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Identity fraud rose in 2011 says new report

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CHANTILLY, Va. (2/23/12)--The number of identity fraud incidents increased 13% in 2011 to a total 11.6 million adult victims, according to a new survey.

The 2012 Javelin Strategy & Research Identity Fraud Report also found that some social media behaviors and the increasing number of data breach incidents contributed to the rise of identity theft  in the U.S. The study was co-sponsored for the fourth year by Intersections Inc. a consumer and corporate identity theft risk management service.

The study underlines the effects that consumer awareness programs by financial institutions such as credit unions and others had in mitigating some of the impact of the identity fraud.

Other findings:

  • Fraud incidents rose. Victims of a data breach were 9.5 times more likely to be a victim of identity fraud.  Data breach victims  increased 67% in 2011, and the increase correlates with the increase in identity fraud victims.
  • Costs of losses stayed steady. Although the number of victims increased, the total dollar amount tied to their losses remained steady in 2011. The report attributed this to more stringent authentication practices by financial institutions and increased consumer-awareness efforts by financial institutions and government.
  • Detection advanced. Electronic monitoring of accounts through the Internet, ATM or other electronic means is leading the way of detecting fraud over reviewing paper records. About 54% of victims in 2011 were notified they had been a victim of an identity theft by their financial institution, law enforcement and other authorities.
  • Social media contributed to the rise.  Consumers who actively engage with social media and use a smartphone had a disproportionate rate of identity fraud when compared with consumers who do not use these media.
The findings in this year's study indicate that fraudsters are taking advantage of consumers' increased use of social networks and hacking into large businesses where many identities are housed in a single place. Consumers must remain consistent and committed to protecting their identity, said Intersections.  Credit unions can help by advising their members to:

  • Protect their information.  Exposing common information such as birthdates and addresses puts consumers at a greater risk because financial institutions commonly use these as security questions and validation of identity to access accounts. Even seemingly harmless information could be of value to experienced ID thieves.
  • Be social, but smart.  Knowing that social networks are a hotbed for identity fraud, members should take extra care when deciding who to "connect" with and what applications to accept. Users who approve "friend" requests from strangers or who use global positioning systems (GPS)/location-based applications are far more susceptible to fraud.
  • Take caution with mobile computing. Online and mobile banking are convenient, so they are here to stay. Consumers must take the extra step of ensuring their network connection is secure and their devices have updated security.
  • Be active in detection.  Consumers must take responsibility of protecting their identities into their own hands and enroll in comprehensive identity protection services.
  • Act quickly.  The sooner a victim learns of the fraud, the sooner they can recover from. It. Consumers should remain alert, act quickly if they notice suspicious activity, and report the activity to their credit union or other financial institution, and to law enforcement.

Church sues NCUA about St. Paul Croatian FCU

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CLEVELAND, Ohio (2/23/12)--An Ohio church filed a motion Feb. 16 in a federal court seeking documents that it says were withheld by the National Credit Union Administration (NCUA) in the church's lawsuit against the agency over the church's losses when St. Paul Croatian FCU, Eastlake, Ohio, collapsed in 2010.

The church, Holy Love Ministries, based in North Ridgeville, Ohio, had filed the lawsuit in the U.S. District Court for the Northern District of Ohio Eastern Division against NCUA on June 17.  At the time the credit union was liquidated by NCUA on April 20, 2010, the church had two joint accounts totaling $1.7 million with multiple co-signers on the accounts but received only the $250,000 insurance payment available to single accounts, according to the church's complaint.

It is suing to recoup the $1.5 million remaining or at least a second $250,000 payment because the two accounts were joint accounts, according to court document.

The complaint said that several days before the credit union's collapse, a church representative tried to withdraw funds from the accounts but was told not to by NCUA. As a result, said the court document, the church's two-year $12 million building project was endangered and "the loss has rendered Holy Love's situation desperate."  The church was also denied a "hardship" exception to the $250,000 insurance limit, said the court documents.

In the motion to allow discovery filed with the court on Feb. 16, Holy Love said NCUA had not produced documents the church needed to proceed with its case and prove it could "demonstrate significant bad faith and improper behavior" by  the agency.

It cited as "fraudulent" behavior, the agency's refusal to allow a church representative to withdraw funds several days before the involuntary liquidation even though agency representatives knew about the pending conservatorship, said the motion filed. The church also alleged in the document that the agency failed to call the church, as it had done with several other members, to allow it to restructure accounts with balances over $250,000 so it could obtain more insurance coverage.

NCUA's National Credit Union Share Insurance Fund lost $170 million when the credit union collapsed due to fraudulent activities of its leaders. It was one of the largest credit union failures in history.

Judge splits card customization patent case for CUs

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WILMINGTON, Del. (2/23/12)--A U.S. District Court in Wilmington, Del., has ordered a patent infringement lawsuit brought by a London and New York company against two groups--including credit union service organizations (CUSOs) and credit unions--split and transferred to more appropriate jurisdictions in Iowa and Colorado.

The company suing, Serverside Group, alleges that two groups have products for computerizing card production equipment that infringe on two patents held by the company. The patents describe an invention of "computerized financial transaction card production equipment operable to apply one or more personalized images to a financial transaction card" and the method for applying it over the internet, according to court documents.  The products addressed in the suit include MyPhotoCard, Picture My Card, Design Your Own Card, CreataCard and Cre8 My Card.

One group of six, called the CPI card group, consists of CPI Card Group-Colorado Inc.; CPI Card Group-Minnesota Inc.;  The Members Group Inc., Iowa; Neighbors CU, Missouri; PSCU Financial Services Inc. , Florida; and Anheuser Busch Employees CU, Missouri.  Their products at issue include MyPhotoCard or Design Your Own Card.

The second group sued is Tactical 8 Technologies LLC and Bank Iowa Corp., both based in Iowa. Both groups market the products to credit unions and other financial institutions, the court documents said.

In his order, U.S. District Judge Richard G. Andrews Saturday ordered that claims asserted  against Tactical 8 Technologies LLC and Bank Iowa Corp. be transferred to the U.S. District Court for the Northern District of Iowa.

He also ordered a March 2 telephone status conference with the other group to determine whether the case will be transferred to the U.S. District Court in Colorado, the state where CPI Card Group-Colorado is headquartered. CPI Card Group-Minnesota, is a Delaware corporation with its principal place of business in Minnesota, which means Delaware would have personal jurisdiction in its case.

Andrews noted in the order that there was no act committed in Delaware that would bring the case under its jurisdiction. "Absent from any of the many exhibits provided by the plaintiffs is any evidence of the sale of a platform by any of the defendants to anyone in Delaware, or any evidence of an offer to sell a platform to anyone in Delaware (or, indeed, to anyone anywhere," said Andrews.

"It is apparent that the plaintiffs scoured the Internet looking for evidence to support personal jurisdiction over the CPI group," Andrews said.  However, he said the absence of evidence is "fairly compelling that the CPI platform technology has not been sold to any Delaware financial institution."

The ruling was on the jurisdiction, not the merits of the infringement claims themselves, said Serverside.

Student-run branches a cornerstone at Michigan CU

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PLYMOUTH, Mich. (2/23/12)--Credit unions nationwide with student-run branches bring the benefits of credit union membership and financial education to today's youth.

Community Financial CU, with $477 million in assets, Plymouth, Mich., is among many Michigan credit unions that take the extra step with their student-run branches in making a commitment to their communities and local school districts.

Community Financial CU, Plymouth, Mich., demonstrates its commitment to youth financial education with 35 student branches. Here, a student volunteer counts change. (Photo provided by Community Financial CU)
Michigan credit unions led the nation--by far--with 58 credit unions fielding 370 student credit unions as of 2010, according the CUNA Center for Personal Finance. The next closest state, Wisconsin, had 86 total student branches.

Community Financial, located in the suburban Detroit, with additional branches in Michigan's lower peninsula, has 35 student-run branches, including 23 elementary branches, eight middle school branches and four high school branches.

The credit union has more elementary than middle and high school branches because the school districts served by the credit union are set up in a tier with more elementary schools feeding into fewer middle schools and ultimately one or two high schools, said Natalie McLaughlin, Community Financial senior education partnership coordinator, said.

Community Financial has offered student branches since 1990. Typically, it adds one or two new student branches each year.

McLaughlin said the credit union has 1,838 members through its student-run branches. In the last academic year, 1,483 students participated as volunteers to run the credit unions.

The credit union's presence in local school systems is a strategic initiative set by the credit union's board, and a reflection of its community charter, McLaughlin said.

"Education has been a strategic cornerstone for our board of directors," McLaughlin said. "As [board members] looked at the credit union's initiatives and thought about what the credit union should represent within the community, they identified education as a priority. They said, 'This is one of the ways we are going to give back to the community, by educating our children.'"

Community Financial dedicates considerable resources to meet that priority. Three part-time and two full-time employees help operate the student branches as education partnership coordinators.

Elementary and middle school branches are open roughly twice a month. High school branches are open about once a week, McLaughlin said. A Community Financial CU partnership coordinator works at each student run branch during the time it is open. The coordinators bring cash to the schools, help with transactions, and use a laptop computer to log into the credit union's mainframe system.

The student branch process begins each fall with a school assembly that includes a financial education element. Students who are interested in working for the student branch fill out job applications and take part in one-on-one job interviews.

McLaughlin and her team also educate the students on preparing for interviews and conducting themselves appropriately during the interview process and while representing the credit union. "Career preparation is part of our education curriculum," McLaughlin said.

Students can hold the role of branch managers, tellers, bookkeepers, computer operators and marketing representatives.

The student-run branches are part of a three-pronged approach Community Financial takes to youth financial education that also includes classroom presentations and donations for special projects and curriculum.

McLaughlin and each of her team members each make two to three classroom presentations on financial education topics each week.

The credit union also provides curriculum supplements and donates money to schools for special projects and curricula. In the 2011, the credit union donated $44,793 to area schools--in addition to its student credit union budget and salaries for employees dedicated to the branches.

"We are looking for ways to support teachers as they are teaching," McLaughlin said. "If there is additional curriculum that teachers feel will be a benefit to their classrooms we help pay for them."

The approach has elevated Community Financial's presence in the community, and also helped attract the students' parents as new members, McLaughlin said.

"We made a decision years ago not to market to parents and teachers," McLaughlin said. "We felt that it was important to the integrity of the program. Both parents and teachers have told us they appreciate that, and as a result they open accounts with us, and they truly appreciate what we do in the community."

The Michigan Credit Union League offers tools for operating and managing a school credit union on the league's website, including a credit union school branch handbook. Use the link.

Alabama bills make CUs eligible for municipal deposits

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BIRMINGHAM, Ala. (2/23/12)--Alabama credit unions would be eligible to accept municipal deposits under a bill recently introduced to the Alabama legislature.

The bill, sponsored by the League of Southeastern Credit Unions (LSCU), was originally referred to the state House Financial Services Committee and to the Senate Governmental Affairs Committee.

The Senate bill has been re-assigned to the Senate Banking and Insurance Committee, an effort on the part of the banks to fight the bill, according to LSCU.

"[Banks] felt moving the bill to that committee presented them with their best chance to defeat the measure," said Jason Cochran, LSCU director of legislative affairs.

Commercial banks maintain that credit unions should not serve local government because of they do not pay taxes, the league noted in a bulletin urging state credit unions to contact members of the state legislature. Credit unions do pay tangible personal property taxes, real property taxes, and as employers, credit unions pay all employment taxes, according to the league. Credit unions' tax status lies in their not-for-profit structure, including cooperative ownership and volunteer leadership, the league maintains.

"Our tax status and whether or not credit unions can accept municipal deposits … obviously those are dots that we feel cannot be connected," Cochran said.

Municipalities could receive better rates of return on their tax dollars if they were allowed to deposit public funds in credit unions, which on average, pay out 0.25 to 0.50 basis points more than banks on deposit accounts, according to the league.

Filene report Competitive balance vs. level playing field

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MADISON, Wis. (2/23/12)--Federal policymakers' focus on creating a "level playing field" can impair the competitiveness of credit unions and other small financial institutions, according to a report released by the Filene Research Institute.

Blayne Haggart, author of "Keeping an Eye on the Ball: Credit Unions, the Level Playing Field, and Competitive Balance," suggests credit unions should use the metaphor of seeking "competitive balance" to advocate for policy changes that would better serve the credit union system.

Haggart, who holds a doctorate in political science with a specialization in political economy, is a visiting scholar at the Regulatory Institutions Network at Australian National University. He says the "level playing field metaphor" used by federal policymakers in the U.S. seeks to have all financial institutions operate under the same rules regardless of size, purpose or structure.

The federal rules produced by that approach govern issues ranging from money laundering and terrorist financing to interest rates and branch accessibility. The report notes that while this approach appears neutral and fair, it may lead to unintended outcomes that impair credit unions' competitiveness.

Haggart compares the two metaphors by examining the competitive settings in which they are often used. A "level playing field" metaphor may be conveyed by games such as football or hockey where teams vie for supremacy in a competition based on a fixed set of rules administered by a neutral referee.

A "competitive balance" metaphor is linked to a competition where handicapping is applied, such as in golf or chess, to use scoring compensation or other advantages to create fair competition among the participants. 

The report argues that using a competitive balance approach would force credit unions and policymakers alike to focus on objectives such as maintaining adequate competition in financial services, rather than "prejudging" the methods for achieving those results.

"A competitive balance approach to regulation thus offers the potential for more results-driven, reality-based regulation," Haggart said.

For more information about the report, use the link.

League launches Crash Delaware initiative

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NEW CASTLE, Del. (2/23/12)--In the latest addition to the credit union crash movement, the Delaware Credit Union League is awarding 10 free registrations to its annual conference, April 19-20.

Crash Delaware will launch the league's new young professionals' initiative.

Delaware credit union professionals under 35 are eligible to apply. Applicants must be employed by their credit union for at least one year and have the approval of their CEO. The deadline to apply is March 9.

Delaware crashers will participate in scheduled education events, and network with credit union leaders to share ideas about the future of credit unions and how credit unions can meet the needs of their generation, the league said.

Registration and hotel accommodations for one evening will be covered by the league. Crashers will share a room and will need to provide their own transportation.

Nationally, the burgeoning crash movement is known as the Filene Research Institute's Cooperative Trust. It was formerly the "Crash Network," a group of young credit union professionals that encourages growth for, and change by, young credit union professionals.

The Crash Network was the brainchild of Brent Dixon, Filene's young adult adviser. Twenty-five young professionals first crashed the Credit Union National Association Governmental Affairs Conference in 2010 (News Now Dec. 6, 2011.)

CU gets 50 bids on new headquarters

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ST. JOSEPH, Mich. (2/23/12)--Because it received an "overwhelming" 50 proposals to construct its new headquarters, United FCU will take additional time to explore new options and ideas offered by potential builders, said Gary Easterling, president/CEO of the credit union. 

"We are treating each submission with the same level of evaluation and working diligently to find the solution that is the best fit for UFCU," Easterling said. "We recognize the importance of this decision to our members and our employees. Hence, we will take the necessary time to complete a full evaluation. We expect to keep all interested parties appraised of any significant progress in this evaluation."

The unusually large number of bids were in response to an October request for proposals the St. Joseph, Mich.-based United FCU issued to accommodate its growing work force. The credit union expects to add 500 jobs by 2020.

The credit union is working out of multiple corporate locations, some on short-term leases, Easterling said.

United FCU doubled its asset size in last five years. In the past year, its membership grew roughly 5%, Easterling said.  Contributing to that growth was the credit union's acquisition of Griffith (Ind.) Savings Bank. The purchase marks the first time a federally chartered credit union has purchased the assets of a state-chartered, Federal Deposit Insurance Corp.-insured mutual savings bank, the credit union said.

The credit union has more than $1.4 billion in assets.

Mich. CU members save 34M through Save to Win

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LANSING, Mich. (2/23/12)--Members of Michigan credit unions saved $34 million in 2011 through the statewide Save to Win program. 

Launched in 2009, Save to Win offers cash prizes to persuade families to save money instead of spending it on the lottery or other games of chance.

Members participating in Save to Win in 2011 had an average balance of more than $2,000, which compares to an average balance of $1,871 and total savings of $30 million in 2010.

Each $25 deposit into a Save to Win certificate entitles a participating member to an entry in an annual drawing for a $100,000 grand prize. This year's winner, a member of Lansing based Astera CU, will be announced today. The program also awards monthly prizes ranging from $100 to $1,000. Participating credit unions may also choose to make individual awards to members.

The Michigan Credit Union League, the Filene Research Institute and the Doorways to Dreams Fund collaborated to develop the Save to Win program.

CU System briefs (02/22/2012)

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CU System briefs

  • HARRISBURG, Pa. (2/23/12)--Carrie Wood, left, CEO of DuBois, Pa., celebrated her birthday Tuesday by being honored as winner of the Pennsylvania Credit Union Association's (PCUA) first Paul E. Kanjorski Advocacy Scholarship.  Wood is shown here with former U.S. Rep. Kanjorski at the luncheon, which also included association staff and members of the Awards Committee. The scholarship covers Wood's expenses to attend the Credit Union National Association's 2012 Governmental Affairs Conference Feb. 18-22 in Washington, D.C.  During the luncheon, Kanjorski discussed the current political climate and issues that impact credit unions. "You have to keep cultivating new credit union champions in Congress," he told the group. "You need to make sure your message is heard."  Also at the meeting PCUA President/CEO Jim McCormack recognized Wood and thanked Kanjorski for the work he has done over the years to support the credit union movement while he was in Congress (Photo provided by the Pennsylvania Credit Union Association) …
  • ANTIGO, Wis. (2/23/12)--A $1.5 million grant from the Community Development Financial Institution Fund will help $907 million asset CoVantage CU, Antigo, Wis., expand its Rescue Refinance Program. The grant will be combined with $8.5 million in loan funds set aside by CoVantage's board for the refinance program to help members who cannot afford current mortgage payments but are blocked from refinancing by declining property values, said the Wisconsin Credit Union League (League News Feb. 20). Rescue Refinance enables homeowners to borrow up to 90% of their home's value without private mortgage insurance in an adjustable rate mortgage that carries a fixed rate for its first 10 years. Remaining funds are provided through a second mortgage that is repaid at a later date, with no payments due and no interest charged on the second mortgage ss long as the home is occupied by the owner. The combination allows homeowners to borrow up to 110% loan-to-value to pay existing mortgages, current or past-due property taxes, judgments or other refinancing …
  • HEATH, Ohio (2/23/12)--Police in Heath, Ohio, warned residents about a scam based on text messages that appear to be sent by employees at $72 million asset Hopewell Financial CU. The fraudulent message claims the recipients' credit cards were deactivated and then provides a telephone number for them to call. Police noted the scam's intent is to obtain personal information that can be used to commit fraud (The Advocate Feb. 21). Message recipients were told by police not to respond to the messages. Instead, they should contact the credit union directly …
  • PALO ALTO, Calif. (2/23/12)--Two women who are cousins will serve prison sentences for allegedly stealing more than $256,000 from an elderly couple's account at $4.9 billion asset First Technology CU, Palo Alto, Calif. A Santa Clara County Superior Court judge sentenced Pang Thao to three years in prison for identity theft, computer hacking and elder fraud with an aggravated white-collar crime enhancement, while Nancy Vang was sentenced to one year in county jail for identity theft and grand theft with an aggravated white-collar crime enhancement (Palo Alto Online News Feb. 16). Thao was an employee at Addison Avenue FCU, Palo Alto, which merged with First Tech in 2011. She is accused of creating an unauthorized PIN for online access, which she allegedly used to transfer the account's balance to Vang's account. The cousins apparently spent the funds on shopping sprees and an automobile, although $85,000 was recovered by REACT, a Bay Area high-technology crimes and identity theft task force directed by the Santa Clara County District Attorney's Office ...
  • FARMINGTON HEIGHTS, Mich. (2/23/12)--Community Choice CU, Farmington Heights, Mich., will offer $100,000 in scholarships to high school seniors graduating this spring. The $457 million credit union has awarded $305,000 in scholarships so far ( Feb. 19, 2012). This is the fourth consecutive year that Community CU will award scholarships. Applicants are required to have a 3.0 grade point average, live within the credit union's charter counties, write an essay and be accepted into a Michigan college or university …