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California DFI eliminating hard copy exam reports

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SACRAMENTO, Calif. (1/14/13)--California's Department of Financial Institutions is eliminating hard copy examination reports, it told the state-chartered credit unions and banks it regulates.

In 2013, credit unions and banks' examination reports will be delivered in a PDF format by secure e-mail to the institution and  the federal regulator (Monthly Bulletin Jan. 11). Paper copies will not be saved in DFI's file system or mailed.

"It is expected that this move will reduce the department's paper and postage costs and the need for file storage space," DFI said. It also means that the licensees and their federal regulators would get the reports sooner than if the reports were sent by postal mail.

CU System briefs (01/14/2013)

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  • NAPERVILLE, Ill. (1/14/13)--The Illinois Credit Union Foundation is offering Debt in Focus for the second year to the state's REAL Solutions partner credit unions. DIF was created by the Filene Research Institute's i3 program to break down barriers preventing many consumers from seeking traditional financial guidance. The financial assessment tool is requires no self-identifying information so users stay anonymous, is available around the clock, and provides action steps . ICUF is paying the 2013 standard package annual fee for the first 45 REAL Solutions partner credit unions who enroll.  So far, 36 are participating.  DIF provides anonymous debt management advice for credit union members and other visitors to the credit union's website. It often is the first step people take when they experience financial difficulties, said ICUF.  Credit unions often use DIF with one-on-one or personalized financial counseling ...
  • WINSTON-SALEM, N.C .(1/14/13)--Piedmont Advantage CU will construct a new corporate office and main branch, which will anchor a 22-acre business park to be named Piedmont Advantage Park. "After completing extensive research on population growth, centers of influence in branding opportunities, this highly visible and convenient location became a site which we believe is second to none in the area," said Judy Tharp, CEO of the Winston-Salem, N.C.-based credit union. The new location will offer a more central location to the homes and workplaces of the credit union's membership, Tharp said. The credit union plans to relocate in 2014 …
  • PLEASANTON, Calif. (1/14/13)--Patelco CU in Pleasanton ,Calif., raised $30,792 for CU4Kids and the Children's Miracle Network with close to 7,000 member and employee donations between Nov. 1 and Dec. 31. The money will go to the University of California-Davis Children's Hospital and to Children's Hospital and Research Center in Oakland to fund equipment, programs, and research. Patelco's effort raised money through the sale of $1 snowmen. Individual donations ranged from $1 to $2,386.  The $3.8 billion asset Patelco also launched a CaféGive Facebook app and raised $6,535 for the American Red Cross Disaster Relief to aid Hurricane Sandy relief efforts on the East Coast. Patelco added $5,000 to bring the total donation amount to $11,535 ...
  • LIBERTY LAKE, Wash. (114/13)--Jennifer Oliver, CEO of South Bay FCU in Redondo Beach, Calif., was elected to the Board of Directors of  CU*NorthWest, based in Liberty Lake, Wash.  CU*NorthWest is a data processing credit union service organization. Oliver represents the first California credit union to serve on the CUSO's board. Oliver's term will run through Sept. 30, 2015.  The board has seven members--six CEOs from credit unions operating the CU*Base software suit and the seventh held by CU*Answers, product manufacture of CU*Base Gold …
  • CONNEAUT, Ohio (1/14/13)--Mary (Jackson) Adams, age 68, former member and president of the board of Port Conneaut FCU, Conneaut, Ohio, died Jan. 8. She was born Oct. 24, 1944. She had been a 45-year employee at Brown Memorial Hospital/UH-Conneaut Medical Center as a Medical Technologist. She retired in 2011 (Star Beacon Jan. 9) …

Secondary life insurance loans topic of CUs' lawsuit

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DETROIT, Mich. (1/14/13)--Two Michigan credit unions have sued three companies that recruited them  to finance life insurance premiums for policies sold or brokered in a secondary "life settlement" market.

Lansing-based Alliance Catholic CU (formerly Michigan Catholic CU) and Troy-based Astera CU (Auto Body CU) allege they each lost more than $1 million because the companies "systematically misstated the underwriting data to procure premium finance loans for policies…that could not have been financed elsewhere through established lenders."

The complaint,  filed Wednesday in the U.S. District Court in Detroit, is against Texas-based Capital Lending Strategies LLC;  its manager, Dan Phillips; Allied Solutions Inc., based in Carmel, Ind.; Allied's principal officer, Peter Hilger; and O'Malley & Associates LLC, Crystal Lake, Ill.

In 2007 and 2008, Hilger and Phillips allegedly proposed to the credit unions an investment scenario calling for "high net worth" individuals to form irrevocable life insurance trusts that would each hold one or more high-dollar life insurance policies.  The credit unions agreed to finance the first 27 months of premiums for each policy through a short-term, non-recourse loan to the irrevocable life insurance trust borrower. The loans were secured with an interest in the underlying policies and a certificate of deposit. O'Malley sold or brokered the loans.

According to the court document, the credit unions were told they would always have a repayment source when each premium finance loan matured--even if the borrower defaulted--because their collateral could be sold in the life settlement secondary market.

However, an "overwhelming majority of the premium  finance loans" defaulted or weren't repaid. The companies, called to service or sell the loans in the secondary market, failed to generate enough repay the loans. The credit unions advanced more funds to preserve their interest.

The complaint alleges the transactions had "fundamental flaws" and the companies "systematically misstated the value of the life insurance policy collateral in the underwriting and other data supplied … in order to induce and trick plaintiffs to enter into the joint venture…"

When they tried to possess the collateral, the credit unions encountered resistance and learned they did not have documentation needed to liquidate the collateral.

Seven NC CUs launch Save to Win

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RALEIGH, N.C. (1/14/13)--Seven North Carolina credit unions this month launched Save to Win, a program that encourages consumers to develop the habit of saving money, said the North Carolina Credit Union League.

The program encourages saving money by offering the opportunity to win monthly prizes--and a chance at a $30,000 grand prize at the end of the campaign (The Weekly Conversation Jan. 11).

The seven credit unions launching the year-long campaign this month are:

  • American Partners FCU, Reidsville;
  • Greensboro (N.C.) Municipal FCU;
  • Mountain CU, Waynesville;
  • Piedmont Advantage CU, Winston-Salem;
  • Premier FCU, Greensboro;
  • Telco Community CU, Asheville; and
  • Winston-Salem (N.C.) FCU. 
NCCUL, in partnership the Michigan Credit Union League, is administering the program on behalf of the credit unions.

Save to Win participants open a special 12-month share certificate to enter the campaign. Participants earn chances for monthly, quarterly, and grand prizes by making additional deposits to the certificate in $25 increments--with up to 10 chances per person per month. Participants do not lose any deposits and earn dividends on the money they save.

MCUL first implemented Save to Win in Michigan in 2009. In its first year, more than 11,000 people saved more than $9 million. The campaign has grown in size and credit union participation since.

To view a video about the first member account opened for the North Carolina program, use the link.

DDoS attacks: NSA's tech assistance raises privacy flags

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WASHINGTON (1/14/13)--The National Security Agency's technical assistance to large U.S. banks fighting increased distributed denial of service attacks means DDoS attacks no longer are just a business issue. They are also a matter of national security. That raises flags for privacy advocates who don't want government and private business data intertwined, the Credit Union National Association has learned.

Government involvement with credit unions and banks is not new. Credit unions have worked for years with the Federal Bureau of Investigation and other agencies to fight fraud and monitor robbery trends. While credit unions work with security firms to block thieves and hackers,  NSA's involvement ups the ante.

The DDoS attacks don't directly involve data theft that leads to fraud. However, they disrupt a key U.S. infrastructure: the financial system, said the American Banker (Jan. 11). The attacks  not only stall service, they also distract financial institutions' security teams. Sophisticated cybercriminals taking advantage of the distraction can steal data and make fraudulent transactions.

The NSA collects intelligence so its technical abilities are beyond other government agencies, said the Banker.  It sends a team to the bank to educate it on how an intrusion occurred, determine if anything was stolen and identify similar events elsewhere. The bank must share some data to help pinpoint an attack's "signature." This creates a privacy problem, said the Electronic Privacy Information Center.

Other government agencies monitoring the DDoS attacks include the FBI, the Treasury Department, the Homeland Security Department and the Justice Department. They provide advance warning of the attacks. For the past five years, banks have gained higher security clearances so the agencies can share information needed to fight the attacks.

Maine league kicks off $800K CU awareness campaign

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PORTLAND, Maine (1/14/13)--Maine's credit unions have launched a two-year, $800,000 statewide awareness campaign. The multi-channeled campaign was developed with guidance from research about the state's consumers.

Credit unions defined several opportunities from the research, said John Murphy, president/CEO of the Maine Credit Union League.

"We found that Maine credit unions are at a great advantage in the current economic climate, with the percentage of Maine population who are credit union members to be one of the highest in the U.S. at nearly 47%," Murphy explained. "Additionally, our state has a large percent of our population that are Gen Y and who will soon be entering into key borrowing age."

The campaign's goals are to bring a higher level of awareness among members, to increase product penetration, and to directly reinforce the benefits of credit unions over banks. Now is the Time, the campaign theme, encourages consumers to take advantage of the many benefits credit unions offer.

With a total media buy of $800,000, and more than 50% of the budget dedicated to prime-time television, the league produced five 30-second television advertisements. The target audience is Gen  X and Y, and females up to age 50. The league projects the commercials will reach 98% of the viewing audience an average of 30 to 45 times annually.

The campaign includes an updated micro site, a mobile credit union locator, and a strong social media presence.

'Bank on California' draws more CUs than banks

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SACRAMENTO, Calif. (1/14/13)--Credit unions so far outnumber banks as participants of Bank on California, a voluntary collaborative initiative in eight communities to provide unbanked households access to mainstream financial products and services.

Seven credit unions are participating, compared with six banks, according to Teveia R. Barnes, commissioner of the California Department of Financial Institutions (DFI), which is administering the initiative (Monthly Bulletin Jan. 11). DFI is the regulator for state-chartered credit unions and banks.

The credit unions participating include:

  • The Golden 1 CU, Sacramento;
  • Orange County's CU, Santa Ana;
  • Patelco CU, Pleasanton;
  • Redwood CU, Santa Rosa;
  • SAFE CU, North Highlands;
  • Schools Financial CU, Sacramento; and
  • Travis CU, Vacaville.
Unbanked consumers in the state will have access to no- and low-cost checking and savings accounts and to financial education through the credit unions' participation.

Much of the state's population comes from countries where bank deposits are uninsured and there is little opportunity to have a banking relationship, said Barnes.

Report outlines Hispanic opportunities for Calif, Nevada CUs

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ONTARIO, Calif. (1/14/13)--More than 60% of Hispanics in California and Nevada were born in the U.S., and with a median age in the mid-20s they represent an opportunity for credit unions to lower their memberships' average age, said a report commissioned by the California and Nevada Credit Union Leagues and Applied Research Institute.

The Hispanic Opportunity Report is part of the leagues' new partnership with Coopera, an Iowa firm focused on the Hispanic market.

Findings in California included:

  • Sixty-two percent of California Hispanics were born in the U.S., with the median age as 27;
  • Hispanics represent 38% of the state's population;
  • One in six businesses are Hispanic-owned (17%);
  • Forty-one percent are underserved;
  • The state is No. 1 in the nation in Hispanic buying power; and
  • Hispanics in California have $265 billion in disposable income.
Nevada results included:

  • Sixty percent were born in the U.S., and have a median age of 26;
  • From 2000 to 2010, Nevada's Hispanic growth rate (82%) outpaced California (28%), Texas (36%) and Florida (57%);
  • By 2030, one out of three Nevada residents will be Hispanics;
  • Eight percent or 18,000 businesses are Hispanic-owned;
  • North Las Vegas and Las Vegas have the highest ratio of  Hispanic-owned businesses; and
  • More than half--more than 350,000 individuals--are underserved.
Coopera estimated that 10% of each state's Hispanic adults were members of a credit union, in California, they would contribute an about $2.1 billion in loan balances and $592 million to credit unions' annual income. Nevada's Hispanic adults would contribute an estimated $82 million in loan balances and $28 million to annual income.

Coopera and the Credit Union National Association designed El Poder es Tuyo (The Power is Yours), a customizable, Spanish-language consumer finance microsite for credit union members and potential members.

Accountant gets 37 months for role in CU's conservatorship

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AKRON, Ohio (1/14/13)--A Cleveland accountant is the latest person to receive a prison sentence for working with a loan fraud ring that brought about the 2010 collapse of the St. Paul Croatian FCU in Eastlake, Ohio.

Zrino Jukic, 42, was sentenced Thursday in an Akron federal court to 27 months in prison and ordered to pay restitution totaling $1.7 million for his role in what is said to be the largest failure in credit union history. He pleaded guilty in July to one count of bank fraud and one count of money laundering (The Plain Dealer and Jan. 11).

Jukic was co-owner of the Zlatko Group, along with  the credit union's CEO, Anthony Raguz, who took $1 million in kickbacks, bribes and gifts for issuing more than 1,000 fraudulent loans that involved 300 accountholders.

Jukic allegedly used false information on 11 loan applications totaling $1.7 million that was funneled through their company and invested in the business ventures of Pepper Pike financier A. Eddy Zai, who pleaded guilty to stealing $16.7 million in loans, said the Plain Dealer.

Raguz was sentenced to 14 years in prison, and Zai is to be sentenced Feb. 5. Jukic's sentencing was delayed while he testified against other defendants.  Police made more 24 arrests  in the case.

The now defunct St. Paul Croatian FCU cost the National Share Insurance Fund more than $170 million.

Kansas CUs merge, five more apply in Calif, Mass

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MADISON, Wis. (1/14/13)--Two Kansas credit unions have completed a merger, and five mergers in California and Massachusetts are in the works.

Mainstreet CU, with $325 million in assets, Lenexa, Kan., merged with $1.9 million Bonner Springs (Kan.) FCU.  By combining, the credit unions' members will be served by 10 branch locations.

The official merger date was Oct. 31. On Jan. 1, members of Bonner Springs FCU gained full access to Mainstreet CU's branches, products and services. They now have access to online bill payment, investment planning, a broader local ATM network, and nearly 30,000 ATMs nationwide.

Mergers in the works in other states include:

  • Alliance CU, with $359 million in assets, San Jose, Calif. has plans to merge with $11 million Electric FCU, also of San Jose (California Department of Financial Institutions Monthly Bulletin Jan. 11).
  • San Francisco Fire CU, with $800 million in assets, hopes to merge with $12 million Bay Media FCU, also of San Francisco.
  • Valley First CU, with $413 million in assets, Modesto, Calif., requested approval to merge with $72 million State Center CU, Fresno, Calif.
  • Metro CU, with $1.1 billion assets, Chelsea, Mass., plans to merge with merge with $1.7 million Fenwal CU, Ashland, according to the Massachusetts Division of Banks (DOB).
  • Premiere Source CU, with $39 million in assets, East Longmeadow, Mass., seeks approval to merge with $30 million Wemelco CU, Springfield, Mass., DOB said.