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CU System briefs (11/15/2012)

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  • CEDAR HILLS, Utah (11/16/12)--A former mayor of Cedar Hills, Utah, has been sentenced to one year and a day in prison after pleading guilty for his role in a loan fraud ring.  Eric Richardson also was ordered by U.S. District Judge David Nuffer to repay no more than the $10,000 received for allegedly lending his name for a falsified loan application. Richardson resigned as mayor on June 25, two days before he was charged with defrauding the Heritage West CU of $330,000. He allegedly signed a blank vehicle application in 2010 for more than $57,0000 to buy a Land Rover, while his partners falsely claimed he earned $15,000 a month more than he did. The sales price was less than the loan. Convicted ringleader Christopher D. Hales is serving a prison term related to the frauds (Salt Lake Tribune Nov. 13) …
  • DUBUQUE, Iowa (11/16/12)--DuTrac Community CU, based in Dubuque, Iowa, recently paid out nearly $2 million in Christmas Club deposits to 1,800 thrifty members participating in its club savings account. "With DuTrac's Christmas Club saving account, participating members are able to fill their holiday stockings without emptying their wallets," said Andy Hawkinson, president/CEO. "In addition, club members' savings benefit local area retailers by providing shopping dollars for the holidays." The Christmas Club helps members alleviate some of the holiday shopping stress by knowing they are saving throughout the year, said the $550 million asset credit union  …

Study 10000 ID theft rings bring surprises

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SAN DIEGO (11/16/12)--More than 10,000 identity theft rings exist in the U.S., and for many they are a family matter, targeting bankcard, wireless and retail card industries, according to a new study released Wednesday by San Diego-based ID Analytics.

The research dispels some stereotypes about who is involved in identity theft rings and where the rings are located.

ID Analytics' ID:A Labs defines a fraud ring as a group of people--two or more--collaborating to commit identity theft. The study examined more than one billion applications for bankcards, wireless services and retail credit cards and found the rings attacking all three industries, with wireless carriers hit the most, aid a company press release.

Georgia and South Carolina were hotbeds of fraudulent activities in all three industries. Two bankcard rings in Gainesville, Fla., and in Orlando each filed 200 applications, said the company.

Among the study's findings:

  • States with the highest number of fraud rings were Alabama, the Carolinas, Delaware, Georgia, Mississippi and Texas.  Three-digit ZIP codes with the most fraud rings were in these areas: Washington, D.C.; Tampa, Fla.; Greenville, Miss.; Macon, Ga.; Detroit; and Montgomery, Ala.
  • A surprisingly high number of frauds were also found in rural areas of the country.
  • While some  involve the stereotypical organized-crime types, many identity theft rings involved families working together, even using each other's Social Security numbers and birthdates. However, rings were more commonly made up of friends having different last names, said Stephen Coggeshall, chief technology officer of ID Analytics and author of the study.
In an interview with Networkworld.com (Nov. 15), Coggeshall said he was surprised that while lone individuals involved in fraud tend to come from urban areas, the fraud rings tended to be in the rural Southeast. He attributed some of the increase in number to a poor economy and the fact that arrests and prosecutions are low.

The study spanned the decade but emphasized the past three years.  It found that two thirds of fraud attempts are shut down before they do any damage. That leaves a third that pose threats to credit unions and other financial institutions, and to members and other consumers.

CUNA outlines CU card benefits to Bankrate Fox

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WASHINGTON (11/16/12)--The Credit Union National Association (CUNA) outlined the benefits of credit cards offered by credit unions for a Bankrate.com article that also was carried in Fox Business as well as on Yahoo!Finance in Canada.

CUNA Chief Economist Bill Hampel is quoted extensively in the article, which discussed the ins and outs of credit unions' credit cards.

Hampel pointed out that one of the most flattering feature of a credit union card is the annual percentage rate (APR), which is often several percentage points below those offered at big banks. The average APR for credit union rewards cars was 9.38% as of Nov. 1, compared with 12.89% for big banks, said the article, quoting Informa Research Services.

Credit unions also offer a variety of options such as secured cards, rewards cards and platinum cards, he noted.

Credit unions don't engage in egregious practices such as double-cycling billing and retroactive rate increases and are bound by provisions of the Credit Card Accountability, Responsibility and Disclosure Act, just like big banks, he said.

Hampel pointed out that credit unions take fewer financial risks so credit limits may be lower at first than bank limits, but if the consumer consistently pays on the card every month, credit unions will quickly increase the limit.

He also said that membership requirements aren't a deterrent. "Everybody can typically find three to five credit unions that they're eligible to join."

Ondine Irving, owner of Card Analysis Solutions, a credit union consulting firm, also noted in the article that credit unions don't typically charge balance transfer fees and they have lower late fees. They also provide a longer grace period for late payments (five days vs. one day at big banks) and won't raise an interest rate after one late payment.

To access the full article, use the link.

S C gov orders protections after massive data breach

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COLUMBIA, S.C. (11/16/12)--A massive data breach at South Carolina's Department of Revenue has prompted an order for cabinet-wide cyber security measures from state Gov. Nikki Haley, as well as warnings to members from credit unions about the breach.

Cyber criminals stole more than 3.5 million Social Security numbers and information from 387,000 credit and debit cards in September from the state's collection agency, said the governor's press release Thursday.  The breach exposed the records of anyone who had paid taxes in the state since 1988. It affects 77% of the state's population.

Credit unions were alerted to the breach, which was announced Oct. 20 and was a topic among CUNA Technology Council members. Some credit unions placed a notice on their website that directs members to free credit monitoring services.

For example, $232 million asset SC Telco FCU, based in Greenville, placed an update on its website warning members about the breach. It said 16,000 of the debit and credit card numbers were not encrypted. Although the credit union does not know if its members were directly impacted, it noted it will continue monitoring the situation and stay "in constant contact with Visa to determine any proactive measures that may be needed. The protection of our members' personal information is our top priority."

The credit union made four recommendations to members.

  • Use the free credit monitoring set up by the state.
  • Check credit reports and report any discrepancies to the credit reporting bureau.
  • Diligently monitor banking accounts.  Because the breach occurred at the department of revenue "all financial institutions are at risk of having their customers/members' information exposed," said the credit union.  SC Telco provided information for checking accounts and transactions  and said to contact the credit union immediately if there is a suspicious or fraudulent transaction.
  • Take advantage of e-mail alerts that notify the consumer when the account has activity.
In a press conference Wednesday, Gov. Haley indicated her order directs the state's cabinet agencies to work with the Division of State Information Technology (DSIT) to implement network monitoring  24/7 as well as intervention and interruption of unusual events or viruses. She also encouraged all non-cabinet agencies to work with DSIT to identify weaknesses in their current monitoring and to implement stronger monitoring if needed.

When a potential threat or attack is identified, the agency's IT staff will be asked to remove the infected computer from the network and begin remediation action.

The state has been scrambling to help consumers affected by the breach. Credit reporting bureau Experian set up a call center to assist the state's taxpayers. As of Wednesday morning it had received more than 775,000 calls and signed up 789,500 callers for its ProtectMyID program, the governor said.

A slew of mergers in the works

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MADISON, Wis. (11/16/12)--A plethora of credit union mergers nationwide have occurred or have been put in motion during the past several weeks.

Here are the latest changes:

  • Piedmont Advantage CU, a $226 million asset credit union based Winston-Salem, N.C., has acquired East Coast CU in Wilmington, N.C., with $8.3 million in assets, effective at the end of November. Piedmont has nine branches, and East Coast has one branch that serves a nine-county area (The Business Journal of the Greater Triad Area Online Nov. 15).
  • Prior Lake, Minn.-based South Metro FCU, with $84.5 million in assets, acquired North Country Cooperative FCU, based in Minneapolis, with $6.4 million in assets (The Jordan, Minn., Independent Nov. 5).
  • United Food and Commercial Workers Local 880 CU in Cleveland, with $10.3 million in assets, closed its doors Nov. 2 and merged Nov. 5 into Firefighters Community CU (FFCCU), a $184.3 million asset credit union based in Cleveland. With the merger, FFCCU has $195 million in assets and serves about 27,500 members.
  • Macon, Ga.-based Smith & Sons Employees CU, with $417,000 in assets, merged Oct .1 into Atlanta (Ga.) Postal CU, which has more than $2 billion in assets, 106,000 members and eight branches.
  • The Pennsylvania Department of Banking approved the merger of $27.8 million asset Bucks County Community College (BC3) Employees FCU in Doylestown, Pa., into Trevose, Pa.-based TruMark Financial CU, with $1.38 billion in assets, on Oct. 1.
  • St. Luke Parish FCU, with $8.9 million in assets, in Dayton, Ohio, merged into $77 million asset Incenta FCU in Englewood, Ohio, effective Nov. 13. Incenta now has more than $85 million in assets and 11,000-plus members.
  • Members of the $20.2 million asset Mercy CU in Miami voted Nov. 5 to merge into $133.8 million asset JetStream FCU in Miami Lakes, Fla. The merger will become effective Dec. 31. The combined credit union will have more than $150 million in assets, eight branches and more than 19,000 members in Miami Dade County and Puerto Rico.
  • San Jose (Calif.) CU, with $130 million in assets, will merge into National 1st CU, based in Sunnyvale, Calif., with more than $210 million in assets (Investment Weekly News Nov. 17). The merger has been approved by the National Credit Union Administration and the California Department of Financial Institutions. About 90% of San Jose CU members voted in favor of the merger.
  • Members of Berlin, N.H.-based Woodlands CU, with $91 million in assets, voted Oct. 27 to merge into Portsmouth, N.H.-based Northeast CU, with $726 million in assets (New Hampshire Union Leader Nov. 6). The merger will take effect Jan. 1. The proposed merger sparked protests from some members, but 60% of Woodland members voted in favor of it.

Members more confident on economy finances than nonmembers

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RIVERWOODS, Ill. (11/16/12)--Credit union members are  more confident in the economy and their personal finances than consumers who don't belong to credit unions, according to data released Thursday from the credit union member demographic of the Discover U.S. Spending Monitor.

Credit union members are also more optimistic than they were at this time last year, said the study.

Credit union members rated the economy more favorably than non-credit union members, though both groups were more positive than last year. Other findings include:

  • In October, 19% of credit union members surveyed rated the economy as "excellent" or "good," a 14-point improvement from the same period last year. By comparison, 16% of non-credit union members rated the economy as "excellent" or "good," a nine-point increase year-over-year.
  • The number of credit union members that rate the economy as "poor" fell 21 points in October, compared with the same period last year, versus a 16-point decrease for non-credit union members.
  • Credit union members who expect the economy to get "better" increased 25 points in October 2012 to 38% , versus the same time last year.
Credit union members rate their personal finances higher than last year, similar to non-credit union members. Survey findings include:

  • Credit union members rating their personal finances as "excellent" or "good" increased eight points to 41% in October from 32% in October 2011. Non-members increased seven points during the same time last year to 35% from 28%.
  • The number of credit union members who believe their personal finances are getting "better" increased 13 points year-over-year, to 30% (versus a 12-point increase to 27% for non-members). Members who believe their finances are getting "worse" declined seven points to 46%, during the same time.
  • More than half (55%) of members survyed expect to have money left after paying bills, while 50% of non-credit union members reported the same this month.
Spending intentions varied by category for credit union members. Overall intentions to spend more next month increased members to 31% in October from 24% in October 2011.

Other findings included:

  • Intent to spend more on household expenses next month rose seven points to 46% in October. This also is an eight-point increase quarterly, from 38% in July.
  • Credit union members' intentions to spend less on household improvements dropped two points to 48% from the same time last year; however, this is a seven-point increase from last quarter.
  • Also, intentions to spend more on discretionary entertainment (up four points to 10%) and major personal purchases (up 1 point to 12%) were up year-over-year in October 2012, but down when compared to last quarter (two points and five points, respectively).

CDFI CUs offered training on MBLs microfinance

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NEW YORK (11/16/12)--The National Federation of Community Development Credit Unions is partnering with Opportunity Finance Network (OFN) to provide small business and microfinance training to credit unions.

The "Scaling Up Microfinance" training series is part of the national Community Development Financial Institution (CDFI) Fund's Capacity Building Initiatives. The training exposes microfinance CDFIs to best practices in the field, and offers tools to take successful strategies to scale. The structure and experience of credit unions has been integrated into all components of the series. The training will provide opportunities for collaboration between loan funds and community development credit unions offering microfinance products.

The curriculum focuses on four themes integral to scaling microfinance operations:

  • Innovative business models;
  • New microfinance products;
  • Technology to improve performance and efficiency; and
  • Development of culture of innovation and talent management.
In January and February, eligible credit unions can participate in one of the two-day Scaling Up Microfinance training in New York, San Francisco and Atlanta.

After the initial training, credit unions can access up to 20 hours of free one-on-one technical assistance with experts from OFN, the federation, FIELD at the Aspen Institute, the Center for Financial Services Innovation, and Resources for Leadership Inc. Attendees can also participate in mentored working groups to develop solutions to challenges that may impede growth in  microfinance programs

"This effort builds on the federation's experience over the last 20 years of fostering and supporting microfinance in underserved communities across the nation," said Cathie Mahon, federation president/CEO. "That these resources are being made available at this historic moment, when we are seeing a dramatic expansion of credit unions serving low-income communities, will open the door to a vast source of lending capital to stimulate small business development and growth."

Credit unions are urging Congress to pass legislation that would raise credit unions' member business lending cap to 27.5% of assets from the current 12.25%. The Credit Union National Association says that raising the MBL cap would help inject $13 billion in new small business loans and 140,000 new jobs into the economy, at no cost to taxpayers.

To register for the training, use the link.

Catalyst poll CU CEOs expect more loan demand

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PLANO, Texas (11/16/12)--Expectations for loan demand among credit union CEOs increased to their highest level in three years, according to Catalyst Corporate FCU's Third Quarter 2012 CU CEO Confidence Survey.

Catalyst said loan expectations have been trending upward in its surveys since first quarter 2011, when they registered -1.02. However, the most recent mark of 19.18 was a jump of more than six points from the previous quarter. The last time loan expectations approached that level was when they hit 20.65 in third quarter 2009, said the corporate, based in Plano, Texas

Credit union CEOs appear to be in a holding pattern regarding overall confidence in the economy. The index, based on a survey taken before the national elections, inched up by less than a point in the second quarter, to 24.03 from 23.25.

The survey indicates that expectations for both the financial condition of their institutions--which declined overall in confidence from last quarter--and the financial condition of their members--which increased from last quarter--to be better in six months than it is today.

"With loan growth up about 4% through the first three quarters of 2012, it isn't surprising that many CEOs are encouraged," said Brian Turner, Catalyst Strategic Solutions director/chief strategist.

"Peer data suggest that growth might be limited to larger credit unions, which have greater perceived risk appetites and capacity. Still, most credit unions with assets greater than $100 million did experience an increase in non-revolving credit this year. Loan growth in 2012 may not compare historically, but it is welcome news compared to last year's 1.2% growth and 2010's 1.4% decline," Turner said.

Marginal spreads between asset yields and funding costs continue to narrow, Turner said. "Fortunately, improvements in loan delinquency have offset much of the decline, helping to boost bottom lines," he added. "With the Federal Reserve reiterating the intent to retain overnight rates at their current level until mid-2015 and most credit unions retaining strong liquidity profiles, there will be little upward pressure on cost of funds over the next 12 months. In fact, credit unions should remain proactive in lowering share rates even further."

The principal driver to the current recovery is the employment sector, Turner said. "Job insecurity has squashed consumer spending--which represents two-thirds of the nation's gross domestic product (GDP)--over the past couple of years," he added. "Unstable consumer spending creates volatility in economic growth and impacts demand for loans. Employment is projected to improve slightly over the next 12 months, yet GDP estimates remain around 2.2%, slightly higher than 2012's 1.8% pace. GDP in 2013 should reflect improvement in consumer spending that hopefully will translate into higher loan demand, particularly for consumer loans."

Halliburton Employees' FCU in Duncan, Okla., said loans put on the books increased significantly throughout the year.

"At this time, we expect the trend to continue," said Chris Bower, president/CEO of the $118 asset credit union. "Following the lull in 2010 and 2011, many folks are now purchasing new cars. Plus, with all the publicity about 'historic low rates,' members have been inquiring whether this is the right time to refinance."

The credit union has also seen activity in direct and indirect auto lending, Bower said.

To capitalize on the lending increase, the credit union introduced a marketing campaign that provides incentives to members and employees when a loan from another institution is refinanced at the credit union.

"Loan officers actively monitor reports of member loans, and when they see paydowns, they contact the members to find out if they have refinanced elsewhere and if they are interested in bringing the loans back to the credit union," Bower said. "In 60% to 70% of the cases, we offer a better deal than they received elsewhere."

Bower said he believes that the severe loan underwriting restrictions of the past three years are beginning to loosen, as people who fell behind on payments gain better control of their finances, and that this will contribute to more loans in the future.

In other survey results, credit union CEOs indicated they believe share deposit growth will be flat during the next six months.

Begun in 2004, Catalyst Corporate's quarterly survey measures CEO confidence in the economy from very negative to very positive (-100 to +100) in six key areas.

The areas CEOs to evaluate include:

  • Current financial condition of members;
  • Current financial condition of the credit union;
  • Anticipated financial condition of members in six months;
  • Anticipated financial condition of the credit union in six months;
  • Anticipated loan demand at the credit union in six months; and
  • Anticipated share deposit growth at the credit union in six months

NEFCU named small-biz loan expeditor for Sandy victims

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WESTBURY, N.Y. (11/16/12)--The National Credit Union Administration (NCUA) has approved NEFCU's designation as a Small Business Loan Expeditor. NEFCU, which serves all of Long Island, can now expedite business loans and lines of credit to help those recovering from the devastation of Hurricane Sandy.

With $1.9 billion in assets and nearly 150,000 members, NEFCU is headquartered in Westbury, N.Y., and has branches and a shared branch network throughout Nassau and Suffolk Counties.

"We know that Hurricane Sandy brought significant losses to many of our members, neighbors and communities," said Edward P. Paternostro, NEFCU president/CEO. "Being selected as a Small Business Loan Expeditor affords us the opportunity to make funds immediately available for restoration and rebuilding."

The Small Business Loan Expeditor designation allows NEFCU to streamline the loan application and underwriting process with the goal of making business loans and lines of credit as readily available to members as possible. "We appreciate that our business partners may have significant liquidity needs at this time, and we stand ready to support them with our special programs," Paternostro said.

Also, NEFCU was one of the first financial organizations to offer Hurricane Relief programs to consumers. For more information, contact Andrew Saluk at NEFCU at 516-714-2965.