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CU System briefs (01/30/2012)

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  • RANCHO CUCAMONGA, Calif. (1/31/12)--Three finalist have been named for the second annual CO-OP THINK Prize--a $10,000 grand prize presented by MasterCard--said CO-OP Financial Services. The prize aims to inspire innovative solutions to issues in the credit union industry. Finalists and their business plans are: Maricela Jauregui, branch manager, Mid Cities CU, Compton, Calif., for "QC Code for Account Access"; Jay Schwartz, vice president, sales and service delivery, Marriott Employees' CU, Bethesda, Md., for "Social Networking for Credit Union Members"; and Paul Yang, CEO, Premier Community CU, Stockton, Calif., for "P2P Payment Card for CO-OP Network Cardholders."  They were selected from 25 semi-finalists by judges with CO-OP Financial Services and the Filene Research Institute.  The winner will be announced May 1 at the THINK 12 Conference, held in Boca Raton, Fla., April 29-May 2. CO-OP Financial Services will work with the finalists to produce a video on their ideas, which will be available on the THINK website …
  • RALEIGH, N.C. (1/31/12)--Coastal FCU has launched a new VIP Program as an initiative aimed at paying qualified members a special dividend of $1.5 million. The Raleigh, N.C.-based, $2 billion asset credit union said it is giving back to members who actively participated in the cooperative during the past year.  The program rewards members who have their primary checking account at Coastal with special benefits and exclusive offers. Members qualified by performing 144 withdrawals from their Coastal checking accounts during 2011. Chuck Purvis, executive vice president and chief operating officer, noted the program is a unique program model "built solidly around our checking accounts and using Coastal as your primary financial institution." In the program, members could earn Loan Rebate Dividends and Deposit Bonus Dividends, which ranged from $100 to $500. Of the 47,000 members who earned VIP status this year, more than 6,000 received a dividend. Purvis said giving a small dividend to every member "lacked substance. Seven and eight dollar payouts might not get noticed, but even members who knew in advance that they were getting a payout were pleasantly surprised when they saw $200 or $300 in their account." One can become a VIP member with either two or more loan types or two or more deposit types …

Members accounts hacked at CU in Alabama

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TALLADEGA, Ala. (1/31/12)--First Educators CU, based in Hoover, Ala., is issuing several members new cards after someone accessed several accounts at its Tallageda and Anniston branches.

The hacking was discovered by a card servicer before any stolen information could be used for fraudulent purposes, according to local media (DailyHome.com Jan. 28).

No members lost funds in the breach.  The $115.7 million asset credit union notified members whose accounts were compromised with a courtesy call and is sending follow up letters, the credit union told The Daily Home.

It was not known how the hacking occurred or how many accounts were involved.

Through VITA program CUs provide free tax help

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WASHINGTON (1/31/12)--More than 12,000 free tax preparation sites will be open nationwide this tax season with an army of volunteers to help low- and moderate-income households with their tax preparation, according to the Internal Revenue Service (IRS). Credit unions will be among them.

Credit unions are offering their expertise through the IRS Volunteer Income Tax Assistance (VITA)  program and the Earned Income Tax Credit (EITC) program. Also, IRS has a Tax Counseling for the Elderly (TCE) Program offering free tax help to taxpayers who are 60 and older, it announced Friday

VITA offers free tax help to people earning $50,000 or less.  It provides trained and certified community and credit union volunteers to help taxpayers with special tax credits and completing their terms. Through the VITA program, credit unions help lower-income consumers keep more of their EITC refunds in their own pockets, according to the National Credit Union Foundation's REAL Solutions VITA site.

Taxpayers who qualify can claim the EITC credit and could pay less federal, tax, no tax, or get a tax refund. The credit is for low-income working families to offset the burden of Social Security taxes and provide an incentive to work (News Now Jan. 30).

Royal CU, a $1.2 billion asset credit union in Eau Claire, Wis., will offer the program from Feb. 7 to April 14, with the exception of March 15-21 at its Shopko South office on Tuesdays and Wednesdays 1-4:30 p.m. It offers assistance filling out basic tax forms (1040EZ, 1040A and 1040). Volunteers are University of Wisconsin-Eau Claire and Chippewa Valley Technical College accounting students certified by the IRS, says RCU's website.

The $876 million asset Georgia United CU, Duluth, Ga., is partnering with IRS and the College of Family and Consumer Sciences of the University of Georgia to provide its VITA program, beginning today. Sessions will be on Tuesday and Thursday evenings through April 12, and on Saturdays through April 14 (OnlineAthens.com Jan. 29).

Beginning Wednesday--and for the ninth year--the $4.2 billion asset Bethpage (N.Y.) FCU will help low- to moderate-income households on Long Island  through the VITA program at 12 of its branches. It will make available 150 IRS-certified volunteers, including bilingual tax assessors, to members and nonmembers. Its VITA services will be available Wednesday evenings and Saturday afternoon.

Bethpage also joined with the Health and Welfare Council of Long Island to help educate eligible taxpayers about EITC, which each year goes unclaimed for thousands of taxpayers. EITC can bring an additional $7,476 into the hands of some families. Roughly 20% of Long Islanders are eligible to receive the EITC because of unemployment or declining wages, according the credit union (Patch.com Jan. 30).

State Employees' CU, Raleigh, N.C., began its VITA efforts Jan. 23 and will run the program until April 17. It has offered the VITA service for four years and its own low-cost tax preparation service for consumers earning more than the $50,000 VITA annual income cutoff for two years. In 2011, SECU tax preparers filed more than 53,000 returns, with members receiving $82 million in refunds and saving $7.9 million in tax preparation fees. 

According to the Pennsylvania Credit Union Association, which is collecting information from credit unions acting as VITA sites in that state, "program participation  is a great way to attract the attention of elected officials and their communities to show how credit unions make a difference by providing citizens with a valuable financial resource" (Life is a Highway Jan. 27).

To help consumers, credit unions can advise them to bring these items when they have their returns prepared:

  • Photo identification;
  • Social Security cards for the taxpayer, spouse and dependents;
  • Birth dates for primary, secondary and dependents on the tax return;
  • Wage/earning statements forms--W-2, W-2G and 1099-R, from all employers;
  • Interest and dividend statements from financial institutions (Form 1099);
  • A copy of last year's federal and state tax returns, if available;
  • Bank routing numbers and account numbers for direct deposit;
  • Other relevant information about income and expenses;
  • Total paid for day care; and
  • Day care provider's identifying number.

CU sues for bond claim in huge ATM scam

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WHITE PLAINS, N.Y, (1/31/12)--A New York credit union has sued CUMIS Insurance Society for reimbursement of its claim of more than $565,000 in losses the credit union incurred when an ATM money management and armored car business defrauded credit unions, banks, retailers, hospitals and universities of  $50 million by "playing the float."

In its lawsuit, filed Jan. 20 in the U.S. District Court for the Southern District of New York, White Plain, Northeast Alliance FCU said it lost $565,462.93 in the Ponzi-like scheme at Mount Vernon  (N.Y.) Money Center  (MVMC) in New York. The Bardonia, N.Y.-based credit union alleges that CUMIS breached its contract when it denied the credit union's insurance claim for losses under the credit union's bond.  Northeast Alliance FCU seeks monetary damages and  a declaratory judgment that would require CUMIS to pay the full amount, plus interest.

The money center supplied cash to more than 5,300 ATMs, including those of several credit unions, which lost a total $5.8 million in the fraud  (News Now Sept. 27, 2010).  ATM provider Cardtronics Inc. also lost $2.1 million and reportedly shut down about 4% of its ATMs as the result of the fraud (News Now May 24, 2010). MVMC had handled Northeast Alliance FCU's cash replenishment and armored transportation needs for more than 15 years, said the complaint.

From 2005 to February 2010, the document said, MVM's president, Robert Egan, and chief operating officer, Bernard McGarry, allegedly conspired with other employees to misappropriate money belonging to the money center's customers, including Northeast Alliance; converted the funds for the company's or personnel's own use; and co-mingled funds of clients, the complaint alleged. 

Both men pleaded guilty to charges of bank fraud and conspiracy to commit bank fraud, according to the court document.  They engaged in a practice known as "playing the float," relying on the continual influx of funds to misappropriate clients' funds to cover its operating expenses, repay prior obligations to other clients or keep for their own  enrichment, said the court document. "Similar to a Ponzi scheme, 'playing the float' schemes have an ultimate breaking point where the influx of funds will be insufficient to cover the monies misappropriated," it alleged.

In January 2010, federal agencies launched an investigation of the money center and uncovered the fraud.  Unaware of the investigation, the credit union requested cash replenishment services on several dates in between Feb. 2 and Feb. 9 for the $565,000 total but did not receive the funds, said the complaint. Egan and McGarry were arrested on Feb. 8, and the Federal Bureau of Investigation was authorized to seize the property. On May 27 that year, the MVMC petitioned for Chapter 11 bankruptcy.

In the lawsuit filed, the credit union claims that CUMIS was aware that the credit union used couriers and armored motor vehicle carriers and other third party servicers and vendors; that the credit union expected its property to be covered from the moment it left the credit union's possession until it was returned to the credit union or its authorized facilities; and that the credit union wired funds each week for replenishing its ATMs and cash teller dispense machines.

The complaint said it was not advised that its "in transit" coverage did not protect the credit union from theft or embezzlement by MVMC representatives when the property was located in MVMC's possession but not within an armored motor vehicle, or when the property was located in the MVMC vault or MVMC bank account. The credit union also alleged it was not advised of the deficiencies in its bond coverage and was not offered a product to cover embezzlement or theft by a third-party vendors.

The case is before U.S. District Judge Edgardo Ramos.  It is one of several lawsuits related to the MVMC theft.  CUNA Mutual Group does not comment on pending litigation.

Catalyst Corporate begins second round of Town Hall meetings

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PLANO, Texas (1/31/12)--Catalyst Corporate FCU executives have begun the second half of a six-week series of Town Hall meetings to help credit unions find a future direction as they transition from Western Bridge Corporate during 2012.

More than 540 representatives from 282 credit unions have registered for the meetings. Catalyst Corporate executives spoke to nearly 300 attendees at the first 13 meetings.

The meetings are a follow-up to the National Credit Union Administration (NCUA) December announcement that Catalyst Corporate in Plano, Texas, was selected to acquire the operations of Western Bridge Corporate FCU in San Dimas, Calif. NCUA's decision led to a plan that provides for a non-disruptive, low-cost transition of Western Bridge member credit unions, said Catalyst Corporate.

The meetings aim to provide Western Bridge member credit unions with information about the Catalyst Corporate business model, investment requirements, and products and services, and to offer details of the upcoming transition and an opportunity to ask questions.

"One of the key points that we share with attendees is the way in which the model allows the corporate to maintain a low-risk balance sheet while building retained earnings sufficient to meet future regulatory requirements," said Dianne Addington, Catalyst Corporate president/CEO."Catalyst Corporate's efficiency will ensure that the corporate will thrive financially, meet all of the capital and retained earnings objectives, and continue to be innovative in the delivery of services."

Catalyst Corporate is already exceeding many of the financial measures included in the business plan, such as the coverage ratio, the key measure of efficiency, Addington said. "Our coverage ratio expectation was high--estimating a ratio of approximately 82%, compared with an industry average of about 55%," she added. "We were delighted when we realized that at the end of November we had achieved 93.9%."

Catalyst's model is designed to be less dependent on member contributed capital over time as a result of strong growth in retained earnings, Addington explained, adding that Catalyst's membership capital requirement is a one-time occurrence with no future adjustments.

Seven meetings remain. For more information, use the link.

Upcoming meetings will be held in:

  • Las Vegas (Jan. 31);
  • Honolulu  (Feb. 1);
  • Lahaina, Hawaii  (Feb. 2);
  • Fresno, Calif.  (Feb. 8);
  • Bakersfield, Calif.  (Feb. 9);
  • Boise, Idaho (Feb. 15); and
  • Pocatello, Idaho  (Feb. 16).

N.C. league to meet about dual exams

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RALEIGH, N.C. (1/31/12)--The North Carolina Credit Union League said it will conduct a special meeting Wednesday to discuss how to protect its credit unions following the National Credit Union Administration's (NCUA) decision to require dual exams. The move came after the Raleigh, N.C.-based State Employees' CU got authorization from its state regulator and disclosed its state-issued CAMEL score.

NCUA said the dual exams are needed to protect the National Credit Union Share Insurance Fund and the credit union system.

The CAMEL rating system is NCUA's method of evaluating the health of credit unions. The rating, adopted by the NCUA in 1987, is based upon five critical elements of a credit union's operations: (C) Capital,  (A) Asset quality, (M) Management, (E) Earnings and (L) asset Liability management.

"The league feels it is important to give our credit unions the opportunity to ask questions and share their frustrations," John Radebaugh, league president/CEO, told News Now about the reason for the meeting. "The state regulator of credit unions in North Carolina, as well as the chair of the North Carolina Credit Union Commission, will be on hand to offer information and answer questions. Both federal and state-chartered credit unions have been invited to participate in this meeting, as we feel that this in an issue that impacts all credit unions in North Carolina.

"This is the first time that our credit unions will have a chance to meet together since they found out that NCUA would be conducting separate examinations," Radebaugh continued. "For credit unions, it will be a chance to hear from their state regulator in person, ask questions and share their perspective. This is a very frustrating time for our credit unions, and we feel that it is important to promote an open and transparent environment that allows our credit unions to see all sides of this issue and participate in the dialogue.

He noted that the league is "in the process of setting up a similar meeting with NCUA and all of our state and federally chartered credit unions."

North Carolina credit unions are well capitalized and among the healthiest credit unions in the country, said the league. As NCUA stated, the action is not the result of any safety and soundness concern about state-chartered credit unions in North Carolina, the league added.

"We have 53 state-chartered credit unions in North Carolina that will now be facing two exams per year--one from the state and one from NCUA," Radebaugh explained. "For approximately 45 of these North Carolina state-chartered credit unions, this is the first time they have ever had NCUA examiners in their credit union. The regulatory burden is real and significant for these credit unions.

"The bottom line in this is the regulatory burden on credit unions is at an all-time high, [and] we need state and federal regulators working together to protect credit unions and their members," Radebaugh said. "Dual examinations on safe, sound, and healthy credit unions do nothing more than add to the regulatory burden and ultimately distract credit unions from focusing on serving and meeting the needs of their members."

Iowa Childrens Museum CU promote fin. lit.

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CORALVILLE, Iowa (1/31/12)--The University of Iowa Community CU, Iowa City, Iowa, has teamed with Iowa Children's Museum to promote financial literacy among children in a museum exhibit.

The museum recently opened a City Money exhibit, which includes a station where kids can write fake checks, make deposits and withdrawals from a pretend ATM and "drive up" to a mini teller window (The Gazette Jan. 30). Kids also can learn about monetary denominations and distinguish between wants and needs.

The museum received a federal grant and money from the Community Foundation of Johnson County to open the exhibit.

The exhibit provides an opportunity for children to learn how money truly works, Deb Dunkhase, the Iowa Children's Museum executive director, told The Gazette.

For example, children must make a deposit into the ATM before they can make a withdrawal, added Dick Noble, director of operations at the credit union.

The University of Iowa Community CU and the Iowa Children's Museum have also worked together to provide free financial workshops for parents and children. Plans are in the works to offer workshops at local schools in the fall and projects with boy and girl scouts.

To read the full article, use the link.

Two pro sports womens groups to form CU

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KATY, Texas (1/31/12)--Two pro sports women's associations are collaborating to form a credit union that has an educational wealth empowerment program for pro athletes and their families.

Professional Sports Wives Association (PSWA), a not-for-profit association that provides resources to peers in more than 16 professional sports leagues, and Leagues of Their Own Inc. (LOTO), a not-for-profit wealth empowerment and financial literacy institute, will form the new credit union (PRNewswire Jan. 27).

"We're sick and tired of seeing pro players and wives go broke, divorce and suffer after playing pro sports," said Gena Pitts, PSWA founder.

"Our mission of chartering a federal credit union is to implement education focused on 'total wealth family leadership and legacy planning' that redefines what we are doing in our own lives and in the larger community," said Stacey August, LOTO founder and mother of Prince Fielder, 2011 major league all-star MVP and newly signed Detroit Tigers first baseman. "We believe that a family's human capital is just as important as financial capital.

"The sudden success of the athlete marks a turning point in the athlete's life that can sometimes be overwhelming," she added. "It is through research and personal experience that we understand the complex issues of our community and are here to transform it with the implementation of systems that focus on all aspects of one's wealth, to include the human capital as well as the financial capital for a more balanced life. Our programs are two-fold, offering wealth empowerment coaching and financial literacy programs." 

The credit union will help fill a void [in providing] "professional athletes and their families with a practical, viable educational training program to learn how to preserve and protect athletes' wealth in an industry where nearly 85% of pro athletes are divorced and a quarter of a million dollars in debt when they retire," Pitts explained.

NCUF elects Butke to board updates grant program

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MADISON, Wis. (1/31/12)--Lee Butke, president/CEO of Corporate One FCU, Columbus, Ohio, has been appointed to the the National Credit Union Foundation's (NCUF) board of directors.

Butke joined the board at NCUF's board meeting in Scottsdale, Ariz., last week. He is the new Association of Corporate Credit Unions (ACCU) representative on the board.

NCUF has worked with Corporate One FCU for years, most notably on the Community Investment Fund, the foundation's primary funding mechanism,  Bucky Sebastian, NCUF executive director, said.

The NCUF board also voted to update the foundation's annual grant program, Financial Education Grants, to make a bigger impact. Instead of a number of smaller grants for different projects, the foundation will make one large grant to support a replicable project around financial education. The NCUF Grants Committee is finalizing details of the grant changes and will provide an announcement in the spring.

NCUF has also updated its logo and mission. The new logo tagline is "Making Financial Freedom Achievable." The updated mission statement is "making financial freedom achievable through credit unions."

National Credit Union Foundation (NCUF) Chairman Gary Oakland presents board member Sandy Lingerfelt with a glass gavel at NCUF's Jan. 24 board meeting. Lingerfelt has been on the NCUF board for more than ten years. (Photos provided by National Credit Union Foundation)
After the Credit Union National Association (CUNA) board meeting in March, Winona Nava, president/CEO, of Guadalupe CU in Santa Fe, N.M., will join the NCUF Board as a CUNA board representative. Sandy Lingerfelt, president/CEO of Clinchfield FCU in Erwin, Tenn. currently holds the CUNA seat on the NCUF Board, but her on the CUNA Board term will end in March.

Additional members of the NCUF board include:

  • Chairman--Gary Oakland, president/CEO, BECU, Tukwila, Wash.;
  • Vice chairman--Laida Garcia, president/CEO, Florida Central CU, Tampa, Fla.;
  • Secretary/Treasurer--John Radebaugh, president/CEO, North Carolina Credit Union League, Greensboro, N.C.;
  • President--Bill Cheney, president/CEO, CUNA, Washington, D.C.;
  • Paul Gentile, president/CEO, New Jersey Credit Union League, Hightstown, N.J.;
  • John Gregoire, president, The ProCon Group, Madison, Wis.;
  • Joe Guilfoy, executive director, Indiana Credit Union Foundation and vice president, consulting & education, Indiana Credit Union League, Indianapolis;
  • Rudy Hanley, president/CEO, SchoolsFirst FCU, Santa Ana, Calif.;
  • Stan Hollen, president/CEO, CO-OP Financial Services, Rancho Cucamonga, Calif.;
  • Christopher Roe, senior vice president, corporate & legislative affairs, CUNA Mutual Group, Madison, Wis.; and
  • Mark Twisdale, senior vice president, human resources, State Employees' CU, Raleigh, N.C.

Three Ohio CUs combine will keep brands

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COLUMBUS, Ohio. (1/31/12)--Three Columbus, Ohio, credit unions have announced a merger under which each will maintain their respective brands, facilities and staffing.

The credit unions are $64 million asset Western CU, $60 million asset Powerco CU and $50 million asset Members First CU.

Michael Shafer, current CEO of Powerco, will serve as CEO of the combined entity. Greg Kidwell, treasurer and CEO of Members First, will serve as president. Western's CEO, Tom Furrey, retired Dec. 31 and will remain as a consultant during the transition.

The merger still must be approved by the Ohio Division of Financial Institutions.

"In this partnership, the individual brands of each credit union will be preserved and the excellent work that each credit union has accomplished in their respective communities will continue and thrive under this partnership," said Kidwell.

"Together we have a combined total of 83 years of credit union management experience, and we each share a common vision and foresight as to the benefits that this partnership will bring to each of our respective credit unions," he said.

The credit unions have been exploring the partnership for three years, Furrey said.

CUNA Mutual steps up internal fraud suits vs. CU employees

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MADISON, Wis. (1/31/12)--The dollar amount paid by CUNA Mutual Group in bond claims that cover fraud losses stemming from dishonest credit union employees has increased steadily since 2006, prompting the insurer to step up recovery efforts through litigation against those responsible for the losses.

"In 2006, CUNA Mutual paid roughly 250 bond claims due to employee dishonesty," Loose said. "In 2010, that number was about 200.  However, claim dollars paid more than tripled, jumping from $12 million in 2006 to $38 million in 2010," she said.

The increase in dollars significantly outpaced the reduction in the number of claims, said CUNA Mutual, noting the average claim cost about $190,000 in 2010, compared with $50,000 in 2006. "Employee dishonesty claims account for 13% of the total number of bond claims paid by CUNA Mutual Group but represent 45% of the total dollars paid," Loose said.

CUNA Mutual said it is aggressively pursuing recovery through civil litigation against the individuals responsible for the losses in an effort to recoup the losses on behalf of its policyowners.

It noted that the individuals sued do not have to be convicted of a crime. Sometimes legal authorities choose not to press charges, said CUNA Mutual.  "Our recovery efforts involve the filing of civil lawsuits, which require only a preponderance of evidence, and that's beneficial for our recovery efforts," Loose said.

CUNA Mutual filed 30 such suits in 2011.  Before suing, CUNA Mutual's subrogation unit typically performs a cost/benefit analysis on each claim and weighs the likelihood of success. "If there are assets available and there's a good probability of success, we will pursue recovery."

Recovering paid claims through civil lawsuits helps lower the cost of insurance, which can benefit policyholders collectively and individually through recouped deductibles, improved loss ratios and lower premiums, Loose added.

Although the company always has pursued recovery in these types of cases,  recovery has become more important with losses increasing  in recent years.  Pursuing recovery is "simply the right thing to do for the greater good of credit unions. Those perpetrating these crimes should be held accountable and repay what they stole. We will continue to aggressively pursue those that take money from our credit union partners," Loose concluded.