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CU System Archive

CU System

Data theft sparks another debate about standards

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MADISON, Wis. (1/30/09)--Credit unions monitoring the Heartland Payments Systems data breach may wonder how it happened to such an extent that an estimated 100 million cards might be compromised. The breach has reopened the debate about security standards, and several experts are questioning whether the Payment Card Industry Data Security Standard (PCI DSS) is enough. The PCI standard is a set of security controls mandated by major credit card companies Visa and MasterCard for companies handling or processing credit and debit card information. The Heartland breach, like a Hannaford Bros. breach in 2008, involved data enroute to a payments system. Both companies were apparently compliant with PCI DSS. Hannaford had been deemed compliant by the credit card companies about three months before it announced its data breach. Heartland, based in Princeton, N. J., was certified by Trustwave, a PCI assessor, as PCI -compliant in April, according to Gartner analyst Avivah Litan (NetworkWorld Jan. 22). Because it is a payments processor, as opposed to a retailer or merchant, Heartland is expected to have stronger controls for preventing, detecting and responding to system breaches, said ComputerWorld Jan. 22). The breach apparently occurred when hackers planted a "sniffer" code for malware aimed at capturing information as data moved through Heartland's network and removing the data from the network in encrypted data streams. How could such a thing happen? Litan suggested to ComputerWorld that Heartland may not have routinely monitored its files' integrity for unauthorized content. Others say it may not have used all the security controls required by the PCI standard, such as analyzing its log data from its firewalls and intrusion prevention systems. Litan told NetworkWorld that PCI doesn't mandate encryption inside a private network because then all the processors would have to encrypt. But, she added, the complex interconnections among payment card processors, financial institutions and merchants would make point-to-point encryption unwieldy. End-to-end application level encryption, however, might be more feasible at the origin of the card data. Some retailers encrypt data in motion inside their store networks but then have to decrypt the information to send it to their processors. The Heartford breach "should make one thing clear: the standards for security around credit card numbers still aren't good enough," said Luther Martin, a solution architect with Voltage Security, writing in Help Net Security Jan. 29. The PCI standard "is a good first step, but it's not quite enough," he said. However, that doesn't mean that the standard has grown irrelevant, according to tech writer George Hulme in InformationWeek's Security Weblog (Jan. 27). "Being compliant to any mandate won't make one secure," Hulme wrote, adding that building a secure and sustainable infrastructure is important. Retailers, manufacturers and health care providers typically have the least mature security programs, he said. Still, the PCI standard has raised the security level, especially in the retail industry. But, Litan said, the payments processors are "definitely being targeted."

NCUAs package gets national media attention

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MADISON, Wis. (1/30/09)--The National Credit Union Administration's corporate stabilization plan generated nationwide press coverage Wednesday and Thursday. Many picked up stories from Associated Press and Reuters news services. Among those publishing reports were The Wall Street Journal (Jan. 28), Bloomberg (Jan. 28), The New York Times (Jan. 28), Washington Post (Jan. 29), CNN (Jan. 28), and MarketWatch (Jan. 28). To view the reports, use the links.

Pa. CUs see loan growth despite economy

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HARRISBURG, Pa. (1/30/09)--Pennsylvania credit unions are experiencing an increase in loans and certificate accounts, said the Pennsylvania Credit Union Association (PCUA). A favorable front-page article in the Monday issue of the Eastern Pennsylvania Business Journal uncovers the secret of the credit union difference and explains how credit unions assist consumers during difficult economic times (Life is a Highway Jan. 28). Brian Wilcox, chief marketing officer for First Commonwealth FCU, Bethlehem; Francesca Vogel, vice president of strategic planning, Sun FCU’s West Lawn branch; and Mike Wishnow, PCUA senior vice president, communications and marketing, contributed to the article. Wilcox said his credit union “saw a flight to safety as people wanted security the stock market wasn’t offering.” Some deposits came from large banks. First Commonwealth experienced an 18% growth in money market accounts; 14% increase in individual retirement accounts; and 11% growth in certificates of deposit. The credit union also gained 4,200 new members. Vogel said Sun FCU saw a 7.7% increase in loans over the previous year, and deposit growth was up 11.6% over 2007. Credit unions are uniquely positioned, Wishnow said. “They had no role in the mortgage crisis. At the same time, credit unions are very well-capitalized. It’s not surprising they have money to lend,” he explained.

N.H. banking commissioner nixes 365-APR loan

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CONCORD, N.H. (1/30/09)--New Hampshire's banking commissioner rejected a proposal for a new "small loan" product from Advance America, the nation's largest payday lender, saying that a 365% annual percentage rate (APR) on a small loan constitutes an unfair trade practice and would be "unlawful." "Generally this was seen as an attempt by the payday lender to work around the 36% interest rate cap law that the New Hampshire legislators had put in place," Rob Kimmett, senior vice president of marketing and public relations of the New Hampshire Credit Union League, told News Now. The state law was passed last year. So far, 15 states and the District of Columbia have enforced annual interest rates in the range of 36% to stop predatory lenders from ensnaring borrowers in high-interest loan traps, according to the Center for Responsible Lending. "It's business as usual when payday lenders try to circumvent state law, but time and time again aggressive state enforcement shows that this is a futile effort," said Uriah King, policy associate with the center. "The New Hampshire Banking Department's bold action should serve an example to policy makers and those charged with enforcing consumer protections in other states," King said. The commissioner, Peter Hildreth, said the proposed product did not meet fairness requirements specified by the Federal Trade Commission and the state Unfair and Deceptive Acts and Practices regulations. He termed small loans with 365% interest as "oppressive." Payday lenders had claimed that the new product was a small loan and didn't fall under the payday and car-title lending law. However, Hildreth said the argument is moot. "The unfairness was not that the loans were called payday or title loans. The unfairness was because of the interest-rates charged," he said. Advance America said it would comply and withdraw from the New Hampshire market as a result.

HarborOne multicultural center a model says NCUF

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BROCKTON, Mass. (1/30/09)--HarborOne CU’s Multicultural Banking Center had such a productive year in 2008 that the National Credit Union Foundation (NCUF) said it could be a model for credit unions nationwide to provide social and financial services.
A class of students attend a first-time homeowners workshop at Harbor One CU's Multicultural Banking Center in Brockton, Mass. (Photo provided by HarborOne CU)
NCUF became interested in the concept when the $1.7 billion asset, Brockton, Mass.-based credit union joined NCUF’s REAL Solutions program through the Massachusetts Credit Union League, said Steve Bosack, NCUF deputy director. The center opened in September 2007 in the former headquarters of the credit union in downtown Brockton. It was established to deal with the consequences of subprime mortgage lending and other predatory financial practices. Those most affected were low- and moderate-income residents, minorities and immigrants. The space was converted into two classrooms and a computer lab. Four HarborOne staff members were assigned there. Office space was made available free to non-profits offering complementary services. In September 2008, the NCUF Grants Committee approved a $100,000 Innovation Grant for HarborOne CU, the largest Innovation Grant approved by NCUF that year. The $100,000 will be paid by NCUF to HarborOne CU in installments throughout this year. After the grant expires in January 2010, HarborOne CU will provide a report outlining how it met its goals. The report also will feature personal success stories of people who attended classes and joined the credit union. NCUF will share the report with REAL Solutions league liaisons and the entire credit union movement. In 2008, the center offered six courses in English for Speakers of Other Languages, four in credit counseling, eight in financial literacy--in four languages. Five First-Time Home Buyer Workshops were conducted in four languages. It also offered eleven pre-foreclosure clinics, one for citizenship test preparation and one for computer literacy. A total of 569 students attended the 28 programs. Neighborhood Housing Services, one of the non-profit occupant partners, assisted 991 residents through home buying, foreclosure education and/or closing cost assistance. Through its efforts, Brockton’s rank in statewide foreclosures improved from first to fourth. South Shore Housing Development Corp. helped some residents with rental assistance, and Self Help Inc. provided fuel assistance. The center also received the Massachusetts league’s 2008 Maxwell Award for Social Responsibility. HarborOne also received a fifth consecutive highest “Outstanding” rating from the state Commissioner of Banks for performance under the Community Reinvestment Act. The commissioner’s report praised the credit union for its innovative practices at the center. January has seen these trends continue with new courses quickly filled to capacity. Recently, HarborOne announced that it was collaborating with Self Help Inc. to offer free Volunteer Income Tax Assistance at the center. “The city and the area still have a way to go, but it is gratifying to note the appreciation of these communities for providing these essential services,” said James W. Blake, HarborOne president/CEO. “Education is the great tool to fight financial predators. We want people to realize that if it looks too good to be true, it probably is too good to be true. The more trust we build, the greater the number of referrals we witness to our programs.”

Minn. lawmakers CUs are bedrocks of community

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ST. PAUL, Minn. (1/30/09)--Amid national economic troubles and a dismal state budget forecast, lawmakers called credit unions are the “bedrocks” of their communities at the Minnesota Credit Union Network’s (MnCUN) Credit Union Day at the Capitol Tuesday.
Minnesota State House Speaker Margaret Anderson Kelliher (D-Minneapolis) said at the Minnesota Credit Union Network’s Credit Union Day at the Capitol Tuesday. (Photo provided by the Minnesota Credit Union Network)
Minnesota State House Speaker Margaret Anderson Kelliher (D-Minneapolis) and Senate Minority Leader David Senjem (R-Rochester) both praised credit unions for their member service. “Despite life’s circumstances, you know your credit union will always be there for you and that’s what separates us from the banking industry--we’re all about people,” he said. During a discussion about the state’s dire budget forecast, Senjem said, “Over my dead body, we aren’t going to tax credit unions.” Senjem and Kelliher encouraged credit unions and their members to tell legislators if they have any ideas to solve the deficit. This year’s Credit Union Day drew 160 credit union volunteers and professionals who shared the credit union difference with elected officials. The event was themed, “Safe. Sound. Secure.” “Each year, Credit Union Day at the Capitol serves as the unofficial launch for credit union involvement in the legislative session,” said Mark Cummins, MnCUN president/CEO. “This year, more than ever, it will be imperative for credit unions to develop and build upon their relationships with legislators. “Through these connections, we will be able to ensure that elected officials know that credit unions are part of the solution--not the cause--of this recession,” he added.

Web-only CU to launch in May

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ROCKVILLE, Md. (1/30/09)--Realtors FCU, the first Web-only credit union, is set to open in early May, with a potentially “huge” field of membership, according to Realtors FCU CEO Tom Glatt. “We will have to work extremely hard to manage growth,” he told News Now. The credit union’s field of membership will comprise members of the National Association of Realtors (NAR), their families and staff. NAR has 1.2 million registered members nationwide. Because there are so many potential members throughout the country, “it never made sense to establish a branch network,” Glatt said. Members will perform all transactions--from account sign-up to lending applications--on the Web. A 24-hour call center through Digital Dialogue, now Total Member Care, will be available. Realtors FCU will primarily offer fee-free checking. Other services include consumer, auto, and mortgage loans. Realtors plans to offer a full range of services, but there are some limitations. For instance, the credit union will offer share certificates for only up to one year, Glatt said. With online-only services, security will be the credit union’s biggest challenge. “We have to be the latest and greatest to be compliant,” Glatt said. “We have to have the means built in so who we’re dealing with at the other end of the mouse is who they say they are.” Skeptics have questioned Realtors FCU’s timing because the housing market is troubled. “People say it’s the worst time,” Glatt said. “But [realtors] need us right now. That’s our stated purpose. This is exactly the time. “They’re good people and they make a living helping us find a house. [The economy] is doubly tough on them as consumers and on their jobs,” he added. Realtors FCU received its charter last November, but the idea for the credit union has been around for eight years. “Dale Stinton [CEO of NAR] kicked around the idea for a long time,” Glatt said. NAR supported the credit union’s start-up with a $15 million gift. Creating a Web-only credit union has been a learning process not just for Glatt and his staff, but also for Realtors’ vendors. Most vendors’ systems are set up to convert systems, instead of starting systems. “It’s a very interesting process,” Glatt said. “Our vendors have been great.” “We have a great relationship with the National Credit Union Administration--they’re working with us to make sure we do this right,” he added. Realtors’ Web-only model will be the first of its kind, but not likely the last. “We want to help other credit unions expand their electronic services,” Glatt said. “We’re all credit union people--we’re willing to share.”

Class action suit filed in Heartland breach

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TRENTON, N.J. (1/30/09)--A class action lawsuit had been filed against payment processor Heartland Payment Systems over the data breach it publicly announced Jan. 20. The breach affected credit unions and their members nationwide. The lawsuit was filed Tuesday in U.S. District Court for the District of New Jersey in Trenton, N.J., by Chimicles & Tilellis LLP of Haverford, Pa., on behalf of Alicia Cooper, a Woodbury, Minn., resident. The suit alleges that Heartland “made unreasonable, belated and inaccurate statements concerning the breach” (Bank info Security Jan. 29). The complaint further alleges that Heartland isn’t offering any credit-monitoring services or other relief to consumers affected by the breach. The complaint also says “there are materially misleading statements and omissions in Heartland’s public description of the breach and its consequences.” To view the lawsuit filing, use the resource link. The information breached included card numbers and cardholders’ names. It did not include merchant data, cardholders' Social Security numbers, unencrypted personal identification numbers, addresses or telephone numbers, said the Princeton, N.J.-based company in a press release last week (News Now Jan. 21). Heartland provides card processing services for 250,000 business locations nationwide, most of them small businesses. About 40% of the transactions it processes are from small to mid-sized restaurants nationwide. It also serves community banks, pay-at-the-pump gas stations, school campuses, parking lots and hospitality businesses. It handles more than four billion transactions a year, according to its website. Last week, media nationwide reported that credit union members were among those whose accounts were impacted by the far-reaching breach (News Now Jan. 26). A number of credit unions said they would block the compromised cards and reissue them to protect their members from fraud. Also last week, CUNA Mutual Group announced it is providing guidance to its Plastic Card Insurance policyholder credit unions regarding the breach. CUNA Mutual sent a RISK Alert Jan. 20 to nearly 5,000 Plastic Card Insurance policyholders. The alert provides recommendations for credit unions to mitigate losses (News Now Jan. 22).

CU System briefs (01/29/2009)

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* JACKSON, Miss. (1/30/09)--Mississippi credit unions have contributed $41,000 to Credit Unions for Kids during 2008, announced the Mississippi Credit Union Association. CUs for Kids benefits the children's hospitals in the Children's Miracle Network. The top credit union fundraiser was Jackson Area FCU, Jackson, which raised more than $7,700. "Our staff and members worked very hard last year in making our goal of $7,000, which we exceeded even in tough economic times," said Gary Fairley, the credit union's president/CEO. Since joining the CUs for Kids program in 1999, Mississippi credit unions have contributed more than $280,000 to Children's Miracle Network hospitals serving Mississippi children. Thirty credit unions in the state participated in the 2008 program … * SAN ANTONIO (1/30/09)--Gordon Dames has been appointed senior vice president of national account development for San Antonio-based Southwest Business Corp. He is the former president/CEO of Mountain America CU, Salt Lake City. Dames will be responsible for helding credit unions improve revenues and efficiencies with SWBC products, services and strategies (San Antonio Business Journal Jan. 29) … * RALEIGH, N.C. (1/30/09)--A credit union attempted-robbery suspect, who holed up in a woman's home after his getaway car crashed, is charged with first-degree murder for scaring the woman to death. The woman, Mary Parnell, 79, went into cardiac arrest while Larry Whitfield, 20, was hiding out at her home. Authorities said Whitfield and an accomplice, both armed with semiautomatic rifles, planned to rob the Gastonia, N.C., branch of Fort Wayne, Ind.-based Fort Financial CU. However, the credit union staff saw the men approaching and locked them outside. The men split up after their getaway car crashed. The accomplice was arrested shortly after the crash; Whitfield was arrested while walking in the neighborhood. If convicted, he faces life without parole (Associated Press Jan. 29) …