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CU System briefs (12/14/2011)

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  • FALL RIVER, Mass. (12/15/11)--Paul Dias, suspected of allegedly robbing St. Anne's CU in Fall River, Mass., Thursday and driving away from the $764 million asset credit union in a stolen car, was arrested Monday while allegedly attempting to rob a bank (heraldnews.com Dec. 14). A police officer working a paid security detail at the bank, Kevin Dolan, noticed a bright orange note being carried the robber after he entered Admirals Bank in Fall River. The robber had pulled into the bank parking lot in a maroon Chevy Impala that Dolan recognized as being reported stolen Dec. 5 in Traunton, Mass. When Dolan approached Dias at the bank, Dias tried to hide the orange note, so Dolan arrested him. The note Dolan seized instructed the teller to turn over cash, police allege …
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  • ROANOKE, Va. (12/15/11)--A former Roanoke, Va.-credit union employee who pleaded guilty to embezzlement was sentenced to 10 days in prison Tuesday (The Roanoke Times and Roanoke.com Dec. 14). Catherine Keith, 35, who was a branch manager at Freedom First CU, admitted that she modified the loans of family members to illegally withdraw money for her own use. She also diverted account notifications, which were sent to her rather than the relatives. Keith told Judge William Broadhurst she used to the money to help make ends meet after her husband went on disability. Keith has repaid $36,000, but still owes $10,000. Broadhurst sentenced Keith to three years in prison, suspended after she serves 10 days …

Court dismisses most of FIs complaints in Heartland breach

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HOUSTON (12/15/11)--A U.S. District Court judge in Houston has dismissed most financial institutions' complaints of negligence and breach of contract stemming from Heartland Payment Systems Inc.'s data breach, but left open the possibility that financial institutions in the case could file amended complaints.

Heartland revealed in January 2008 that its system had been breached and that roughly 130 million credit and debit card accounts, including thousands of credit union member accounts, had been compromised in one of the largest data breaches ever recorded. The breach spawned a variety of lawsuits by both consumers and financial institutions, which replaced the cards of the compromised accounts.

Financial institutions' suits against Heartland had been consolidated into a single case while consumers' lawsuits were consolidated into a separate case.

The ruling by U.S. District Judge Lee Rosenthal of the U.S. District Court for the Southern District of Texas, Houston division, in the financial institutions' suit found in favor of Heartland on all counts except on a claim brought under the Florida Deceptive and Unfair Trade Practices Act, but left open the ability to amend the complaints in several areas.

The court:

  • Dismissed with prejudice and without leave to amend the claims for negligence and for violation of the New Jersey Consumer Fraud Act, the New York consumer protection law, and the Washington Consumer Protection Act.
  • Dismissed without prejudice and with leave to amend on these claims: breach of contract, breach of implied contract, express misrepresentation, negligent misrepresentation based on nondisclosure, and violations of several state consumer laws in California, Colorado, Illinois and Texas.
  • Denied the motion to dismiss on a claim brought under the Florida Deceptive and Unfair Trade Practices Act. That act's purpose, said the court ruling, is "to protect the consuming public and legitimate business enterprises" from "unfair methods of competition, or unconscionable, deceptive, or unfair acts or practices in the conduct of any trade or commerce."
In the 62-page decision, Judge Rosenthal indicated that the financial institutions were not protected as "third-party beneficiaries" in contracts between Heartland and its two acquiring banks, KeyBank and Heartland Bank; were not protected under the contracts between Heartland and the major card brands, such as Visa, MasterCard and D; and Discover; and were not consumers who could claim misrepresentation  or negligence under various state consumer protection laws.

"Unlike the plaintiffs in Hannaford Brothers [another data breach case], and like those in Hammond, the financial institution plaintiffs do not allege a direct contract relationship with Heartland that would plausibly suggest the mutual assent necessary for an implied contract.  The financial institution plaintiffs' contracts are with Heartland clients, not Heartland. The pleadings allege that the financial institution plaintiffs have at most an indirect relationship with Heartland through Heartland's processing of transactions made with payment cards that they issued. The implied contract claim is dismissed," wrote the judge.

Several credit unions were among the financial institutions that filed original complaints related to the breach. They included GECU, a $1.146 billion asset credit union in El Paso, Texas; MidFlorida FCU, a $1.283 billion asset credit union in Lakeland Fla.; Matadors Community CU, a $123 million asset credit union in Chatsworth, Calif. They joined Amalgamated Bank of New York, N.Y., and Farmers State Bank, Marcus, Iowa, among others. (News Now May 27, 2009).

Other suits filed against Heartland involved PBC CU, West Palm Beach, Fla.; Gulf Winds FCU, Pensacola, Fla.; Alabama Rural Electric FCU, Montgomery, Ala., and First Castle FCU, New Orleans.

More than 560 financial institutions, including at least 178 credit unions, had to reissue credit and debit cards as a result of the breach. Heartland reached several settlements last year with Visa and MasterCard and Discover, which also had sued on behalf of their financial institution clients.

FDIC approves United FCUs purchase of thrift

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ST. JOSEPH, Mich., and WASHINGTON (12/15/11)--The Federal Deposit Insurance Corp. (FDIC) confirmed Wednesday that it has approved the acquisition of Griffith (Ind.) Savings Bank by United FCU, based in St. Joseph, Mich. It will be the first savings bank to be acquired by a credit union.

FDIC spokesman David Barr confirmed to News Now in an e-mail that FDIC approved the measure Tuesday. He noted the FDIC does not comment on such actions.

"The transaction was approved by the National Credit Union Administration a few weeks ago, subject to FDIC approval," Gary Easterling, CEO of the nearly $1.3 billion asset United FCU, told News Now. "We received a letter from our Region I director, and we're waiting for FDIC's letter to get to Griffith."

Easterling noted that  "we've been working with the team at Griffith and communicating with its customers and we will send an official notification by mail to them."

The credit union is not taking on the bank charter, but is acquiring assets and members. Under terms of the agreement, which was announced July 27, the credit union will purchase all loans, investments, real estate, accrued interest receivables, and other banking related assets of Griffith--valued at about $81 million after a discount on the loan portfolio.  Griffith will retain certain assets used to fund accrued liabilities related to its employee benefits plans. Griffith will  liquidate after the closing and distribute any remaining assets to its depositors.

The acquisition will be complete by Jan. 1, with the first business day of the Griffith branch as a branch of the credit union on Jan. 3, Easterling said. Griffith has one branch. Its addition will bring the credit union's branches to about 24. Griffith's board had already voted for the acquisition.

Easterling told News Now that the process likely would be more expedited now that the credit union has undergone the process for the first time. "We took a brand new pathway, and it took a while for us to work through it. I'm thankful for the patience of the regulators and all the parties involved."

The bank had first contacted the credit union in early first quarter, and the agreement was made in April, pending regulatory approval.  He noted it will be an opportunity to extend United FCU into downtown Griffith, Ind., and offer perpetual financial services in Northwest Indiana.

Catalyst Corporate successful bidder for Western Bridge assets

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PLANO, Texas, and ALEXANDRIA, Va. (12/15/11)--Catalyst Corporate FCU, Plano, Texas, has been awarded the exclusive right to acquire the assets of Western Bridge Corporate FCU, San Dimas, Calif.,  announced the National Credit Union Administration (NCUA) Wednesday.

"NCUA's Corporate System Resolution Plan took a huge step forward today," said NCUA Board Chairman Debbie Matz Wednesday. "Catalyst has a proven track record of integrating operations in prior acquisitions and employing sound business practices to maintain continuity of operations. We are confident that Catalyst will provide the same array of payments services presently provided by Western Bridge to its member consumer credit unions," she said.

As conservator of Western Bridge, NCUA sought an acquisition solution that would minimize service disruption to Western Bridge's member credit unions and ensure the best financial outcome for the Temporary Corporate Credit Union Stabilization Fund, the agency said.

NCUA conserved the former Western Corporate FCU in 2009 and created Western Bridge to ensure continuity of service and operations for member consumer credit unions. In 2011, Western Bridge members failed to capitalize a new corporate credit union, United Resources Corporate FCU. NCUA then conducted a competitive bidding process to identify a buyer for Western Bridge.

"We had partnered with Wescorp on a variety of projects over the years, and as a result we were already familiar with many of its systems and processes," said Brad Ganey, senior vice president/chief operating officer of Catalyst Corporate.  "After performing due diligence, we feel confident that Catalyst can provide a compatible, cost effective option for Western Bridge members."

Ganey noted the corporates have operational similarities, shared platforms, and many of the same products, which will smooth the migration for credit unions moving from Western Bridge. All in all, he said, credit unions will experience minimal changes to the way they do business with their corporate: "Wescorp, and its successor Western Bridge, have offered members high value products and services for many years. We want to assure these credit unions that Catalyst will continue to provide everything they have come to expect, and perhaps even offer some enhancements."

Dianne Addington, Catalyst president/CEO, noted that "Catalyst not only offers every product and service provided by Western Bridge--we offer about a dozen more, "Right out of the gate credit unions will experience an improved value proposition--not just a replacement of their services. Credit unions deserve that after the challenges of recent years.

"We are hopeful that many credit unions will be relieved as they learn more about our transition plans," she added.

Credit unions that committed to recapitalize Western Bridge as United Resources Corporate will face a capitalization requirement that is the same or lower.  Credit unions on the sidelines can join with a maximum capital investment of 25 basis points, said Addington. Catalyst's capitalization methodology has dollar amount caps and a proportional scale-back feature for credit unions with under $50 million in assets.

The same rules for capitalization will apply to future members as those established for Catalyst's charter members. "Perpetual contributed capital is essential for Catalyst to be well-capitalized," she said. "Because we incur a degree of risk by offering our on-balance sheet services, any credit union that uses them must make a capital commitment. It's what's fair to the membership as a whole."

So far, Catalyst has nearly 900 capitalizing members who contributed $96 million to capitalize Catalyst, the result of a 2011 merger of Southwest Bridge FCU and Georgia Corporate FCU.

Existing member-owners will also benefit with the transition. "With the increased efficiencies, we will be able to achieve our income targets more rapidly, which means we can invest more heavily in new services and product enhancements that help our credit unions remain relevant to their own members," said Ganey. 

In the coming weeks, Catalyst will contact prospective members as well as conduct a webinar this month and offer a special "Welcome Western Bridge Members" micro-site on the Catalyst website.  Town Hall meetings will begin in January. The transition will be in full swing through mid-2012.

"We had an extremely smooth consolidation just a few months ago when Southwest Bridge Corporate and Georgia Corporate merged to become Catalyst, and we are more than ready to do it again," Addington said.

Southeastern CUs note 3Q growth amid bank fee backlash

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BIRMINGHAM, Ala., and TALLAHASSEE, Fla. (12/15/11)--Credit unions in Alabama and Florida experienced higher than normal membership growth in the third quarter, following the League of Southeastern Credit Unions' (LSCU) Statewide Image Campaign in September and the backlash against banks for suggesting a $5 fee for debit card use.

Southeastern credit unions added 48,000 members in the third quarter--31,000 in Florida and 17,000 in Alabama. Florida credit unions averaged 12,000 new members in the first two quarters of 2011, while Alabama credit unions averaged 8,000. This equates to 76,000 new members year over year for Southeastern credit unions from 2010 to 2011with another quarter yet to report.

"The LSCU Statewide Image Campaign hit at the exact right time," said LSCU President/CEO Patrick La Pine. "The campaign debuted Sept. 7, which was two weeks before the bank fees were announced and before the Bank Transfer Day buzz. It set the stage for consumers to begin looking at a credit union. We can clearly see the jump in numbers. Consumers are moving to a financial institution that has their best interest in mind."

As credit unions saw new members opening accounts, they also experienced a jump in assets. Southeastern credit unions have added $1.4 billion in total assets year over year in 2011 with another quarter yet to report.

The largest jump came for Alabama credit unions, which saw $1.3 billion in assets added, while Florida saw $159 million in growth. Alabama's assets have grown $4.4 billion since 2007. For Florida credit unions, the 0.4% growth indicates that the economy is slowly showing signs of improvement, said LSCU. Asset growth was negative in 2010.

Florida credit unions reported 2.2% growth in member business loans (MBLs), which is almost double the growth rate for 2010. Alabama credit unions saw a 1.5% growth in MBLs. There is pending legislation in Congress to lift the MBL cap for credit unions to 27.5% of assets from 12.25%. The Credit Union National Association, leagues and credit unions have been urging Congress to adopt that legislation.

"We are seeing the need for member business loans and we're seeing where our credit unions want to make them," said La Pine. "However, this arbitrary cap is keeping many credit unions from actively pursuing them. The need is great right now and there is literally no reason why Congress would not pass H.R. 1418 or S. 509. By raising the cap, Congress would infuse $785 million into the Alabama and Florida marketplace. The best part is that it would not cost the taxpayers one penny."

For the third consecutive quarter, Alabama and Florida credit unions reported delinquent loans to loans and net charge-offs to loans as improving. Alabama credit unions had a 14 basis-point decline in delinquent loans to loans in 2011, compared with 2010. This is well below the national credit union average, said LSCU. Florida's delinquent loans improved by 30 basis points. This is still above the national credit union average, but a major drop from 2009 and 2010.

Net charge-offs in Alabama dropped 12 basis points in 2011, compared with 2010. It's also shaping up as the best year for net charge-offs since 2007. In Florida, net charge-offs show a 33 basis points improvement in 2011 from 2010. That is the best net charge-off improvement since 2008, LSCU said.

Credit union members continue to save at rapid rates. Alabama members' savings grew at a rate of 8%, twice the national credit union average, and 3% higher than in 2010. In Florida, members' savings grew 2%. That is below the national average, but reverses the 2010 numbers, which showed negative growth.

These all are signs that the economy is slowly improving in the Southeast, LSCU said.

LSCU represents 300 credit unions in Alabama and Florida with $59 billion in assets and more than 6.4 million members.

LaBalme to keynote CUNA council conference

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MADISON, Wis. (12/15/11)--The CUNA Marketing & Business Development Council (CMBDC) announced that the keynote speaker for its 19th Annual Conference, March 7-10 in New Orleans, is Victoria LaBalme.

LaBalme's keynote session, "Crazy, Busy, Nuts: Getting Off the Conveyor Belt of Life," takes the demands of society and work life, and examines them against life-changing experiences. She will offer attendees practical, applicable tools for managing the chaos and the inspiration to change.

LaBalme has spoken for organizations such as the New York Police Department, American Heart Association, and L'Oreal.

Other conference highlights include Dennis Dollar's session, "THE UGLY, BAD & GOOD: Impacting Credit Union Scenarios in a Decade of Change," and Mark Adams' business development sessions, "The Wolf Pack Strategy."

LaBalme, Dollar, and Adams will center their on the theme, "Get Inspired."

"With the ever-expanding role of the marketing and business development professional, it is critical to become more productive in work and home environments alike," said Michelle Hunter, co-chair of the CMBDC Conference Committee and senior vice president for Credit Union of Southern California in Brea, Calif.

Filene outlines CU innovations for the future

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MADISON, Wis. (12/15/11)--During its annual Think.DO session, the Filene Research Institute provided a glimpse of the services it offers the credit union industry--and also encouraged the credit union industry to use Filene resources.  

Think.DO is Filene's annual exploration of issues and innovations for the year ahead

George Hofheimer, Filene's chief research officer, described how Filene will soon introduce strategic opportunity reports, which will provide credit unions with peer comparisons based on strengths, weaknesses, opportunities and threats.

Filene also is exploring how to link member/customer loyalty with market share, based on a net promoter score metric, Hofheimer said.

Matt Davis, Filene's director of innovation, discussed Low Interest for Timeliness (LIFT), a loan program that targets the low‐to‐moderate income consumers with sub‐prime credit by rewarding consistent, timely loan payments on car loans. Participants earn annual percentage rate reductions for on-time payments. LIFT focuses borrowers on the goal of making on-time loan payments and backs up that focus with financial incentives.

Ben Rogers, director of research, described Filene's research with credit unions that experienced at least 5% growth in consumer loans during the economic downturn.

Among the traits the credit unions shared were:

  • Strong sales cultures;
  • Consistent underwriting standards;
  • Refinancing programs;
  • A strong market presence;
  • Symbiotic product lines; and
  • Both direct and indirect lending.
Denise Gabel, Filene's chief innovation officer, shared ideas from Finovate, a conference in which technology providers showcase innovative solutions in rapid seven-minute sessions.

Gabel said conferences such as Finovate--and sessions such as Think.Do--encourage participants to shift their focus from the "dashboard to the distance."

"There's never been a more exciting time in the history of personal finance to be a credit union," said Filene CEO Mark Meyer. "We're you're creative sandbox. Come play with us."

FIs move beyond basics in mobile banking says study

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BROOKFIELD, Wis. (12/15/11)--Financial institutions, including credit unions, are poised to ramp up their mobile banking capabilities, according a survey of the mobile banking and payment plans of 10 top-tier financial institutions, including credit unions.

The survey results were announced Tuesday by Fiserv Inc., a global provider of financial services technology solutions.

The survey, conducted by Forrester Consulting on behalf of Fiserv in September, evaluated the plans of 10 banks and credit unions that collectively hold more than one-third of all U.S. deposit accounts. These financial institutions are progressing beyond the basics to provide increasingly sophisticated mobile capabilities, the results indicated.

Nine out of 10 financial institutions surveyed already have a mobile-banking offering that provides basic account access, and almost all provide ATM branch locators, transfers between accounts and bill payment.

"Most banks and credit unions are committed to delivering more robust capabilities and a better consumer experience via the mobile channel," said Erich Litch, division president, digital channels, Fiserv. "Faced with a rapidly evolving market that is also being pursued by sophisticated, well-funded third-parties, it is essential that financial institutions that want to remain competitive push forward with their own mobile-banking and payment strategies in 2012."

Transactional services, such as remote deposit capture and mobile person-to-person payments, will account for the bulk of mobile investment in 2012. However, despite a nearly unanimous commitment to expand overall mobile functionality, institutions remain split on plans to support mobile point-of-sale payments.

For 2012, financial institutions plan to focus on delivering remote deposit capture; actionable alerts, which allow recipients to initiate an action such as a funds transfer in response to an alert about a low balance; and additional payment capabilities. Eight of ten surveyed institutions plan to invest in some type of mobile payments in the next 12 months, with person-to-person mobile payments cited as a priority by seven respondents.

Financial institutions are committed to providing mobile banking and payments capabilities for a range of devices, with a focus on smartphones, Fiserv said. While none of the surveyed institutions offered specialized support for tablets, this was cited as a priority for 2012 by multiple respondents.

While banks and credit unions are forging ahead in some areas, many have adopted a wait-and-see attitude with mobile point-of-sale payments. Although the surveyed financial institutions demonstrated an understanding of what it will take to make mobile point-of-sale payments a reality, many articulated a chicken-and-egg scenario in which concerns about consumer demand and merchant acceptance are hindering greater investment from their own institutions, Fiserv said.

While financial institutions surveyed view the progress of nontraditional competitors such as technology and telecommunications providers as a validation of mobile payments, and as a promotional tool to build consumer and merchant interest, most of them stated that such announcements have had no or minimal impact on their own mobile-payments strategy. This may put them at risk of delivering new capabilities too late, Fiserv said.

A white paper detailing the survey results can be downloaded. Use the link.

Community Choice unveils unbanking ads

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JOHNSTON, IOWA (12/15/11)--Community Choice CU, Johnston, Iowa, will soon roll out its "unbanking" advertising campaign, which takes a playful jab at for-profit financial institutions in a wave of anti-bank sentiment following Bank Transfer Day.

The credit union launched a microsite and a Facebook page, and will soon roll out print ads. Radio and TV ads will follow early next year.

Community Choice is trying to show consumers that  credit unions are different than banks, Josh Cook, vice president of operations and business development at Community Choice told the Des Moines Register (Dec. 13).

Branch lobbies feature walls where members can post graffiti. Branches also offer free popcorn and are filled with the scent of apple pie--provided by scent machines.

Nintendo DS3s and iPads also are available for members to use in the lobbies.

Community Choice CU's in-house marketing department distinguished itself six years ago with its "Fed Up with Bills" series of advertisements. The ads featured portly men wearing white tanktops emblazoned with the word "Bill." The men were kicked out of the house by a beautiful brunette who was sick of her debts.