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CU survey addresses challenges growth issues

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BOSTON (1/23/08)--About 36% of credit unions surveyed say their biggest challenge is lower profit margins, while 34% say they struggle to identify ways to attract new members, according to a report released Monday on the evolution of credit unions. The report, “The Evolution of the U.S. Credit Union Market,” by Aite Group, analyzes the current credit union market, and credit unions’ changing strategies and product offerings. Aite Group surveyed 101 credit unions with more than $100 million in assets. While credit unions reported their challenges, 33% of those surveyed also indicated that they are planning charter conversions to savings institutions, thrifts or banks. Head-to-head competition with banks, increasing demand for more sophisticated portfolios from members and other factors have caused credit unions to change their strategies, the report noted. More than half of credit unions surveyed said they believe that offering superior member service has been the most successful strategy for attracting new members, and 63% said they consider the branch to the be the most importance member-service channel. New market conditions are forcing credit unions to abandon their strict membership guidelines and competitive strategies based primarily on price. Surviving today’s competitive marketplace requires flexibility and “in the case of credit unions, it also sometimes means expanding well beyond their roots,” said survey author Christine Barry. Technologically, credit unions continue to offer new products and enhance online capabilities by focusing attention on the user experience, the survey stated. Credit unions are often more advanced than banks of similar sizes in regard to online capabilities and online adoption--about 57% reported that they achieved online adoption rates between 30% and 49%. The survey is part of a larger study, in which Aite studied 201 U.S. credit unions.

League chides bankers for distorting UBIT lawsuit facts

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PEWAUKEE, Wis. (1/23/08)--"There they go again, distorting the facts to promote their anti-consumer, tax-increase agenda." Brett Thompson, president/CEO of the Wisconsin Credit Union League, is referring to a press release from the Wisconsin Bankers Association (WBA) (see link). The release says Appleton, Wis.-based Community First CU's lawsuit against the Internal Revenue Service (IRS) for overpayment of taxes represents a larger attempt by Wisconsin credit unions to avoid paying taxes. "That's simply not true," says Thompson. "Wisconsin credit unions pay millions in taxes annually. The lawsuit isn't about money, but serving members." The lawsuit seeks a refund of $54,000 that IRS said the $916.2 million asset credit union owed, based on the sale of credit life and credit disability insurance and guaranteed auto protection (GAP) insurance. The lawsuit seeks a legal clarification about what may be subject to IRS' unrelated business income tax (UBIT) rule. The IRS erred in apply UBIT to these services because they are financial services that help mitigate losses to the credit union, enable it to grant loans and further credit unions' mission to serve members, Thompson says. The suit has the support of the league, the Credit Union National Association, CUNA Mutual Group and the National Association of State Credit Union Supervisors. They support the suit because it is essentially an effort based on principle, Thompson says. "Like all credit unions, Community First exists to offer financial products that contribute to the financial well-being of its member-owners. The services for which Community First paid the unrelated business income tax are in fact central to that mission--and to the mission of all credit unions who offer them," Thompson says. WBA misses the point, failing to address the UBIT issue entirely and instead continuing to refer to its own flawed, self-funded study of credit unions to push for a tax increase agenda. WBA's assertion that Wisconsin credit unions deny the state millions in tax revenue further jumps the tracks, said Thompson. The lawsuit, filed in the Eastern District Federal Court, is a federal tax issue--not a state tax issue--he said. Thompson noted that Wisconsin banks are in the hot seat on state taxes. More than 87 Wisconsin banks challenged the state Department of Revenue the past few years when the agency said they used subsidiaries with no purpose other than to avoid state taxes. Banks reached settlements with the agency. "Some of the state's largest banks paid no taxes at all," he said. "The WBA would do well to heed the adage to refrain from throwing stones when you live in a glass house."

Washington CUs flood state Capitol for data breach bill

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FEDERAL WAY, Wash. (1/23/08)--More than 100 credit union representatives met with Washington state legislators Thursday to encourage them to pass proposed data breach reimbursement legislation written by the Washington Credit Union League. The proposed bills, Senate Bill 6425 and House Bill 2838, were introduced Jan. 15. The bills would make the costs associated with data breaches, such as the TJX Cos. breach, a responsibility of the merchant. The legislation is sponsored by State Rep. Brendan Williams (D) in the House and State Sen. Rosa Franklin (D) in the Senate. Thursday’s visits provided an opportunity for Washington’s credit union industry to become familiar with the importance of legislative advocacy. “Approximately half of the people participating were first-timers,” said Washington league president/CEO John Annaloro. “This gives our 2008 legislative efforts a great start and shows the wide interest among Washington credit unions in becoming active in the lawmaking process.” In addition to the proposed legislation, credit unions also discussed Biz Kid$ and why credit unions support the children’s financial literacy television program. Prior to the visits, Stacy Augustine, league senior vice president and general counsel; and Mark Minickiello, vice president of legislative affairs, helped the attendees improve their lobbying skills. The league staff provided background on the bill and other bills of interest. “Our goal for the state Governmental Affairs Conference is to build and solidify relationships with our elected officials,” Augustine said. “And not just for our current session, but for legislative sessions 20 or 30 years from now.”

More scams reported in two states

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PLYMOUTH, Mich., and HARRISBURG, Pa. (1/23/08)--Credit unions in Michigan and Pennsylvania have reported that their members have been targeted by vishing scams and fraudulent e-mails purporting to be from the U.S. Department of Justice (DOJ). Monroe Community CU and Monroe Area FCU, both in Monroe, Mich., reported that vishers have contacted their members, asking for personal financial information. Vishers contact victims by an automated phone dialer, with the intention of soliciting personal financial information from them by telling them that their credit cards have been used illegally or suspended (Michigan Monitor Jan. 22). Some vishers have “spoof” caller identification, so members may see the name of their credit union on the identification, but there is no guarantee that the call is legitimate, said Todd Mason, CU Village president and chief operating officer. Credit unions with broad fields of membership, such as Monroe, are targeted because the odds of finding a real credit union member when making random phone calls are high. Credit unions need to reinforce and repeat the message to their members that they should not share personal account information over the phone or online, Mason said. The Pennsylvania Credit Union Association (PCUA) also received calls from credit unions saying their members had received e-mails from the DOJ. The e-mails tell recipients they have been the subject of complaints filed with the DOJ and forwarded to the Internal Revenue Service. The e-mails contain an attachment with the alleged complaint, according to the association (Life is a Highway Jan. 22). The DOJ is urging recipients not to open attachments because they may contain malicious software. The agency also has placed an alert on its website stating that the e-mail messages are fraudulent and should be deleted. Credit unions receiving the messages should contact the DOJ or PCUA, said PCUA.

Robbery suspect killed in shootout identified

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NILES, Mich. (1/23/08)--Devarence Damon Kimbrough, 22, of Elkhart, Ind., has been identified as the suspect who was shot and later died in an attempted armed robbery of Berrien Teachers CU Friday (Niles Daily Star Jan. 21). Kimbrough 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 with the guard, both inside and outside of the credit union. 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 Kimbrough at South Bend Memorial Hospital. Kimbrough later died during surgery, police told the newspaper. Authorities are still seeking two suspects in connection with the attempted robbery of the $219 million asset, St. Joseph, Mich.-based credit union.

WOCCU leads group-study of Brazil CU growth

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PORTO ALEGRE, Brazil (1/23/08)--The World Council of Credit Unions (WOCCU) is leading a small group of credit union executives on a tour this week of Brazil’s credit union system growth as part of the WOCCU-sponsored Brazil Engagement Program.
From left: Lucy Ito, vice president of research, communication and public affairs for the California and Nevada Credit Union Leagues; Pete Crear, CEO of the World Council of Credit Unions (WOCCU); and Bill DeMare, president/CEO of Bay Gulf CU, Tampa, Fla., listen to a speaker talking about Brazil's credit union governance system Tuesday in Porto Alegre, Brazil, as part of the WOCCU-sponsored Brazil Engagement Program going on this week. (Photo provided by World Council of Credit Unions)
“We’ve had inquiries from the U.S., Canadian and Australian credit unions about learning lessons from around the world to achieve higher membership growth that doesn’t undermine safety and soundness,” Brian Branch, WOCCU executive vice president and chief operating officer, and tour leader, told News Now. There generally are three engagement programs per year--small groups from the U.S. and usually Canada who go to a country to examine credit unions issues, he added. In 2007, programs included China and Peru. In 2008, there will be three: the present one in Brazil, and programs in Poland and Chile. Brazil’s credit union industry has seen 15% membership growth over the past five years, as well as 30% asset growth, while holding capital-to-asset ratios steady, Branch said. The purpose of the trip is to “learn how Brazil credit unions maintain safety and soundness” while achieving solid growth, Branch said. In Brazil, the centralized federated credit union system has 103 credit unions, with the policies for the country’s credit unions set by the central Federation. “The Federation designs the credit unions’ products and helps them to manage their growth,” Branch explained. “Today we spent quite a bit of time examining the centralized credit union system in Brazil and how it works,” Branch said about Tuesday’s agenda. In Porto Alegre, the group was at Federation headquarters. The Federation is an umbrella organization for Brazil credit unions--similar to the manner in which the Credit Union National Association serves U.S. credit unions, Branch explained. The group learned about the tradeoffs between creativity versus soundness, and individual credit union liberty versus efficiency. “These tradeoffs define Brazil’s branding strategy for its credit unions, and it is the framework for its growth strategy,” Branch said. “The branding strategy is how Brazil sells credit unions on the need for a consistent, quality image. This is part of the credit union’s branding strategy, which in turn leads to growth.” Watch for further reports this week from News Now on the Brazil Engagement Program.

CU System briefs (01/22/2008)

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* MUSKEGO, Wis. (1/23/08)--Corporate Central CU has promoted Jesse Kohl to director, business development, the corporate announced Tuesday. He will oversee the business development efforts for the corporate's Midwest market growth. Kohl joined the corporate's staff in 2002, assisting member credit unions with their correspondent service needs and securing new members throughout the Midwest as a relationship development officer … * MEDFORD, N.Y. (1/23/08)--William J. O'Brien has been named president/CEO of Suffolk FCU, announced Martin Haley, the credit union's chairman of the board. O'Brien previously served as the chief operations officer of NuVision FCU, Huntington Beach, Calif., where he managed the credit union's retail branches, lending, call center, marketing and investment services. He also oversaw the execution of a new brand and image campaign, and the development of the credit union's commercial lending division at Kinecta FCU, Manhattan Beach, Calif. … * BELLEVILLE, Ill. (1/23/08)--Montez Fuller, 26, of Madison, Ill., was sentenced to 47 years in prison for the armed robberies of two Madison County credit unions. He was convicted in August of being one of four men who robbed Granite City Steel FCU on June 5, 2006, and the Olin Community CU in Alton on June 16, 2006 (Belleville News-Democrat Jan. 19). Fuller also was sentenced to five years of supervised release and ordered to pay $400 mandatory special assessment, plus $26,802 in restitution to Granite City Steel and $31,514 to the Olin Community CU. During the robberies, Fuller waved a firearm. He fired shots during the Alton robbery, prosecutors said … * ALBANY, N.Y. (1/23/08)--A man convicted of submitting a false application for an $800,000 mortgage loan at Sunmark FCU was arrested Thursday in Missouri after skipping two sentencing hearings. Robert Bove, 38, was arrested at a hotel in Booneville, Mo., and returned to Albany for a hearing this week. In October he pleaded guilty to one count of attempted grand larceny in the second degree and one count of criminal possession of a forged instrument in the second degree. He faces two to five years in prison per count (Times Union Jan. 19) … * Irondequoit, N.Y. (1/23/08)--Police arrested Gary Beshures Thursday in connection with a robbery at ESL CU, Irondequoit, and a subsequent car-jacking of a woman at a nearby Delta Sonic restaurant. The car was abandoned, and Beshures is accused of stealing another vehicle before his arrest in Greece, N.Y. He is charged with criminal possession of stolen property, first-degree robbery and petit larceny related to the credit union incident, and second-degree robbery and grand larceny for the car-jacking (Inergize Digital and Democrat and Chronicle Jan. 18) …