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Study FIs make progress toward FFIEC online security expectations

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MOUNTAIN VIEW, Calif. (12/19/11)--Credit unions and banks are making progress in the initial phases of preparing for new Federal Financial Institutions Examination Council (FFIEC) expectations on online banking security that will be effective in 2012, according to a new survey. However, many will have to rush to meet the January 2012 deadline.

Fifty-seven percent of the credit unions and banks surveyed have completed their risk assessment, and 59% have formed a plan to fill online banking security gaps, according to a study by Guardian Analytics, a Mountain View, Calif.-based fraud prevention provider, who released the findings Thursday.

The company surveyed more than 300 executives responsible for online banking security decisions at more than 100 U.S.-based banks and credit unions of all sizes in November. Most respondents lack clarity on the minimum expectations for layered security outlined in the FFIEC Supplement to the Authentication in an Internet Banking Environment, the study found.

Of those surveyed, 84%  plan to invest in new technologies to address the enhanced expectations. However, most are not far along in technology implementation--43% said they have purchased new technology solutions, and 49% said they intend to in the future.  Many plan their investments for the next six to 12 months, in time for their 2012 exam, said the report.

"The FFIEC raised the bar on expectations for online security, and financial institutions are scrambling to evaluate and invest in preparation for their 2012 exams," said Terry Austin, CEO of Guardian Analytics. "In the last six months, we have seen exponential growth in investments in anomaly detection by those who are following the guidance diligently. As institutions work more closely with their examiners to fully understand the new requirements, we expect that growth to continue in the coming year."

The FFIEC supplement outlined two minimum expectations against which financial institutions would be examined: The ability to detect and respond to suspicious activity at login and initiation of transactions in all accounts, and enhanced controls of administrative functions for business accounts.

The survey indicated that despite the specific language in the supplement, nearly half the respondents did not fully understand the minimum expectations. Roughly 41% were unable to identify anomaly detection as an FFIEC minimum expectation for layered security, and 56% could not identify enhanced controls for business banking administrative functions.

Respondents also ranked the factors that determine their priorities for technology investments. "Level of protection" was ranked most important driver for choosing a technology solution, followed closely by "customer convenience." "Meeting minimum FFIEC requirements for layered security"  was ranked the lowest.

The FFIEC supplement, released in June, was in response to rapidly evolving banking attacks and ongoing growth in online fraud losses. Regulars have said they expect financial institutions to take significant steps toward conforming with updated expectations for ongoing risk assessments, enhanced layered security and customer education by January 2012.

More CUs report growth topic alive in media

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MADISON, Wis. (12/19/11)--The media continued serving up credit unions in a smorgasbord of positive stories on three fronts: credit unions' record growth related to Bank Transfer Day; credit unions' record-breaking high scores on a new customer satisfaction survey; and advice/comparisons of credit unions' services vs. those of banks.

Many articles had key input from state leagues and the Credit Union National Association (CUNA). Leagues were armed with state-level statistics reflecting growth in their states. Examples are five separate articles featuring credit unions in Florida, Pennsylvania, New York, Wisconsin and Minnesota discussing their membership and asset growth. Among them:

  • "Credit-union customers spiked as banks floated fees" in the Orlando Sentinel (Dec. 8) offered up the League of Southeastern Credit Unions' (LSCU) statistics.  "It's no secret that credit unions have had many more people calling, checking out their websites and stopping in branches," LSCU spokesman Mike Bridges told the Sentinel. It also cited CUNA's figures. Mark Wolff, CUNA senior vice president and chief communications officer, said in the article that the statistics demonstrated the "dissatisfaction many consumers felt about their banks."
  • An article in Daily Record/Sunday News (Dec. 10), entitled "Credit unions, banks seeing growth," featured the Pennsylvania Credit Union Association and three York and Mechanicsburg, Pa.-area credit unions--Members First FCU, Heritage Valley FCU, and First Capital FCU--discussing their growth.
  • "Credit union industry sees increase in business in 2011," an article in the Wisconsin State Journal (Dec. 13), noted  that "it is boom time for credit unions across the U.S. and Wisconsin's credit unions are enjoying some of that success." In it, CUNA Chief Economist Bill Hampel noted that the banking industry crisis that began in late 2008 didn't prompt many bank customers to switch. "But more recently when (increased fees) started to hit pocketbooks, you could say it's the straw that broke the camel's back,"  he said.
  • "Thousands of Minnesotans move money to credit unions," published in the Twin Cities Daily Planet (Dec. 11), was one of a three-part series on banks, credit unions and the unbanked in Minnesota.  The Minnesota Credit Union Network told the newspaper credit unions in the state gained 11,000 new members after the end of September and that members save on average about $76 a year.
  • A Dec. 15 article in the Jamestown (N.Y.) Post-Journal, "Credit Unions Gain New Accounts on 'Switch Day,'" outlined growth of New York credit unions, with the Credit Union Association of New York estimating the state's credit unions added at least 39,000 members and grew $270 million in deposits after Bank of America unveiled its now-rescinded $5 monthly fee on debit cards. In it Affinity One and Southern Chautauqua FCU noted their growth and the response to Bank Transfer Day.
For stories on credit unions achieving a record-breaking high score in the 2011 American Customer Satisfaction Index, the headlines tell it all:  "Credit Unions Blow Big Banks Away in Customer Satisfaction Survey" (Business Insider Dec. 13); "Credit unions trounce big banks in consumer survey" (TD Ameritrade Dec. 15) and "Credit unions soar in customer satisfaction survey (Winston-Salem Journal Dec. 14) are three examples.

"These results are consistent with survey results done through the years that show people really appreciate the value of credit union membership," North Carolina Credit Union League President/CEO John Radebaugh told the Winston-Salem newspaper. "Some people might argue that negative headlines about banks helped drive the credit union numbers up even further this year, but it's our view that credit unions are doing the right things to earn the loyalty and trust of their members."

And finally, there are still items circulating advice related to fees and comparing services. A columnist who wrote "Sick of Fees? Here Are Some Banking Options" ( Dec. 15), said that "For people who want a full-service bank, but don't want to pay huge fees, credit unions are a great choice." Also, "given the choice between high-cost banks and lower-cost credit unions, it's not surprising that many customers are moving their money."

And a segment on KSL Newsradio (Dec. 14), "Should you use a bank or a credit union," advises consumers to determine first how they want to access their money. A credit union focuses on "providing savings and service to their members, which, in most cases, results in higher interest rates on savings accounts and lower interest rates on credit cards and loans," Preston Cochrane, CEO of AAA Fair Credit Foundation, told the station.

WOCCU European CUs advocacy efforts a success

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BRUSSELS, Belgium (12/19/11)--European credit unions made headway last week as champions in providing basic services to the financially underserved because of efforts by the World Council of Credit Unions' (WOCCU) European Network of Credit Unions (ENCU), WOCCU said.

Meetings with European Union (EU) parliamentarians and the European Commission in Brussels, Belgium, as part of ENCU's annual lobbying efforts, resulted in credit unions being invited to participate in a commission hearing on financial inclusion in January.

Also, the topics of transparency of account fees and anti-money-laundering rules were discussed by credit union participants and lawmakers. In addition to WOCCU, participants represented credit union movements in Estonia, Ireland, Poland, Romania and the United Kingdom.

"The meetings with lawmakers were essential to ensuring that credit unions' unique structure and commitment to the social and economic well-being of their members is recognized within draft legislation, subsequently creating regulatory environments that enable, rather than inhibit credit unions from achieving the spirit of the law," said Brian Branch, WOCCU president/CEO.

In addressing financial inclusion, EU lawmakers have considered allowing member states to designate at least one financial provider within each jurisdiction in EU countries, which would be required to offer basic payment accounts to financially excluded citizens at a reasonable cost. In light of such considerations, the credit union representatives present highlighted histories of successfully providing affordable, tailored financial products and services to rural, low-income and financially excluded individuals, said WOCCU.

As a result, credit union participants were among the few financial industry representatives invited to participate in the parliament's Internal Market and Consumer Affairs Committee hearing on financial inclusion Jan. 25 in Brussels.

The credit union delegation also expressed support for legislation requiring account fees to be disclosed in transparent and meaningful ways to consumers.

Regarding anti-money-laundering rules, representatives asked for less burdensome reporting requirements and certain flexibility on identity verification of individuals in remote areas. Although credit union disclosure practices and adherence to anti-money-laundering efforts already align with commission requirements, participants agreed that ongoing advocacy efforts are critical to ensure that legislation and regulation avoid becoming so burdensome that they compromise the policy objectives of financial inclusion.

"While financial inclusion is a hot topic of debate amongst EU policymakers today, it is a topic that European credit unions have lived and breathed throughout their history," said WOCCU Director Brian McCrory, who also serves on the board of the Irish League of Credit Unions. He noted that the "cooperative advocacy efforts have been fruitful in gaining the opportunity to advocate on our members' and potential members' behalves at the EU policy level in January," and added he hopes "that such efforts will result in a more holistic approach to financial inclusion."

Study notes shift in traditional retirement income plans

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BOSTON (12/19/11)--The retirement income industry in the U.S. is still in its infancy, with the shift from accumulation to decumulation evolving slowly, notes a new report from Aite Group. With the demand generated by the retiring Baby Boomers, this can impact credit union operations, and products and services for employees and members.

Based on a July-to-September Aite Group survey of 22 senior financial services executives who serve the retirement income marketplace, the report considers the industry's progress and the issues it faces in moving from wealth accumulation to decumulation.

The report assesses the state of the U.S. retirement income marketplace, which includes retail-distribution financial advisers, asset managers, insurance firms, online brokerages and financial institutions.

"The shift from wealth accumulation to decumulation is where financial advisers and distribution firms must transform their practice-management skills," says Greg Cherry, senior analyst with Aite Group and author of the report.

"The accumulation practices of the past are simply not sustainable as consumers demand less market risk and an increased focus on one day replacing their paychecks with retirement paychecks," he added.

In the report, executives agree there is over-emphasis in the industry on building up a portfolio before retiring. Today's investing dynamics for accumulating assets are far different from those living off those assets. They agreed new compensation models are needed to encourage financial advisers to adapt to decumulation.

Investment outcomes and lessons from the 2008 financial crisis continue to weigh on investors' minds, and many consumers were unable to do the one thing necessary to enjoy a comfortable retirement: Save adequately, Aite said.

As a result, retirement-income firms across various areas of the industry are dealing with how to construct appropriate and suitable retirement income plans for clients with differing levels of wealth.

Aite Group is an independent research and advisory firm focused on business, technology and regulatory issues and their impact on the financial services industry.

San Francisco FCU offers free ATM use at Walgreens stores

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SAN FRANCISCO (12/19/11)--San Francisco (Calif.) FCU has entered an agreement with Welch ATM to allow its members surcharge-free access to ATMs in more than 500 Walgreens locations statwide.

Under the agreement, the ATMs will carry the credit union's brand at selected locations throughout San Francisco.

"People have already begun to notice our branding on the ATMs," says Steven Stapp, San Francisco FCU president/CEO. "The locations are in neighborhoods near San Francisco FCU branches. This agreement will not only help attract new members, but it will enhance the convenience of our services for existing members."

CUNA HRTD Council paper addresses retirement gap

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MADISON, Wis. (12/19/11)--The CUNA HR/TD Council addresses issues brought on by retirement of credit union employees in its newest white paper, "The Coming Retirement Gap."

Retirement has become a growing concern not only for pre-retirement employees, and the organization's human resources and senior management, but also for employees looking to rise in the ranks of the organization. Many organizations, including credit unions, are experiencing a gap when it comes to retirement.

The white paper, written by Lucy Harr, evaluates the factors contributing to the gap and the implications and opportunities that exist for addressing it. They include:

  • Succession plans. One succession plan strategy is to eliminate a position by either replacing it with technology or dividing the responsibilities among remaining employees. Another is to outsource functions when vacancies occur. For example, a credit union converts to an external data processing system from an in-house operation when a senior level information technology manager retires.
  • Preservation of credit union and cooperative philosophy. A key issue in losing long-time or senior employees is the effect it has on corporate culture, and for credit unions, the fading of the rich tapestry depicting their history and philosophy. Credit unions hold a unique position in the financial services industry. Are their shared values and shared vision in jeopardy when long-time leaders head out the door, the white paper asks.
  • Management of job functions. Two ways to balance the need for recruiting new talent with the benefits inherent in retaining the knowledge and experience of seasoned employees are to offer part-time positions and to hire retired employees as consultants or temps. These were cited as the most popular strategies among organizations for recruiting and retaining workers who are past traditional retirement age, according to a 2010 SHRM/AARP survey of human resources professionals.
  • Adequacy of benefit plans. Ultimately, the decision to retire is a personal one, but if workers haven't saved enough to do so comfortably they have three choices: work longer, save more, or reduce their standard of living in retirement. When workers on the verge of retirement who have lost money in the stock market were asked to choose, most said they would delay retirement and continue to save rather than cut costs, according to a 2009 study from the Center for Retirement Research at Boston College.
The paper offers several suggestions for bridging the gap and finding solutions that fit the credit union's staffing, knowledge, and expertise, and the employee's desire to maintain employment. One thing is certain: human resources, training, and development staff play a pivotal role in ensuring the credit union's needs are met and that senior management and the board of directors are informed of the options available, the council said.

For more information, use the link.

CU temporarily blocks 2000 cards to prevent fraud

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VENTURA, Calif. (12/19/11)--Ventura (Calif.) County CU, Ventura, Calif., temporarily blocked 2,000 of its members' 50,000 credit and debit cards late Wednesday and early Thursday as a fraud prevention measure.

The block was placed after Visa alerted Ventrua County CU about fraudulent activities early Wednesday evening (Ventura County Star Dec. 16).

The block was removed by noon Thursday.

The fraudulent activity involved debit cards, according to Tina Estes, director of marketing for the credit union, told the Ventura County Star.

About 15 people--an unusually high amount--were lined up when the credit union's Ventura branch opened at 9 a.m. Thursday.

The credit union typically calls members or sends letters when fraudulent activities are suspected, but it wanted to be proactive in protecting members and was unable to provide notification Wednesday evening, Estes said.

Biz lending up CUs outshine big small banks

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NEW YORK (12/19/11)--In addition to the membership gains they made related to Bank Transfer Day, credit unions also continued to make strides in small-business lending marketplace during November.

Credit unions--and community development financial institutions (CDFI), micro lenders, and others--approved 62% of small business funding requests in November, a rise from the 61.8% during October, according to the Biz2Credit Small Business Lending Index, an analysis of 1,000 loan applications on

Credit unions granted 57% of small business funding requests, up from 56.6% in October.

Loan approvals by small banks increased to 47% in November, their highest rate this year and an increase from 46.3% in October.

Approvals by large banks also rose, reaching 10% for the first time since April.

Small Business Funding Requests
  Big Bank ($10B+ assets)

Lending %
Small Bank

Lending %
Credit Union

Lending %
January 12.8 43.5 48.9
February 11.9 43.9 49.1
March 11.6 44.2 48.8
April 10.4 44.6 50.1
May 9.8 45 51.2
June 8.9 42.5 52.3
July 9.8 44.9 53.4
August 9.4 43.8 54.2
September 9.2 45.1 55.5
October 9.3 46.3 56.6
November 10 47 57

"Optimism seems to be returning," said Biz2Credit CEO Rohit Arora. "We have seen an increase in the sheer volume of loan applications, which is a good sign. The strong start of the holiday shopping season combined with the latest jobs report showing that the U.S. unemployment rate fell to 8.6% in November--its lowest level in two-and-a-half years--indicates that brighter days may be ahead."

Biz2Credit's analysis also found that loan request amounts ranged from $25,000 to $3 million; that the average credit score was above 680, and that average time in business was slightly more than two years.

The study indicates that demand for member business loans (MBL) is arising.

The Credit Union National Association estimates that increasing the current 12.25% of assets MBL cap to 27.5% of a credit union's total assets would have a number of beneficial effects on the ailing economy, including infusing $13 billion in new credit for small businesses and adding 140,000 new jobs within the first year of enactment--all at no cost to the American taxpayer.

Holiday surprise changes life for boy struck by lightning

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VIRGINIA BEACH, VA. (12/19/11)--A Virginia Beach, Va., credit union's holiday surprise for the
Noah Addesa's mother, Lisa Addesa, is overcome upon learning that Chartway FCU's charitable arm, the We Promise Foundation, has bought the family a specially designed wheelchair van to enable the home-bound family to transport Noah after a remarkable recovery after being struck by lightning in 2007.
family of 16-year-old Noah Addesa, whose heart stopped after lightning struck him on the left side of his head in 2007 in his backyard, gave an uplifting message about the generosity of credit unions.

The credit union's charitable arm, the We Promise  Foundation, presented the gift of freedom and mobility--a specially-designed, fully paid for, wheelchair van.

Noah's extraordinary recovery--he was dubbed the "Miracle Boy" by thousands of supporters--has left him wheelchair bound. He is unable to walk, talk, fully control movement and to enjoy everyday activities like visiting area family members during the holiday season.

The 6' tall Noah weighs 160 pounds. That and his 105-pound wheelchair make transferring Noah to a vehicle extremely difficult and dangerous for everyone involved, said the credit union.

The day after Noah Addesa's family received the wheelchair van, Noah was thrilled to be able to shop with his mom and enjoy ice cream at Rick's Frozen Custard.  (Photos provided by Chartway FCU)
The family struggled to take him to therapy treatments, doctor's appointments, church, and other off-site activities. Given the sheer strength and effort transportation required, the family was predominantly confined to its home.

The credit union and its foundation invited the Addesa family to its corporate center to surprise them with "Noah's wheels."

As the family arrived, more than 100 employees and supporters welcomed them with applause and signs stating, "We Promised. We Delivered!" and "Chartway's We Promise Foundation is proud to make your dream come true!" and "Honored to bring a smile to your face today."

To experience the heartwarming event, use the link to the video.