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CU System briefs (01/07/2013)

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  • PORTLAND, Maine (1/7/13)--2013 will mark a year-long 75th anniversary celebration for the Maine Credit Union League. The league unveiled a new logo and will acknowledge the milestone with articles highlighting significant achievements and occasions; special events and activities; and some surprises, the league said (Weekly Update Jan. 4). Its 75th Annual Meeting and Convention will pay special tribute to the anniversary. League President John Murphy said the league "will honor and recognize the efforts and commitment of the individuals that helped to form the league back in 1938, as well as those who have contributed to its strength and success over the years" …
  • WASHINGTON (1/7/13)--Jim Regan, president/CEO of Digital FCU (DCU), Marlborough, Mass., has been appointed as trustee for Trust for Credit Unions (TCU), a mutual fund created for and by credit unions. Regan has been active for more than 10 years in CUFSLP, a credit union service organization of 36 credit unions that acts as TCU administrator. He has been a part of the credit union community since 1992, when he joined DCU as internal auditor. He later served as chief financial officer. Regan joins seven other trustees: Jim Barr, managing member, JCB Enterprises LLC; Rudy Hanley, CEO, SchoolsFirst FCU; Stan Hollen, president/CEO, CO-OP Financial Services; Gene O'Rourke, managing director, O'Rourke & Associates; Bucky Sebastian, executive director, National Credit Union Foundation; Bob Coen, professor emeritus of economics, Northwestern University; and Gary Oakland, retired president/CEO, BECU …
  • SOUTH BURLINGTON, Vt. (1/7/13)--The Association of Vermont Credit Unions (AVCU) launched its redesigned website during the weekend. The site should better integrate with other social media sites from AVCU, the Credit Union National Association, the National Credit Union Administration (NCUA) and other industry leaders, said AVCU's Newslines Express Friday. The site has a stronger consumer focus. It also features one-click access navigation to a list of its member credit unions, Falcon and CO-OP Network ATMs, NCUA deposit insurance, AVCU's Facebook page and Management Minute blog. Each credit union name links to corresponding information on CUNA's consumer-facing ASmarterChoice.org. The revamped site also features rotating Flash images with captions that will be updated frequently, a Products and Services page and more …

Javelin: CUs' 2013 challenges include securing 'trust' position

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SAN FRANCISCO (1/7/12)--Trust, omnichannels, distributed denial of service attacks and challenges to payment networks' pricing practices are among the major trends forging ahead for financial services in 2013, says a new report. All of these can affect credit unions' strategies.

San Francisco-based Javelin Strategy & Research said these trends highlight steps that financial institutions (FIs) must take to bring order to the rapidly changing arena for banking, payments, mobile and security.

Many financial institutions will lose their positions of trust.News Now's review of articles last year noted that credit unions consistently beat their competitors on the issue of financial trust and member/customer satisfaction, but don't get cocky.  Trust in FIs is "under assault by a seemingly endless list of players, including Apple, Google, mobile carriers and scores of innovative personal financial management players," said Javelin.

The winners "will be defined by who does the best job of developing an intimate financial snapshot of the customers, without crossing the line of being too 'creepy,'" said Javelin. Existing and new players are fighting for market share by offering competitive consumer-friendly services, like personal financial management  (PFM) and alerts.

"It is difficult to rebuild trust once it erodes," said Mark Schwanhausser, Javenlin's director of multichannel financial services. "FIs that put themselves in position as proactive, straight-shooting advisers will reap trust and loyalty."

Omnichannel is the next evolution in banking trends. Members, like other consumers,already trust their financial information to multiple channels, but their data often aren't interconnected and unified into a single integrated, brand experience.  Omnichannels will allow consumers to select any device or channel and have a secure, convenient and familiar way to transact financially.  "This does not mean solutions will be identical across all channels, but that banking consumers' experiences will be harmonious, connected and consistent," said Javelin.

FIs must change their perception of omnichannel banking "as necessary rather than novel," said Mary Monahan, executive vice president and research director, mobile at Javelin.  She suggested investing "in developing an integrated architecture wherein data and platforms can seamlessly converge while enhancing the quality of the brand experience."

Distributed denial of service attacks will go mobile. Two out of three mobile devices aren't protected from malware, Javelin said. These will be an attractive new attack vector for hackers to cripple information technology infrastructure. Al Pascual, Javelin industry analyst of security, risk and fraud, advised forming a partnership with security vendors to increase adoption of mobile security software. "Deputizing consumers through education on mobile security threats and encouraging use of anti-malware, firewall protection and other security solutions will have far-reaching benefits," Pascual said.

Retailers will increasingly challenge payment networks' pricing practices and take greater control of the payments business. While traditional card networks will still control transaction volume, the Dodd-Frank Act's interchange provision "has been a game changer," said Javelin. It suggested forming partnerships and leveraging merchant developments in pioneering ways.

Maine membership reached new high in 3Q

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PORTLAND, Maine (1/7/13)--Maine's credit unions reached a record 626,765 members during third quarter, said the Maine Credit Union League.

"For many years, we have talked about credit unions being 'the best kept secret in financial services,' " said league President John Murphy, "and it is great to see that the secret about the benefits and value of using a credit union is getting out to more consumers than ever."

From January through Sept. 30, 2012, the state's credit unions added nearly 10,000 new members, including nearly 3,000 in the third quarter alone (Weekly Update Jan. 4).

Other year-to-date third quarter results:

  • Assets increased 4.6% to $5.87 billion;
  • Loans rose 5.1%, an increase of nearly $200 million; and
  • Shares grew 5.2% to $5.03 billion.
Murphy attributed the increase to the collective efforts of the league's Statewide Awareness Campaign, strong media outreach and local credit union marketing initiatives.

Lane, NCUA reach settlement in WesCorp lawsuit

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LOS ANGELES (1/7/13)--The last Western Corporate FCU official sued by the National Credit Union Administration (NCUA) has reached a settlement with the agency, according to court documents from the federal court in Los Angeles.

The confidential settlement is with Todd Lane, former chief financial officer of WesCorp.

It  is subject to approval by NCUA's  general counsel and board, said the U.S. District Court, Central District, California. Counsel has until Jan. 17 to lodge a stipulation of dismissal. U.S. Magistrate Judge Margaret A. Nagle ordered the record of the proceedings sealed.

Other former WesCorp employees had settled their cases earlier. NCUA has since issued cease and desist orders against four officials, prohibiting them from participating in the affairs of any federally insured credit union. They are: Robert Siravo, former CEO; Thomas Swedberg, former human resources director; Bob Burrell, chief investment officer; and Timothy Sidley, former chief risk officer.

The lawsuit stemmed from losses that WesCorp experienced when it purchased residential mortgage backed securities that contributed to its conservatorship.

NCUA asks for review of losses in ResCap bankruptcy

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NEW YORK (1/7/13)--The National Credit Union Administration (NCUA) filed a motion Friday in a New York bankruptcy court to join other creditors' motion seeking compensation for losses incurred before Residential Capital LLC filed for bankruptcy.

The New York City-based ResCap is the subprime mortgage subsidiary of Ally Financial Inc., the former mortgage unit of GMAC.  ResCap filed for Chapter 11 bankruptcy on May 14 (Dow Jones Newswires Dec. 12).

NCUA's motion and the creditors' original motion were filed in U.S. Bankruptcy Court, Southern District of New York, Manhattan.

According to the motion filed, the agency is acting as the liquidating agent for the now defunct Western Corporate FCU and U.S. Central FCU, which bought residential mortgage-backed securities (RMBS) that caused losses contributing to the two corporates' collapse.  The court document indicates that NCUA is holding about $300 million in fraud and other claims under state and federal securities laws and common law.

The original motion seeking compensation was brought by AIG Asset Management (U.S.) LLC, The Allstate Entities, Massachusetts Mutual Life Insurance Co. and the Prudential Entities. It seeks two things:

  • An order that would classify RMBS fraud claims in the same class as the securitization trust claims for purposes of any Chapter 11 plan for debtors; and
  • A direction that misrepresentation claims cannot be placed in a plan class that will be subordinated (to other creditors).
A mediator was appointed in late November to handle the reconstruction negotiations (Dow Jones Newswires Jan. 3).

New indictments in St Paul Croatian FCU failure

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CLEVELAND (1/7/13)--Three men were indicted Thursday for loan fraud related to the collapse of  East Lake, Ohio-based St. Paul Croatian FCU. The new indictments bring the total number of indictments from the failure to 24.

Indicted were:

  • Gezim Selgjekaj, 41,of Avon Lake, who allegedly received more than $11 million in loans. He was charged with one count of conspiracy, six counts of bribery, six counts of money laundering and 15 counts of financial institution fraud. He allegedly received $3.6 million of fraudulent loans between 2004 and 2008 while serving a federal prison term in an unrelated case. Selgjekaj owned several business entities that allegedly were safe havens for credit union proceeds, said a press release from the Federal Bureau of Investigation's Cleveland District.
  • Arthur Hoxha, 40, Rocky River, who is charged with one count of financial institution fraud (Plain Dealer Jan. 4).
  • Judmir Capoj,36, of North Olmstead, charged with two counts of submitting false statements to a financial institutions (Crain'sCleveland.com Jan. 3).
They join 21 other defendants who have been indicted the past two years for the loan fraud scheme that involved $1 million in kickbacks, bribes and gifts paid to the credit union's CEO, Anthony Raguz, in return for issuing more than 1,000 fraudulent loans.  About 300 accountholders were involved (News Now Dec. 27).  Several key figures in the fraud ring, including Raguz, are serving prison sentences.

The credit union collapsed in 2010, costing the National Credit Union Share Insurance Fund more than $170 million. It is considered the largest failure in credit unions' history.

Texas league working with Muslim group on new CU charter

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AUSTIN, Texas. (1/7/13)--The Texas Credit Union League (TCUL) is working closely with a Muslim group that seeks to charter a new credit union.

The group has filed a charter application with the Texas Department of Credit Unions. Jafari No-Interest CU would operate out of the Houston area, the department confirmed to News Now. The proposed new credit union will serve Muslims residing in Houston, Dallas and Austin and who follow the Jafari School, commonly known as Shia Muslims.

Linda Winkfein, vice president of the small credit union development at the Texas league, and Lorri Gaither, assistant vice president of small credit union development, have worked closely with the credit union's organizer, Imran Dhanji, according to Linda Webb-Manon, TCUL vice president of public relations and communications.

Winkfein and Gaither have put Dhanji organizers in touch with mentors who shared best practices and provided guidance on credit union operations, Webb-Manon said.

"Linda and Lorri have both commented on how impressed they have been with the credit union's organizer," Webb-Manon told News Now. "Determined to make this credit union a success, he has eagerly accepted their assistance and is open to gaining as much knowledge and information as possible."

The Texas Department of Credit Unions has 60 to days to approve the charter upon completion of the application, according to Betsy Loar, assistant commissioner and general counsel for the department.

As part of the application process, the credit union organizers must submit a business plan that outlines how the credit union will be funded, Loar told News Now.

The applicants must also receive share insurance approval from the National Credit Union Administration, Loar said. The league will assist credit union organizers with the insurance approval process, Webb-Manon said.

The proposed Jafari No-Interest CU is not the first credit union to serve the Muslim population. North Jersey FCU, with $198 million assets, Totowa, N.J., was the first credit union to offer products based on Islamic religious law, or Sharia law. It serves an unbanked population of Muslims in North Jersey (News Now Jan. 23).

It offers mortgage loans through Reston, Va.-based Guidance Residential. Mortgages are approved by an independent board of Sharia scholars. The loans also comply with the federal truth-in-lending law, but are different from conventional mortgage loans. Although sharia-compliant mortgages can be structured in several ways, Guidance Residential uses a method in which the buyer and the lender create a partnership to purchase a house.

North Jersey FCU's deposit accounts are structured to pay dividends rather than interest to its Muslim members.

CUNA's Googolplex for kids spotlighted in Pensacola paper

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MADISON, Wis. (1/7/13)--"Googolplex," an online program from the Credit Union National Association that teaches money skills to children, was highlighted in a Jan. 3 Pensacola News Journal article about saving.

As part of its efforts to teach kids about money, Harvesters FCU said it steers young members to Googolplex.

Googolplex includes three customizable Web sites that feature interactive games, videos and colorful stories dealing with money matters and life issues. Each Googolplex site appeals to a specific age group--5-Spot for elementary schoolers, A-J's for middle schoolers, and C-Note for high schoolers.

Because Googolplex teaches different denominations of money and explains how to count it, kids become more financially independent at an earlier age, Melanie Velaski of Harvesters FCU, told the Journal.