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No harm no foul rule upheld in Missouri breach case

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ST. LOUIS (12/7/09)--A federal judge in Missouri has dismissed a consumer class-action lawsuit against a benefits company over a 2008 data breach, citing a position that other judges have taken in similar cases: Without actual harm, consumers can seek no damages. Magistrate Judge Frederick Buckles said the plaintiff in the case, John Amburgy, failed to show how the data breach at St. Louis-based pharmacy benefits company Express Scripts had caused him any direct injury or put him in imminent danger of any injury (Computerworld Dec. 3). The judge said abstract injury is not enough to demonstrate injury in fact. "The injury or threat must be concrete and particularized, actual and imminent; not conjectural or hypothetical." The case is of interest to credit unions because they and their members have been impacted by a number of data breaches the past two years involving TJX Cos., Hannaford Brothers and Heartland Payment Systems. The Maine Supreme Court has been asked in a trial against Hannaford Bros. whether time and effort spent in mitigating the impact of a breach constitutes a cognizable injury under Maine law (News Now Dec. 2). As in data breaches involving credit union members, the suit against Express Scripts claims financial accounts were affected during the company's breach. Amburgy claimed that as a result of the company's failures to maintain adequate security measures, he and others whose records were compromised by the breach were at increased risk of identity theft and extortion. He and others similarly impacted had to spend time and money monitoring their credit accounts and reports, prescription records and other financial accounts, the suit claimed.

UBIT trial begins today in Colorado

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DENVER (12/7/09)--The Greenwood Village, Colo.-based credit union challenging the government's unrelated business income tax (UBIT) will make its case in a federal court in Denver this week. The Bellco CU v. U.S. trial is set to begin this morning in the U.S. District Court for the District of Colorado. Bellco will argue why income derived from credit life and disability insurance, as well as royalties from accidental death and dismemberment (AD&D) insurance, should not be subject to UBIT. Presiding over the trial will be U.S. District Judge Christine M. Arguello. In November Arguello issued a summary judgment on another aspect of the case, finding that income from investment products--such as stocks, bonds, mutual funds and annuities--that the credit union made available to its members is not subject to UBIT because the products were "substantially related" to Bellco's tax-exempt purpose. However, income from such products sold to nonmembers was ruled as not "substantially related" to Bellco's tax-exempt purposes and therefore could be subject to tax (News Now Nov. 13). In the summary judgment, Arguello also said the trial should address the issue of whether sales of certain insurance products to people who are not members to Bellco but who do belong to other credit unions, should be exempt from UBIT because the products further Bellco's tax-exempt purposes. Bellco brought the lawsuit in May with the support of the UBIT Steering Committee, which includes the Credit Union National Association (CUNA), CUNA Mutual, the American Association of Credit Union Leagues, and the National Association of State Credit Union Supervisors. CUNA General Counsel Eric Richard will be attending the trial, which is scheduled to end Friday afternoon. Bellco is seeking a refund of $199,293 in tax paid on income from AD&D insurance, credit life and disability insurance, and financial products and services in 2000, 2001 and 2003, as well as statutory interest. Lead attorney on the case is Michael M. Conway of Foley & Lardner LLP, who was also lead counsel in another UBIT trial earlier this year in the U.S. District Court for the Eastern District of Wisconsin. In that case, Community First CU of Green Bay, Wis., won its challenge against the Internal Revenue Service's interpretation of the UBIT rule related to three insurance products (News Now May 15). The government did not appeal that decision.

National Maxwell Herring winners announced

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MADISON, Wis. (12/7/09)--Recipients of the 2009 Dora Maxwell Social Responsibility and Louise Herring Philosophy in Action Awards have been chosen from among the state winning entries by the Credit Union National Association’s (CUNA) national awards committee. The 2009 Dora Maxwell Award winners include:
* Great Horizons FCU in Hammond, Ind.; * Pee Dee FCU in Florence, S.C.; * Hawaii First FCU in Kamuela, Hawaii; * Latino Community CU in Durham, N.C. * CASE CU in Lansing, Mich.; * Rogue FCU in Medford, Ore.; * Chartway FCU in Virginia Beach, Va.; and * Credit Union Miracle Day, Inc., Washington, D.C.
Winners of this year’s Louise Herring Award are:
* Communicating Arts CU in Detroit; * Down East CU in Houghton Lake, Maine; and * Credit Union 1 in Anchorage.
“These prestigious awards honor credit unions and their organizations for making commitments to innovative community involvement and to member financial education – both core values of the credit union pioneers whose names are associated with them,” said CUNA President/CEO Dan Mica. “Our hope, at CUNA, is that other credit unions will take notice of the programs celebrated by these awards and find ways to emulate their best practices in their own communities.” Maxwell was an original signer of CUNA’s constitution and a tireless organizer of hundreds of credit unions throughout the United States. She also developed volunteer organizer clubs and worked tirelessly with organizations on behalf of the poor. The Maxwell award is presented to credit unions and chapters for outstanding social responsibility projects in their communities. Herring was also an original signer of CUNA’s constitution as an Ohio delegate to the 1934 national credit union conference in Estes Park, Colo. She saw credit unions as more than just financial institutions and believed they should work to better people’s lives. The Herring award recognizes a credit union demonstrating the credit union philosophy to help better financial matters and increase financial education for its members. Winning entries will be on display at CUNA’s 2010 Governmental Affairs Conference, Feb. 21-25, in Washington, D.C. The award winners will be honored during the Feb. 24 reception. For a complete list of winners, use the link.

Ireland CUs donate 181092 to flood victims

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DUBLIN (12/7/09)--Irish credit unions donated $181,092 to help people affected by recent flooding in Ireland. More than 90 credit unions have donated money to a central fund established last week--the first time the credit union movement has organization such a fund. Credit unions also have created their own funds so members can donate (The Irish Examiner Dec. 4). The flooding in Ireland has occurred along the Shannon River, which is expected to take at least three weeks to return to normal levels. At least 70 families in the area were forced to leave their homes, the newspaper said (Nov. 26). Credit unions are seeing how the weather conditions experienced in the past week will have “real and lasting damage on the families and the communities affected by flood damage,” said Irish League of Credit Unions President Mark Bailey. St. Vincent de Paul and the Irish Red Cross were presented Friday with a check from the credit unions to help flood victims.

VSECU becomes first CU to serve all Vermonters

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MONTPELIER, Vt. (12/7/09)--Vermont State Employees CU (VSECU) is the first credit union in Vermont approved to serve anyone who lives or works in the state. The Vermont Department of Banking, Insurance, Securities and Health Care Administration recently made the decision about VSECU, said the Association of Vermont Credit Unions (Newslines Express Dec. 4). “Our long-term vision has been to make VSECU a true alternative to for-profit banks and to be available to all Vermonters,” said Steven Post, CEO of the $472 million-asset, Montpelier, Vt.-based credit union. “We now have that opportunity.” “This development is especially significant as consumers try to make sense of the bailouts, investment decisions and shortcomings in the country’s banking system,” he added. “The acquisition and merging of regional and state banks also have left Vermonters with less consumer choice and the loss of local control and servicing. We like being a local credit union, we like working with a Vermont regulator and we like being inclusive.” Prior to the decision, VSECU served residents of seven counties and state employees statewide.

Pa. CU prepared for Harley-Davidson restructuring

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YORK, Pa. (12/7/09)--Harley-Davidson Inc. announced Thursday it will retain its motorcycle operations in York, Pa., and will restructure its operations. The company credit union said it is prepared to help the motorcycle manufacturer. The company had considered moving the York plant to Kentucky. The announcement follows the approval of a seven-year labor agreement by union employees early last week (Life is a Highway Dec. 4). “[I am] pleased that they are staying in York, for all concerned,” Sherry Garner, CEO of HD York (Pa.) FCU, told the Pennsylvania Credit Union Association (PCUA). “Management at the credit union had already addressed this scenario in previous planning sessions, so it didn’t hit us with the full force some might have expected.” When talk began that the plant might shut down, the credit union began exploring its options for survival, PCUA said. With Harley-Davidson’s latest announcement, the credit union can revisit its options. “We plan on forging ahead, putting our current planning session and goals into action and remaining HD York FCU,” Garner told PCUA. “From our members’ reaction to the possible relocation and downsizing, we know they want their credit union to remain right here in York as it operates now.” Though the plant will remain in York, hundreds of employees will still lose their jobs under the new contract. The plant will employ about 1,000 hourly employees, down from the current 1,950; and 150 salaried employees, down from 270, the company said. For those impacted, the credit union will work with each member and offer options such as converting to a monthly payment plan, loan extensions, or reworking loans to lower monthly payments, Garner told PCUA. Because the new contract also contained salary decreases, the credit union is planning budgeting workshops for all members. HD York FCU has $4.3 million in assets.

Low rates prompt refinance boom in Grand Rapids

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GRAND RAPIDS, Mich. (12/7/09)--Low interest rates are triggering a mortgage refinancing boom in the Grand Rapids, Mich.-area. The Grand Rapids Press reported Thursday that Lake Michigan CU, Grand Rapids, had record-low mortgage rates Wednesday. A 30-year mortgage was going for a 4.625% fixed rate with no points, and a 15-year mortgage was selling for 4% percent. DFCU Financial, Dearborn, Mich., offered a 30-year fixed rate loan at 5.125% Tuesday. The Michigan boom is reflective of national trends. A survey indicated that nationally, 30-year mortgages were going for 5% and 15-year mortgages were going for 4.47%. Three months ago, rates were a half-point higher, the newspaper said. Greg McBride, Bankrate senior analyst, told the newspaper that the record lows are due to the fact the Federal Reserve Board is showing no signs of raising short-term rates. Mike Kruczek, DFCU chief lending officer, said rates “shouldn’t be this low, but the government is keeping them low to try and stimulate the economy.” He also suggested low-rate adjustable rate mortgages (ARMs) for people who are buying homes that they don’t plan to stay in for more than five or 10 years. The credit union sells ARMs with rates locked for seven to 10 years. ARMs mean lower monthly payments for the homeowner until the mortgage resets. History shows that people don’t stay with one mortgage, even if they stay in a home longer than 10 years, Kruczek said.

Velocity CU members to vote on private share insurance

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AUSTIN, Texas (12/7/09)--Roughly 75,000 Velocity CU members are being asked to vote by Dec. 29 on whether to switch from the National Credit Share Insurance Fund (NCUSIF) deposit insurance administered by the National Credit Union Administration (NCUA) to a private insurer. The $500 million asset, Austin, Texas-based credit union’s board of directors unanimously decided to make the conversion, with support from credit union management, so Velocity “can deliver greater coverage to our members and better manage the cost of operations as it relates to deposit insurance,” the credit union said in newsletter mailed to members Aug. 26. “In 2009, due to estimated losses in the NCUSIF, the credit union’s federal deposit insurer announced a premium affecting all federally insured credit unions,” the Velocity newsletter said. “As a result, Velocity CU has been assessed a premium in 2009 of $675,106. This additional cost for federal deposit insurance adversely affects the credit union’s earnings and net capital in 2009. This premium will not affect the level of federal share insurance on members’ accounts. “As a state-chartered credit union in good standing in Texas, Velocity CU has the option of insuring member accounts through American Share Insurance Corporation (ASI), the nation’s largest credit union-owned private deposit insurer, and not the NCUA,” Velocity added. ASI is based in Columbus, Ohio. In a postcard mailed to members Tuesday, Velocity said: “ASI is a credit-union owned private deposit insurer founded in 1974 by credit unions to provide a viable alternative to federal deposit insurance that members trust and rely on. Currently, [more than] 1.3 million members belong to credit unions insured by ASI.” Ballots were mailed to Velocity members Nov. 30 and also are available in its branches, the credit union said. Federal regulations require that all members be given the opportunity to vote on the proposition to cover deposit insurance, and that a minimum of 20% of the membership must vote, Velocity said in a postcard to members. News Now received the information sent to credit union members concerning the deposit insurance conversion from Brie Franco, Velocity vice president and general counsel. The credit union did no want to comment on the matter because of federal regulations that prevent it from influencing or compromising the membership vote. “While the board unanimously supports the decision to consider converting deposit insurance to ASI, the actual resolution to do so has not been made or passed,” Board Chairman Carl Lynch said in the member newsletter. “We are anxious to hear from our members, and we are hopeful you will support this move to change deposit insurance coverage.”

CU System briefs (12/04/2009)

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* ST. LOUIS, Mo. (12/7/09)--When First Community CU, Chesterfield, Mo., learned the Humane Society of Missouri urgently needed supplies, staff acted fast, reports the Missouri Credit Union Association (The Missouri difference Dec. 4). The animal shelter and adoption agency had received more than 150 pit bull puppies as a result of a multi-state dog-fighting raid. The $1.5 million asset credit union encouraged employees to bring in jars of peanut butter, new dog toys and clean linens by offering a dress down day. Employees donated more than 300 jars of peanut butter and toys. "We have a lot of 'dog people' at First Community so I'm not surprised so many employees wanted to help a great organization like the Humane Society," said President Glenn Barks. "We hope when these puppies get adopted their new owners will bring them through our drive-ups for a free dog treat." … * HARRISBURG, Pa. (12/7/09)--James McCaw, president/CEO of Viriva Community CU, Philadelphia, was featured recently on WPHL TV-17's "Better Philly" show about the Credit Card Accountability, Responsibility and Disclosures Act, says the Pennsylvania Credit Union Association (Life is a Highway Dec. 3). McCaw told the station that "Consumers are strongly encouraged to shop around," even if they've accumulated a balance on their card. He said the opportunity to save money is still available by transferring the balance from their high interest rate card to a lower interest rate card. However, consumers must make sure they are aware of any balance transfer fees … * MONTPELIER, Vt. (12/7/09)--Colin M. Ryan has been selected to spearhead the Association of Vermont Credit Unions' (AVCU) Concerts for Financial Literacy project, which will debut at several high schools in the state early next year. Ryan has background as a journalist, a radio station general manager, and film school graduate. AVCU said his background made him the best choice to connect with Vermont's 14- to 18-year-old population (Newslines Express Dec. 4) … * BELLEVUE, Neb. (12/7/09)--Gail DeBoer, president of Bellevue, Neb.-based SAC FCU, received the Bellevue Chamber's Woman of the Year Award at Bellevue University's Student Center. DeBoer was recognized for significant contributions to the nearly $400 million asset credit union and the business community since becoming president in January 2007. During that time, the credit union changed its logo and received several awards, including an ethical business practices award from the Better Business Bureau; and the Best of Omaha award in 2007, 2008 and 2009, and more … * BATON ROUGE, La. (12/7/09)--The Baton Rouge chapter of the
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Louisiana Credit Union League began building its house for Habitat for Humanity on Oct. 31, says the league's newsletter, eNews (Dec. 2). The chapter raised more than $75,000 for the building. Each Wednesday and Saturday volunteers such as these from all Baton Rouge area credit unions work on the home. The league said the project is scheduled to be completed in February. (Photo provided by the Louisiana Credit Union League) … * LA PLACE, La. (12/7/09)--Louisiana FCU bucked the mortgage financing trend by celebrating the grand opening of its Mortgage
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Operations Center Nov. 12, reports the Louisiana Credit Union League (eNews Dec. 2). "Even though we've all witnessed the national crisis in mortgage financing combined with a significant decline in new housing in St. John's residential growth rate, we're very optimistic about some more recent trends," said Louisiana FCU President/CEO Rhonda Hotard. "With recent growth rates showing a steady increase coupled with an overwhelming interest in mortgages, our members are looking for affordable financing options, and we are able and ready to help them achieve this financial milestone." The new center will be open weekdays from 9 a.m. to 5 p.m. The La Place-based credit union offers first mortgages, home equity loans, construction and land loans and other real estate financing options. (Photo provided by the Louisiana Credit Union League) …