not certain if anything was taken during the attack. The shooting remains under investigation and no arrests were made by late Wednesday, police told the newspaper. Other episodes include:
* A woman died Dec. 22 after she was shot during a robbery attempt while withdrawing cash from an ATM at a credit union in Knoxville, Tenn. Davida Nicholson, 46, was withdrawing funds from the ATM at TVA Employees CU, when she allegedly was approached by the suspect, Brandon James Johnson, 20, who was wielding two guns. When she tried to shut the door to her truck and pull away, the suspect allegedly shot her. The truck struck the credit union building, police said. Also injured were the shooting suspect, who was shot by police, and a man in a second car at another ATM ( Dec. 22 and Dec. 22). * Three suspects were arrested in an attempted murder and robbery Dec. 16 at an ATM at a Gainesville, Fla.-based credit union. Alachua police arrested Akil Flagg at his residence on Dec. 30 in connection with the incident ( Jan. 9). Two suspects, Derae Jenkins, 18, and Richard Addison, 24, both of Gainesville, were arrested earlier in connection with the incident. A man was shot at while retrieving cash from an ATM at SunState FCU in Alachua, Fla., at about 11:15 p.m. Dec. 16. He had withdrawn cash from the ATM, returned to his car and was leaning forward to start the engine when a gunshot shattered the driver’s side window of the car. He was not hit but drove to the police department, where he told police he noticed a white Ford Explorer nearby (News Now Dec. 20). * A man was shot and killed by police while in the drive-thru lane at a Monona, Wis., credit union, after he took a member hostage Dec. 8 and tried to withdraw funds from the member’s account, police said. Daniel L. Thomas, 30, allegedly invaded the 63-year-old hostage’s home and drove him to the Monona, Wis., branch of UW CU, where they entered the drive-thru lane in the hostage’s sports utility vehicle. A teller recognized that the member was in trouble and called police (Wisconsin State Journal and Dec. 9).

Leagues address Feds interchange proposal

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MADISON, Wis. (1/14/11)--Credit union leagues have begun to weigh in on the interchange proposal from the Federal Reserve. The interchange proposal presents a formidable challenge for credit unions, which are smaller than many banks and do not have multiple lines of business from which they can create additional income (Finance & Commerce Jan. 12). “Our members’ ability to generate revenue is pretty challenged,” said Mark Cummins, president of the Minnesota Credit union Network, who was featured in the article “Now our ability to offer free checking accounts, which are critical to us, are under threat. Losing revenue like this is potentially huge for our members.” Cummins said many credit unions also suspect that the duel-pricing platform that Visa has proposed will not be in place for long. “Small institutions generate a small part of overall fees,” Cummins said. “The marketplace will be driving this, and we wonder if it’s really practical to believe they’ll keep a second tier of pricing for these small institutions.” Jim McCormack, president/CEO of the Pennsylvania Credit Union Association, said that Visa’s two-tier proposal fails to resolve many issues associated with interchange. “Creating a two-tiered system could be harmful to credit unions, resulting in higher fees and shift[ing] costs to consumers,” McCormack said in a press release Wednesday. “Creating classes of issuers within the network is likely to lead to preferentialism and discrimination. While the legislation exempted financial institutions under $10 billion--the majority of all credit unions--the Federal Reserve’s proposal is not as clear.” Paul Gentile, president of the New Jersey Credit Union League also made note of the lack of clarity in the Fed proposal in the league’s newsletter (The Weekly Exchange Jan. 6). “While the proposal does reference an exemption from interchange rate setting for small issuers with $10 billion or less in assets, it does not include provisions to enforce the exemption,” Gentile said. “Without enforcement, the exemption will likely prove meaningless, and from a practical standpoint small issuers will end up being subject to the same rate setting as large issuers. It is vital that credit unions participate in this effort to reinforce to the Fed the importance of getting this proposal right for the future of credit union debit card programs.” The Fed proposal remains open for public comment until Feb. 22. The Ohio Credit Union League has put together the following “game plan” to mobilize credit unions in that state ( eLumination Jan 12):
* Create an interchange work group of credit union executives; * Assess the financial impact on Ohio credit unions and their members; * Produce an official league commentary on the Fed proposal; * Produce strong grassroots efforts by Ohio credit unions to comment on the Fed proposal; * Stage a congressional campaign to prepare for legislative solutions; * Host a statewide conference call to solicit input from credit union executives; and * Evaluate product and pricing alternatives for future consideration by credit unions to restore interchange-vulnerable income.
The Credit Union National Association has said that that the pending interchange fee rule changes will create issues for both credit unions and their members, as well as consumers in general, whether a two-tier fee system is followed or not. Overall, smaller institutions such as credit unions could lose revenue due to the interchange changes, a circumstance that may force credit unions to increase member fees or reduce the amount of services they offer to those members, CUNA has said (News Now Jan 11).

Monday holiday--CUNA closed no INews NowI

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WASHINGTON and MADISON, Wis. (1/14/11)--In observance of the Martin Luther King Jr. holiday, the Washington and Madison, Wis., offices of the Credit Union National Association will be closed on Monday. News Now will not publish a Monday issue but will resume regular publication on Tuesday.

CUNA Mutual notes spike in ATM fee disclosure suits

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MADISON, Wis. (1/14/11)--CUNA Mutual Group is warning its policyholder credit unions of a "significant" spike in lawsuits against credit unions related to ATM fee disclosures required under Regulation E, according to several league and state association newsletters. CUNA Mutual's Credit Union Protection Claims division has seen a steady increase in the number of class action lawsuits filed against credit unions. Twelve new suits were filed between mid-December and the new year (Life is a Highway and LoneStar Leaguer Jan. 13 and eWeekly Jan. 12). The lawsuits involve missing signage on or at the ATM and incorrect fees disclosed on the sign at the ATM. Many also involve remote ATMs serviced by third-party vendors, said CUNA Mutual. "Many credit unions involved in the lawsuits erroneously believed the fee notice sign was not necessary since the fee was disclosed on the terminal screen of the ATM." Changes in fees for ATM transactions prompted some of the lawsuits. The regulation requires credit unions to post a sign--in a prominent, conspicuous location on and at every ATM they own or operate--stating that a fee will or may apply. The warning noted that the regulation does not require the actual fee to be placed on the sign. It also requires disclosing the fee on the terminal screen or paper notice before the consumer is committed to paying the fee. The fee also should appear on the transaction receipt. CUNA Mutual also warned credit unions to develop and maintain written procedures for inspecting all their ATMs regularly--either weekly or when the machine is serviced--to ensure the ATM fee signs are intact. Credit unions should photograph each ATM at the time of inspection, maintain an inspection log for all ATMs, and have management review the log to ensure inspections are taking place properly. The ATM inspection log should contain:
* ATM location inspected; * Date of inspection; * Status of the sign (missing or present); * Action taken, such as replaced sign or notice; and * Initials of the employee performing the inspection.
CUNA Mutual also suggested that credit unions maintain a supply of signs/stickers to replace missing ones, and periodically test the ATMs using a non-credit-union issued ATM network card or debit card to confirm the fee appears on the screen and the transaction receipt. It suggested general language for signage and cautioned credit unions to be alert for damage or removal of signs during remodeling projects.