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Hackers target small-biz online-banking accounts

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WASHINGTON (3/11/10)--Credit unions seeking ways to serve members with small businesses need to be alert to cyberattacks against the online banking accounts belonging to small and mid-size businesses and make sure their authentication processes can handle the attacks. During fourth quarter 2009 alone, cyberthieves stole more than $150 million from small and midsize business accounts, says the Federal Deposit Insurance Corp. (FDIC). The scope of the thefts has raised questions about authentication and fraud-detection measures used by financial institutions. Several banks are fighting lawsuits from business customers seeking to recoup some of their losses, according to Computerworld (March 10). Almost all the incidents reported to FDIC involved malicious software (malware) on online banking customers' personal computers (PCs) that trick a victim into visiting a malicious website or downloading a Trojan horse program that provides access to the business' banking passwords, according to David Nelson, FDIC examination specialist who spoke at an RSA conference in San Francisco last week (IDG News Service March 8). Banks require their business customers to use several forms of authentication, but online banking customers may rely too much on authentication and layers of controls-- because hackers are still stealing, said Nelson. Hackers are targeting higher-balance accounts and looking for small businesses where controls might be lax, said Nelson. This is problematic not only for the business facing losses but for the financial institution serving that business. Businesses do not have the deposit reimbursement protections that consumer deposits do if funds are stolen from their accounts. Instead, they eat the losses from fraud in wire transfers and in the automated clearinghouse system--and some file lawsuits against their banks. Typically the suits claim the banks failed to detect and stop transactions that were patently fraudulent. Hillary Machinery Inc. sued its bank, Plains Capital, after cybercrooks stole more than $800,000 from the company's account last year. Hillary charges the banks did not stop the wire transfers, which involved foreign bank accounts and dollar amounts that were not typical for the company. The suit alleges that Hillary had a reasonable expectation that the bank would protect the company's account. It also argues that a small business should not be expected to have significant expertise on data security issues. In another case, after it lost $560,000 from its account to cyberthieves, Experi-Metal Inc., a Michigan-based firm, sued Comerica Bank, alleging the bank did not heed the red flags that signaled fraud was occurring. Several years ago the Federal Financial Institutions Examination Council issued guidelines suggesting financial institutions upgrade their single-factor authentication processes based on usernames and passwords by adding a stronger, second level of authentication. However, many banks are not using these solutions. The growing and more sophisticated hacking attacks are testing the token-based authentication measures than many banks have used for years, Paul Smocer, vice president of security at BITS, told Computerworld (March 10). BITS is an industry consortium representing the 100 largest financial institutions. It is advising its members to work with law enforcement to determine patterns used by the money mules working the accounts for the cyber criminals. Other organizations advise financial institutions to review their internal security controls and implement multiple security layers to help them detect fraud on their members' accounts.

CUNA phone calls are a smelly phish scam

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PARK HILLS, Mo. (3/11/10)--Phone calls about ATM cards, purporting to be from the Credit Union National Association (CUNA), flooded the Park Hills, Mo., area last weekend, said a local newspaper. The calls are a phishing scam and are not from CUNA. The automated messages hit Sunday morning and told recipients that their ATM or debit card had been deactivated, said the Daily Journal (March 9). Several recipients contacted the newspaper. The calls went to customers and members of a variety of financial institutions, including people who do not have an ATM or debit card. One woman called the number in the message and was asked for her bank account number. She knew her bank wouldn't call and ask for information it already had, so she hung up. Others who called the number were asked for their bank account number, PIN and the card's security code. The calls allegedly came from overseas. Similar calls were received in Greeley, Colo., this time using the names of Weld Schools CU, a Greeley-based credit union, and the local Wells Fargo Bank (Greeley Tribune March 9). The credit union told the local newspaper it had received 200 calls about the calls, which were directed to both members and non-members. Authorities warned consumers not to give out numbers and key information to callers.

Michigan candidate proposes state-owned bank

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LANSING, Mich. (3/11/10)--The Michigan Credit Union League will monitor a proposal made by a state gubernatorial candidate who announced a plan Tuesday to create a state-owned bank to serve as a lending "backstop" and help ease the credit crunch. The plan, according to Lansing Mayor Virg Bernero, a Democrat running for governor, would mimic the state-owned Bank of North Dakota, which works with banks in that state to help finance business growth, provide student loans and offer other banking services (The Grand Rapids Press and March 10). "On the surface, we're opposed to the concept of a state bank that would compete against credit unions," David Adams, president/CEO of the Michigan Credit Union League, told News Now. "However, we remain open to studying the proposal further to see if this is something we might support," he added. The Bank of North Dakota is backed by the state, not by the Federal Deposit Insurance Corp. A proposed Michigan bank would be capitalized with assets of the state and a bond sale, said Bernero. North Dakota's bank has existed since 1919, when residents organized it, along with a state-owned grain elevator and mill, in defiance of big out-of-state banks and mill operators hindering the state's farmers early in the 20th century. In February, the Association of Vermont Credit Unions (AVCU) addressed that state's House Ways & Means Committee because state lawmakers were interested in exploring how a state-owned bank similar to the Bank of North Dakota would work in Vermont (News Now March 1). AVCU said its president/CEO, Joe Bergeron, and others addressing the panel had more questions than answers about the merits and practicality of a Bank of North Dakota clone. The association said that other legislatures--primarily in Florida, Oregon and Washington--were also looking into a state-owned bank.

Federation offering 1M to match CDCI investments

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NEW YORK (3/11/10)--To help more community development credit unions (CDCUs) qualify for Community Development Initiative (CDCI) funds, the National Federation of Community Development Credit Unions' board has voted to make an additional $1 million in secondary capital available as matching funds for member CDCUs that might not be immediately eligible for CDCI investments. The initiative from the U.S. Department of the Treasury has launched a program in which low-income credit unions (LICUs) certified as Community Development Financial Institutions (CDFIs) can obtain up to 3.5% of their assets as secondary capital, which will count toward their regulatory net worth. Eligibility for the CDCI program will be determined by the National Credit Union Administration (NCUA) along with the Treasury Department. Highly rated credit unions that are well-capitalized are expected to qualify readily, in the absence of material negative trends. Credit unions that fall below that standard may still qualify for funds if they can obtain matching secondary capital from non-governmental sources. Federation Board Chairman Randy Chambers, chief financial officer of Self-Help CU in Durham, N.C., commented on the Treasury’s new initiative. “We believe the CDCI program is a unique opportunity for low-income credit unions to rebuild the net worth that was eroded over the past year by the corporate meltdown, share insurance charges, and the troubled economy,” he said. “While our resources are limited, we plan to do whatever we can to help our members access these funds.” The federation has been the primary private-sector provider of secondary capital since 1996. Based on Treasury’s guidelines, the CDCI program will invest secondary capital at 2% for eight years, after which the rate escalates to 9% as an incentive for institutions to repay the money. “We have no doubt that most credit unions will repay CDCI funds by the eight-year mark, so they won't be encumbered by the high rate of funds for the last five years,” said Cliff Rosenthal, federation president/CEO. Applications are due April 2. Credit unions that are not yet CDFI-certified and want to apply for CDCI must submit their certification applications to the CDFI Fund by April 15. They also must submit a secondary capital plan to NCUA by May 3, Rosenthal said. The federation will help CDCUs apply for CDCI funds by providing technical assistance to its members on all aspects of the program and its applications. The federation also offers extensive consulting services to other credit unions interested in applying. For more information, use the link or contact Associate Director of Membership Development, Pablo DeFilippi at or call 800-437-8711, ext. 304.

CUs are the hot thing in Mississippi

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JACKSON, Miss. (3/11/10)--There are many reasons why credit unions “have skyrocketed in popularity” with Mississippi consumers, according to Charles Elliott, president/CEO of the Mississippi Credit Union Association. “First, I would say that people’s awareness of credit unions has increased significantly in the past few years,” Elliott told the Mississippi Business Journal (Feb. 22) in an article headlined “Bye-bye banks? Credit unions are the hot thing.” “Media coverage has been very positive,” he added. “I think people have a lot of confidence and trust in credit unions.” There are 96 credit unions with more than 555,000 members in Mississippi, the publication said. Elliott said he believes there has been a backlash against large banks after some of their lending practices led the economy to slump. Still, credit unions are not viewed as major competitors to banks, he told the Journal. “[Credit unions] only make up about 6% of the money market,” Elliott said. “That number hasn't changed in the past few years.” “Banks are owned by people who have stock in the bank and whatever profits the bank realizes must be paid to the stockholders,” Elliott said. “Our rates and fees are favorable and a large portion of financial institutions have stopped lending. We’ve never stopped lending. Every member owns the credit union.” A Jackson, Miss., credit union manager agreed with Elliott. “We don't have the overhead that banks do,” Charlotte Hutchison, who manages the Mississippi Highway Safety Patrol FCU in Jackson, told the Journal. “… Since members own the credit unions, we return profits to members and not shareholders.”

CU System briefs (03/10/2010)

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* ST. LOUIS (3/11/10)--Rep. Russ Carnahan (D-Mo.) met with 15 Missouri credit union
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representatives at Neighbors CU, St. Louis, to discuss credit union issues, with a focus on member business lending (MBL). Carnahan, a co-sponsor of H.R. 3380, which would raise the MBL lending cap, said, "I've always believed in what credit unions offer the community, but credit unions are especially critical in this turbulent financial climate. Credit unions are uniquely equipped to help make loans to small businesses, and credit unions are going to be part of the solution going forward. He also listened to credit unions' concerns about interchange fees, overdraft protection, mortgage cramdown and the proposed community reinvestment act. Most of the detrimental issues facing credit unions don't have traction in Congress, he said. From left: Mike O'Brien, St. Louis Community CU; John Servos, Neighbors CU; Brian Eyestone, Southpointe CU; Laura Alfeldt, First Community; Charlie Waalkes, American Eagle; Rep. Carnahan; Rosie Holub, Missouri Credit Union Association (MCUA); Larry Giesing, Neighbors, Nina Pilger, lst Financial FCU; Dennis Sommer, Alliance CU; Lisa Farnen, Electro Savings CU; Hubert Hoosman Jr., Vantage CU; Micki Milonas, West Community CU; Jana Wolfe, First Missouri CU; and Doug Macias, MCUA. (Photo provided by the Missouri CU Association) ... * LATHRUP VILLAGE, Mich. (3/11/10)--Michigan First CU last week launched its online business banking website,, for small businesses (Investment Weekly News March 6). The new program, branded as the Business+Community business banking program, offers financial tools and resources that businesses need to grow. It offers products traditionally found at big banks plus other more unique products such as flexible loans, low-cost business checking or an innovative financial solution ... * HUTCHINSON, Kan. (3/11/10)--The board of directors at Hutchinson (Kan.) CU voted to distribute a combined $83,000 to members in the form of a member participation bonus. The bonus was paid Feb. 28 and based on the amount of dividends a member earned and/or interest that was paid on loans during 2009. "The credit union's volunteer leadership is credited with having the spirit to make the bonus decision, balancing it against the demands of regulatory requirements, growing expenses and today's economic uncertainties," said a letter in March 9) ... * FLINT, Mich. (3/11/10)--Robert C. White of Mt. Morris, Mich., died Feb. 18 at the age of 81. He was general manager of the Flint (Mich.) Area School Employees CU for more than 30 years, said the Michigan Credit Union League (MCUL) (Michigan Monitor March 9). White began his career with the credit union as a part-time employee in 1957 and was hired as the credit union's first, full-time general manager in 1959. Under his management, the credit union grew from $1.9 million in assets and less than 2,500 members to a $120 million institution with nearly 20,000 members before he retired in 1993. According to Pat Hagedorn of the credit union, White was"instrumental in laying the groundwork for the credit union and "taught many of us through his example" about the credit union philosophy. White was active in the credit union movement and heavily involved in MCUL committees and Flint Chapter activities. Funeral services were held in Mt. Morris. White is survived by his wife, five children and many grandchildren, nieces and nephews ...

Georgia regulator former NASCUS chair to retire

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ATLANTA (3/11/10)--George Reynolds, senior deputy commissioner of the Georgia Department of Banking and Finance and a former chair of the National Association of State Credit Union Supervisors (NASCUS), is set to retire May 1. Reynolds has worked for the department for 34 years as an examiner, deputy commissioner for supervision, and as senior deputy commissioner. The department oversees regulation of state-chartered credit unions. “We will certainly miss him,” Judy Newberry, Georgia’s deputy commissioner for legal affairs, told News Now. “He has made tremendous contributions to the department.” Reynolds was elected to the NASCUS board in 2006 and served as chair from 2007-2009.

Plant closing to have no impact on CU

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ATHENS, Pa. (3/11/10)--An Ingersoll-Rand plant closing in Athens, Pa., scheduled for December, will have no impact on Ingersoll Rand FCU in the city, said the CEO. The company is going to consolidate its Athens plant into its operation in Southern Pines, N.C., Ingersoll Rand said Monday (The Daily March 9). The credit union has more than 7,000 members with several select employee groups, and only a small percentage of its membership--about 199 members--were employed by Ingersoll Rand, said Michael Viselli, CEO of the credit union. The credit union is poised to help members affected by the plant closure, Viselli told News Now. “We’ll basically perform a one-on-one analysis of their whole financial picture,” he explained. “Based on that, we’ll set up a strategy to review their assets and to keep up with their financial obligations with us and others. Some tools we could use would include loan extensions, modifications and temporary interest rate changes. “Whatever is at our disposal, we’ll put to their benefit,” he added. With the imminent plant closing and the fact that the credit union serves other diverse groups, Ingersoll Rand FCU could have a name change, Viselli said. “We’ve considered it before, but put it on the back burner because we have a 49-year history with the name,” he added. “With these changes we could possibly look at alternatives that reflect what we are now, as opposed to what we were before.” Ingersoll Rand FCU has $56.8 million in assets.

WYCUP celebrates 10 years serving young CU pros

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MADISON, Wis. (3/11/10)--The World Council of Credit Unions' (WOCCU) Young Credit Union People (WYCUP) Scholarship Program celebrates its 10th anniversary this year.
Click to view larger image Young Credit Union People Scholarship Program winners during last year’s ceremonies were, from left: Amy Stanton, U.S.; Carolyne Luvembe, Kenya; Ross Lambrick, Australia; Julie Ferguson, Ireland; and Jeff Rout, Canada. Presenting the honors at the 2009 World Credit Union Conference (WOCCU) in Barcelona were WOCCU President/CEO Pete Crear (third from right); WOCCU Chair Barry Jolette, U.S.; and WOCCU Director and Awards Committee Chair Ron Hance, U.S. (Photo provided by World Council of Credit Unions)
WOCCU is accepting nominations for this year’s WYCUP program, which promotes international education and networking opportunities for credit union professionals and dedicated volunteers under age 35. The deadline for nominations is June 7. “The WYCUP program was an excellent opportunity to broaden my perspective through networking with peers from around the world,” said Carolyne Luvembe, education and training officer for Kenya Union of Savings and Credit Cooperatives, Nairobi. She earned a WYCUP scholarship at the 2009 World Credit Union Conference in Barcelona, Spain. “It also provided an opportunity for me to learn how to think in a more dynamic way,” she added. More than 400 young credit union professionals and volunteers have passed through the program, said WYCUP founder Dave Grace, WOCCU vice president of association services. “We’ve seen national programs in Australia, Canada, Ireland, Poland and, more recently, in the U.S. begin as a result of WYCUP's influence and effectiveness,” Grace said. The program seeks individuals who have already made significant contributions to the development of their credit unions or regional or national credit union systems and who have demonstrated the potential to employ their talents at the international level. Credit unions and credit union organizations that are WOCCU members can nominate their next generation of leaders to compete for the WYCUP Scholarship. To be eligible for the scholarship, nominees must:
* Be sponsored by their credit union or credit union organization to attend The 1 Credit Union Conference--a combination of WOCCU's World Credit Union Conference and the Credit Union National Association’s America's Credit Union Conference--in Las Vegas, July 11-14; * Be 35 years old or younger on Jan. 1; and * Submit a completed nomination form to WOCCU with all the necessary supporting materials by June 7.
The WYCUP Scholarship, which consists of an all-expense-paid trip to the 2011 World Credit Union Conference in Glasgow, Scotland, will be awarded to five recipients at the 2010 Las Vegas conference. WYCUP nominees, regardless of award status, will be formally recognized in Las Vegas and invited to take part in events and networking sessions organized specifically for participants under age 35. All conference registrants age 35 and under also qualify for a discounted registration fee. For more information, use the link. For questions about WYCUP, contact Liliana Tangwall or call 608-395-2043.