Archive Links

Consumer Archive
CU System Archive
Market Archive
Products Archive
Washington Archive

CU System Archive

CU System

Judge signs off on Centrix Chapter 11 plan

 Permanent link
DENVER (1/22/08)--A U.S. Bankruptcy Court judge Thursday approved the outline of auto lender Centrix Financial LLC's plan to exit Chapter 11 bankruptcy and repay its creditors. The ruling by Judge Elizabeth E. Brown in the U.S. Bankruptcy Court in Colorado means the liquidation plan can be sent to creditors for a vote (Associated Press via chron.com Jan. 18). The Centennial, Colo.-based Centrix, which financed subprime auto loans for credit unions, proposes to pay creditors with proceeds from any successful litigation and from the remaining proceeds from selling its assets to Kendrick CF Acquisition Inc, now known as Peak 5. That sale closed on Feb. 23, 2007, at roughly $30 million. Unsecured creditors' recovery will likely depends on whether Centrix can pursue claims against its CEO, Robert E. Sutton, who helped establish Kendrick, said AP. The company said the claims against Sutton and other non-debtor insiders and entities are critical assets of the debtors' estates and likely will be the key source of any meaningful recovery. Centrix and its creditors committee identified potential claims of more than $100 million against Sutton for fraud and breach of duty to the company and its creditors, according to AP. It proposes to repay all administrative claims, including fees charged by professionals it retained during the case, in full and estimates these at $3.3 million. Centrix and its seven affiliates under bankruptcy protection plan to consolidate into a single entity, with Centrix assuming the affiliates' assets and liabilities. It will pool assets to repay each affiliate's creditors. The company and its committee of unsecured creditors supported the plan because the affiliates have intertwined, dependent relationships and operated together as a single business enterprise. Creditors can vote on the plan through March 4. Brown will conduct a hearing 10 days later to consider whether to confirm the plan Centrix was placed under involuntary Chapter 11 protection on Sept. 15, 2006 by creditors IFC Credit Corp., Suntrust Leasing and Wells Fargo Equipment Finance Inc. It owed them a combined $4.6 million in lease payments. Several days later it and its affiliates filed voluntary petitions for Chapter 11. According to News Now (Jan. 23, 2007), more than two-thirds of Centrix's portfolio is owned by about 230 credit unions across the nation. It has partnered with more than 300 financial institutions and underwrote more than 250,000 loans totaling $4 billion (News Now Sept. 6, 2006).

Southwest Corporate partners with Belize league

 Permanent link
MADISON, Wis. (1/22/08)--Representatives from Southwest Corporate FCU in Plano, Texas, traveled to Belize two weeks ago to form an international partnership with the Belize Credit Union League, the first relationship between an international association and a corporate credit union in the U.S. The partnership is the most recent of 25 partnerships established
From left: Southwest Corporate FCU Senior Vice President of Sales and Marketing Bob Rehm; President of Southwest Corporate’s Northwest Regional Office Kathy Garner; Belize Prime Minister Said Wilbert Musa and his wife Joan; and Southwest Corporate Product Manager Lisa Thomas met in Belize to form a partnership between the Belize Credit Union League and the corporate. (Photo provided by the World Council of Credit Unions)
through the World Council of Credit Unions’ (WOCCU) International Partnerships program. By sharing information, the two organizations will establish a relationship based on technical areas. “Most of the services that Southwest Corporate offers are applicable in the league,” said Natalie Goff, the Belize league’s executive director. “The credit unions in Belize also can transfer a lot of knowledge to U.S. credit unions, especially in community outreach.” In such partnerships, credit union leagues play a bigger role in advocacy efforts on the part of their affiliated partner organizations, said Victor Miguel Corro, WOCCU’s International Partnerships manager. Southwest Corporate delegates who traveled with Corro to Belize Jan. 9 included Kathy Garner, president of its northwest regional office; Lisa Thomas, product manager; and Bob Rehm, senior vice president of sales and marketing. Delegates visited 12 of Belize’s 13 credit unions to familiarize themselves with the institutions’ technical needs. The league also organized a social gathering that included Belize Prime Minister Said Wilbert Musa and his wife, Joan, and representatives from the country’s credit unions. A reciprocal visit to the U.S. by the Belize league is planned for this summer.

A year later TJX breach implications widespread

 Permanent link
BOSTON (1/22/08)--It was one year ago last Thursday that the TJX Cos. disclosed the largest credit and debit card data breach in history. The implications of that breach are widespread. That breach set off a chain of lawsuits from consumers and financial institutions, including credit unions who footed the bill for notifying members and replacing their compromised cards. It instigated a number of bills in state and federal legislatures to protect consumers' data and make merchants more responsible for the data they handle. The event, coupled with a significant increase in sophisticated attempts to phish personal information from consumers, also changed the way credit unions and their members deal with security issues. More credit unions are taking precautions by offering credit monitoring identity theft services and security solutions. The Framingham, Mass.-based retail company, which owns T.J. Maxx and Marshall's, figures the intrusions began in mid-2005 at two Marshall's stores in Miami that had wireless Local Area Networks (LANs). Eventually at least 45.6 million card numbers were compromised and card companies such as Visa and MasterCard estimate that as many as 94 million cards were exposed. Computerworld, looking at the one-year anniversary of the breach, said security managers have five take-aways from the incident (Jan. 17):
* Breach disclosures don't always affect a company's revenue or stock prices. Customer and investor confidence in TJX was "largely unshaken." When the breach was disclosed its stock was worth about $30 per share. Its closing price on Thursday was just over $29 per share. Its sales for the 48-week ending Jan. 5 increased 4% from the same period a year ago. * Breach disclosures are still costly. TJX spent or set aside in the past year about $250 million for costs related to the breach. * The Payment Card Industry (PCI) Data Security Standard remains a work in flux. The industry's rules require merchants to implement 12 broad security controls for protecting customer data. However, many companies still aren't in compliance. Court documents indicated TJX wasn't compliant with nine of the controls. * The breach exposed card-payment issues that exist between merchants and their financial institutions and credit card companies. Credit unions and smaller banks have lobbied several state legislatures to pass new laws requiring merchants to reimburse them for the costs involved in notifying member/customers and reissuing cards. Retailers are fighting these bills. * The perpetrators of the breach are still out there. Only a few people have been arrested for using card numbers stolen during the breach. The hackers are still free and likely will strike again.

Ohio CU modernization moves forward

 Permanent link
COLUMBUS, Ohio (1/22/08)--The Ohio Credit Union League (OCUL) presented testimony in support of a bill to modernize the administration, operation and governance of Ohio’s state-chartered credit unions. John Kozlowski, OCUL general counsel, testified Jan. 15 before the Ohio Senate Finance and Financial Institutions Committee in favor of Ohio Senate Bill 247. The legislation’s new provisions were not in the 2006 Credit Union Member Service Powers Bill (HB 81). SB 247 provisions relate to operational issues, such as ballots, merger requirements, payable-on-death accounts, record keeping and representation requirements for the Ohio Credit Union Council (eLumination Newsletter Jan. 16). The bill sets forth time limits on how long certain records should be kept by a credit union, eliminates the written ballot approval and proxy process by the Superintendent of Credit Unions each time a ballot is used for voting--provided the ballot format complies with guidelines from the superintendent--and sets criteria when an election is not necessary, Kozlowksi testified. The bill also provides additional protections for credit unions on payable-on-death accounts and the use of safes, vaults, safe deposit boxes and night depositories by limiting liability on handling and releasing funds or other assets, Kozlowski said. Among other provisions in the bill are merger requirements modified to allow member approval based on a majority vote--not a two-thirds vote--and reasons for when the superintendent can waive a member vote. “We believe that the purpose of this bill before you today continues to address the needs of credit unions that will help them continue to operate more effectively and efficiently now and in the future,” Kozlowski concluded in his testimony. Also testifying on behalf of credit unions was KEMBA Financial CU CEO Jerry Guy.

CU System briefs (01/18/2008)

 Permanent link
* COLUMBIA, S.C. (1/22/08)--Timothy Wayne Eddington, Fort Mill, S.C., was convicted Wednesday of multiple charges related to planning a pipe-bomb diversion at a school to divert police from a planned robbery of Founders FCU. He was arrested at a vacant house with three other men on Aug. 23 after police received a tip about the plans. Also arrested were his son, Steven Michael Eddington, then 18; his nephew, William Christopher Puckett, then 19; and Edgar Scott Williams IV, then 19. Authorities discovered two pipe bombs in the house. Eddington, who was 35 at the time of the arrest, faces a minimum 40 years in federal prison. He will be sentenced in about 90 days (The Herald Jan. 18) … * SYDNEY (1/22/08)--Australian Central CU announced it will raise its variable rates on home loans by 17 basis points. The increase went into effect on Thursday. The credit union said the raise was in response to cost pressures related to the subprime mortgage situation in the U.S. (Herald Sun Jan. 16) … * ALBANY, N.Y. (1/22/08)--Tony Schilling had joined the New York Credit Union Foundation as financial education specialist. He will be responsible for managing the foundation's youth financial education programs, including outreach to stakeholders in the field of education and community organizations. Schilling previously was an associate in instructional services for the New York State Education Department. He also has served as adjunct lecturer at the State University of New York in Albany and as a high school teacher-coordinator at two high schools … * NAPLES, Fla. (1/22/08)--Anthony Joseph Cianfero Jr., 41, was charged with grand theft and uttering a forged instrument after allegedly bouncing a $50,000 check stolen from his grandmother's house. The Collier County Sheriff's Office said he deposited the check into his account at the Naples branch of Tampa-based Suncoast Schools FCU on July 25, 2007. The check was drawn on the account of his grandmother, Yolanda Cianfero, and aunt, Marirose Stewart. During the transaction he obtained a cashier's check for $44,372 made payable to a Naples law firm and withdrew $3,500 in cash. The check was returned on Aug. 1 for insufficient funds. He was arrested earlier this month (News-Press Jan. 16) …

Consolidated FCU to close S. Carolina branch

 Permanent link
PORTLAND, Ore. (1/22/08)--Consolidated FCU, a Portland, Ore.-based credit union, announced it will close its Seneca, S.C., branch Feb. 29. In 1974, the Seneca office opened as a branch of Jantzen FCU to serve Jantzen employees working in Seneca and Westminster, S.C. After the Jantzen sewing and distribution center closed, the credit union applied for, and was granted, a local community charter in Oconee County, S.C., after regulators determined the area to be an underserved area (UpstateToday.com Jan. 18). In 1996, Jantzen FCU merged with Consolidated FCU. Recently, Consolidated FCU was granted the authority to serve people in the Portland tri-county metropolitan area. As a condition for expanding the credit union’s field of membership, the National Credit Union Administration (NCUA) mandated that Consolidated FCU stop enrolling new members at its Seneca location. The NCUA requirement stems from a lawsuit filed by an out-of-state bankers group, which challenged the NCUA’s authority to approve a community chartered credit union in one state to operate an underserved community in a different state. The closing of the Seneca branch is unrelated to its finances, which are sound, Ed Baldwin, Consolidated president/CEO, told the newspaper.

Suspect dies after shootout at CU

 Permanent link
NILES, Mich. (1/22/08)--A suspect involved with an attempted armed robbery and shootout at the Niles, Mich., branch of Berrien Teachers CU died in surgery at a local hospital Friday. The suspect was allegedly shot during the attempted robbery Friday morning by a security guard. Two men entered the credit union at 10 a.m. and exchanged gunfire, both inside and outside of the credit union, with the guard. At least five shots were fired, police told the Tribune (Jan. 18). After the shooting, the two suspects fled the credit union in a car driven by a third suspect. They dropped off the injured suspect at a local hospital, police told the newspaper. Some members were at the credit union during the shooting. Police are not sure how much money was taken. Police may have found the car the suspects were driving. The vehicle was described as a grey four-door sedan, the newspaper said. Berrien Teachers CU, based in St. Joseph, Mich., has $219 million in assets.

J.C. Penney card processor owned by GECC

 Permanent link
PLANO, Texas (1/22/08)--A credit card processor for J.C. Penney and other retailers whose customer information on a computer backup tape has been missing since October is owned by General Electric Capital Corp. (GECC)--the company that almost bought credit union mortgage/vehicle fleet management company PHH Corp. earlier this month. The backup tape with the personal information of about 650,000 customers of J.C. Penney and nearly 100 other unidentified retailers was discovered missing from a data storage warehouse run by Iron Mountain Inc. The tape was not checked out of the warehouse, said a spokesman for GE Money, the processor owned by GECC (Associated Press Jan. 18). The information could be compromised, although so far, no indication of theft or fraud has occurred, said GE Money. It took GE Money two months to reconstruct the information on the missing tape and identify consumers whose information was lost. The company has notified customers in batches since December and it expects to complete the notification this week. The notification letter, from GE Money President Brent P. Wallace, instructs customers to phone a call center set up to deal with the breach. GE Money said it will pay for 12 months of credit-monitoring for customers whose Social Security Numbers were on the tape. Wallace's letter said the information on the missing tape isn't enough to open a new account in the customer's name, but the company is monitoring the account for misuse. On Jan. 1, PHH Corp. announced it had terminated plans for its purchase by GECC and the Blackstone Group because Blackstone could not finance the deal (News Now Jan. 3). The agreement had planned for a wholly owned subsidiary of GECC to merge with and into PHH Corp. Then GECC was to sell the company's mortgage business to Pearl Mortgage Acquisition 2 LLC, a Blackstone affiliate. PHH Corp. purchased CUNA Mutual Mortgage in 2005.

League backs Massachusetts lawmakers fin lit efforts

 Permanent link
BOSTON (1/22/08)--The Massachusetts Credit Union League is supporting legislation that would require the Massachusetts Department of Education to include all aspects of personal finance as a major component of the existing math curriculum in state public schools. State Rep. Stephen LeDuc (D-Marlborough) introduced the legislation earlier this month. The bill was favorably reviewed by the state legislature’s Education Committee, and is waiting to be heard before the full legislature, according to LeDuc (Marlborough Enterprise Jan. 16). He hopes the bill will be passed before the current legislative session ends, LeDuc wrote in the newspaper. The bill is geared to help students learn personal finance math skills to help them succeed in life, LeDuc wrote, noting that the need for financial literacy cuts across all socio-economic segments of the population. Financial education will afford students knowledge of personal economics that will carry into their adult lives, he wrote. The personal finance curriculum would provide instruction in the following areas:
* Personal budgeting; * Savings; * Compound interest rates; * Taxation; * Residential real estate planning; * Consumer spending; * Retirement planning; * Educational savings; * Personal insurance needs; * Estate planning; * Stock and bonds; and * Understanding borrowing.