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Michigan court rules in DFCU Financial case

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DEARBORN, Mich. (3/19/08--UPDATED 10:18 a.m. CDT)--A Circuit Court in Michigan has ruled that DFCU Financial FCU must hold a special meeting as demanded in a petition members presented during the credit union's earlier attempt to convert to a mutual savings association. "DFCU Financial recently received a copy of the decision by Judge Cynthia Stephens of Wayne County Circuit Court in which she ruled in favor of a petition submitted April 26, 2006, to hold a special membership meeting to recall the board of directors at DFCU Financial," said the credit union in a statement this morning. The credit union "is disappointed by and disagrees with Judge Stephens' decision, which fails to take into account events that have occurred since the lawsuit was filed in 2006. In particular, eight of the nine directors named in the recall petition have either resigned or been re-elected by the membership since 2006," the statement said. "DFCU Financial will continue to evaluate the court's decision and the appellate and other options available to it," the credit union said. The court also ruled in the Feb. 25 decision that the members of the Dearborn-based credit union had a right to inspect the credit union's books and records under state law. The court scheduled a hearing for March 25 to consider the reasonableness of the terms and conditions under which the inspection would occur and said the special membership meeting must take place within 60 days after the hearing. The Michigan Credit Union League said it hoped the matter would be resolved quickly and fairly. "We hope that this is resolved quickly and fairly in the interest of all the credit union's members who are being very well-served by their credit union," said David Adams, president/CEO of the Michigan Credit Union League. He noted that DFCU Financial has had two years of strong, record patronage dividends. Last October, the credit union issued a dividend exceeding $17 million for the second consecutive year to nearly 134,000 members (News Now Oct. 25). "It serves no one's interest to have an extended battle," Adams said. "There is too much at stake in the Michigan economy for the state's largest credit union to be embattled for an extended time," he added. The league believes in the principles and rights of members and in observing the credit union's bylaws, Adams said, adding the credit union's "positive track record the past two years" should be considered and that the matter not be extended to "finish a crusade." Since the credit union dropped its attempt to convert to a mutual savings bank, it's not clear how the decision will play out. "We don't know what this means, but the members and the officials need to talk more and work things out," Adams said.

Summit Great Wisconsin CU merger OKd

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MADISON, Wis. (3/19/08)--A proposed merger between Summit CU and Great Wisconsin CU, both of Madison, Wis., has been approved by the Wisconsin Department of Financial Institutions and the National Credit Union Administration. The merger is scheduled to be completed this fall. The merged credit union will be known as Summit CU, the largest credit union in the state, with $1 billion assets (Milwaukee Business Journal March 17). The Wisconsin Bankers Association has criticized the merger because Summit CU “will be larger than 95% of the state’s taxpaying banks, will have 20 branch locations, and will be able to offer subsidized financial services, including commercial loans, to anyone,” the WBA stated on its website. The Wisconsin Credit Union League responded in a press release: “It’s still a member-owned cooperative,” said Brett Thompson, league president/CEO. “Like all credit unions, it will continue to return its earnings to its members and create more opportunities for Wisconsin families to access affordable financial services.”

CUNA Mutual will send out risk alert today

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MADISON, Wis. (3/19/08)--CUNA Mutual policyholders will receive an alert today outlining steps they can take in the event of a card data breach. The alert comes after news of a data breach involving Hannaford Bros. grocery stores broke earlier this week. The breach affects 165 Hannaford Bros. stores in New England and New York, and 106 Sweetbay stores in Florida. Credit unions need to read carefully any alerts they receive from credit card companies--in the case of Hannaford Bros., the companies are Visa and MasterCard, Ann Davidson, CUNA Mutual risk manager, told News Now. The alerts will tell credit unions what data elements were compromised. For instance, the Hannaford breach put Track 1 or Track 2 card data at risk, which could lead to magnetic stripe fraud. “This is critical because if a thief got enough data for transactions, that is a high risk,” she said. Credit unions also should:
* Review authorization strategies for adjustments based on compromises; * Pay attention to the transaction types at risk (signature versus personal identification number); * Look at the list of cards that were affected and focus on the ones that are still live; * Consider blocking and re-issuing cards that are at high risk; and * Work with any third-party service providers to make sure they are aware of the situation.
If full track card data has been compromised, credit unions “can’t afford not to block and re-issue cards,” Davidson said. The Hannaford breach is comparable to last year’s TJX breach, but the window of time that the data was exposed is much shorter. The Hannaford breach exposed data from Dec. 2007 to March 2008, whereas TJX was “a number of years,” she said.

New England Florida CUs brace for breach impact

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MADISON, Wis. (3/19/08)--Since news of a data breach involving Hannaford Bros. Co. retail stores broke, NorthCountry FCU’s contact center “has been taking calls left and right,” CEO John Benoit told News Now. NorthCountry, located in South Burlington, Vt., expects to re-issue about 3,000 debit cards and 500 credit cards for members as a result of the breach, which affected all 165 Hannaford stores in New England and New York State, and 106 Sweetbay stores in Florida. The credit union also prepared a letter. “Our first concern is to get the word out to the members,” Benoit said. The Association of Vermont Credit Unions (AVCU) has spoken with its affiliated credit unions and is identifying which cards were compromised. “We have limited reports,” AVCU president Joe Bergeron told News Now. “But it’s still early.” AVCU has a debit card program that it operates with 18 credit unions and is working with those institutions to catch fraudulent activity. Because credit unions in Vermont are “surrounded” by Hannaford stores, a substantial percentage of their card base was theoretically compromised, Bergeron added. Massachusetts credit unions are not overly panicked, but they are not happy, Rob Kimmett, Massachusetts Credit Union League senior vice president of public relations and marketing, told News Now. “It’s sad to say that they’ve gotten used to working through these things,” he said. Hannaford Bros. stores are more prominent in Central and Eastern Massachusetts, but Kimmett recognized that the breach could spread to other parts of the state. The breach’s impact on individual consumers could depend on shopper competition and consumer loyalty. It may not be as deep as a data breach involving discount retailer TJX Cos. last year because some consumers may choose to shop at other grocers, whereas with TJX, many consumers were likely to have visited one of the TJX stores at some point, Kimmett noted. However, “I’m comfortable in saying that pretty much every credit union could be affected,” he said. Stopping future breaches will require a legislative and regulatory answer, and the Massachusetts league has worked with U.S. Rep. Barney Frank (D-Mass.) on bills that impose restrictions on retailers, Kimmett said. “The problem needs to be solved.” Since receiving its Visa alert, St. Mary’s Bank has been in “‘investigative and research mode,’” said Carole Landry, director of deposit and lending operations. The Manchester, N.H.-based credit union is currently matching the Visa information it received against credit card records. Visa’s alert did not specify the name of the retailer involved with the breach, but members who saw news reports about Hannaford have contacted St. Mary’s Bank to get new credit cards. St. Mary’s Bank supplied staff with question-and-answer sheets about the breach, and has re-issued cards to members who have requested it, Landry said. “We’re putting members at the comfort level they want to be at,” she said. St. Mary’s Bank also is advising members to monitor their own banking activity, added Elizabeth Stodolski, St. Mary’s Bank director of marketing. Staff at Fulton County FCU, Gloversville, N.Y., stayed until about 9 p.m. Friday night to “hot-card” or stop members’ credit cards after receiving an alert from Visa regarding the security breach. “It was a decision we made, and in hindsight, it was a good one,” Gordon Beebe, Fulton County FCU president, told News Now. The credit union also called each member to let them know their cards were going to be re-issued. Of the 3,500 cardholders at the credit union, 1,100 have been re-issued. “It’s substantial for us,” Beebe said. “We’re just short of a $50 million asset credit union with a staff of 26, so it’s quite an impact in terms of staff time.” Fulton County FCU received some compensation for the cost of the TJX Cos. breach. “That one wasn’t too bad,” Beebe said. “But we’re wondering what the reimbursement will be with this.” Credit union members were worried when Fulton County FCU contacted them about the breach but were appreciative of their efforts. Some “think it’s an internal breach,” Beebe noted, and said the news reports have helped members understand what happened. In terms of issuing new cards, Beebe estimated that it would take about seven days. But a lot of other credit unions are re-issuing cards, which could lengthen the process and add frustration, he said. Members should have several cards, such as a Visa debit or credit card, so that when a problem occurs, they have a way to get money, he said. No credit unions in Florida have reported that they have been affected by the breach to the Florida Credit Union League, Amy Jowers, league communications coordinator, told News Now.

CU System briefs (03/18/2008)

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* MADISON, Wis. (3/19/08)--UW CU announced that it is the first Wisconsin financial institution to go mobile. Members can use their cell phones or other mobile devices to check their account balances, make transfers and loan payments, use Web Pay and access Money Link, a serve that allows anyone to transfer money electronically to another UW CU member. UW CU’s mobile banking can be accessed by visiting m.uwcu.org. The site is protected with security technologies and can be used on devices with small screens and iPhones with wireless access. UW CU has more than $1 billion in assets ... * WESTBROOK, Maine (3/19/08)--Maine’s credit unions donated $10,000 to the Good Shepherd Food Bank in memory of the bank’s founder, JoAnn Pike. The food bank is the primary source where 95% of hunger organizations in Maine purchase food. From left: Rick Small, executive director of Good Shepherd Food Bank, accepts a check from Jon Paradise, Maine Credit Union League governmental and public affairs manager. (Photo provided by the Maine Credit Union League) ... * BOULDER, Colo. (3/19/08)--Elevations CU, a $760 million asset credit union based in Boulder, announced that its branching strategy includes plans for three new branches within the next 12 months. It is considering branches in Erie/northeast Broomfield, northeast Longmont and Superior. The additions will help establish a more prominent presence in Boulder and Broomfield Counties and portions of Westminster. According to Dennis Paul, assistant vice president of business and community development, the credit union received a state charter last year allowing it to serve those communities. Elevations CU already has significant market penetration in the communities, he said. Opening dates are pending completion of each project … * FEDERAL WAY, Wash. (3/19/08)--Ascend United (Au), a broker of credit union charge-off debt, awarded Michael Luckin, senior vice president of San Jose, Calif.’s Technology CU, a 100-gram bar of solid gold valued at $3,500. Luckin won the “Au: Gold Standard” promotion contest on the credit union’s new website. Au Program Manager Phillip Slater displays the gold bar before it was given to Luckin. (Photo provided by Ascend United) ... * SAN DIMAS, Calif. (3/19/08)--Todd Lane, WesCorp FCU executive vice president and chief financial officer (CFO), will step down from his position to become CEO at Executive Compensation Solutions (ECS), succeeding Alec Berkman. ECS also announced that Heidi Pederson Donahe has joined the company as chief marketing officer. Lane has been CFO of WesCorp since 1998. Donahe was senior vice president of Octavus Group LLC, where she led the company’s marketing operations ...

Maine league Retailers data breach significant

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WESTBROOK, Maine (3/19/08)--The magnitude of a Hannaford Bros. Co data breach could top previous retail data breaches, according to the Maine Credit Union League. “Because the compromise occurred at a major Maine retailer that so many Maine people use on a regular basis, the impact and cost of this compromise will be significantly higher than the TJX compromise last year,” said Rebekah Higgins, card services manager at Synergent, a service subsidiary of the league. The breach occurred at Maine-based Hannaford Bros. Co supermarket chain, which affected all 165 stores in New England and New York, and 106 Sweetbay stores in Florida. The breach also affected some independently owned retail locations in the Northeast that sell Hannaford products, Hannaford Bros. said. Maine credit unions expect to reissue 100,000 new credit and debit cards as a result of the compromise, the league said. Higgins urged cardholders to contact their financial institutions to report suspicious activity. “Consumers have zero liability in this compromise,” she said. In the case of Hannaford Bros., the affected financial institutions have “done everything right and it is the merchant who bears full responsibility of the compromise,” said John Murphy, league president, noting that financial institutions will bear most of the costs of reissuing cards, staff resources and communications with members. The league helped to draft legislation introduced this session that directs the Bureau of Financial Institutions in Maine to study the effect of data security breaches on Maine credit unions and banks and report its findings by Dec. 1, 2008. The legislation has passed the state’s House and Senate, and is almost ready for the governor’s approval. “Hopefully, this is the first step in helping to further understand the significance of this issue and begin to look for ways that will force the cause of the compromises and breaches to be held accountable and responsible for the cost, a solution we believe would lead to better security measures being put in place to prevent breaches and better protect consumers,” Murphy said. “We are strong advocates that the time has come to shift the financial burden from the financial institution to the source of the breach because, in the case of credit unions, every member-owner is affected by the breach,” he concluded.

Speedconvenience drive m-demand security an issue

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SAN FRANCISCO (3/19/08)--Speed and convenience drive the demand for mobile banking services, but only one in 10 consumers is willing to adopt mobile person-to-person (P2P) payment services, according to recent research. Security concerns remain the leading deterrent, with 63% of consumers surveyed saying enhanced security would encourage them to use the mobile P2P payments. The online survey was conducted by Javelin Strategy & Research, a financial services research firm based in San Francisco. "Perceived security threats are definitely the sticking point for mobile P2P payments right now," said Mary Monahan, partner and senior analyst with Javelin. "Once the safety and access hurdles are cleared, we expect this technology will become part of everyday life." Even tech-savvy consumers, while interested in mobile P2P payments, strongly fear the loss of personal information (62%) and fraudulent transfers (52%), said Javelin. Credit unions can use some of the findings to shed light on the interests of different member segments. Those most willing to employ mobile payment services were 25 to 44 years old and/or earning more than $100,000. Thirty-nine percent of 45- to 55- year-olds said that anytime, anywhere access to their money was important--but only 14% would use the mobile P2P payment. The 55- to 64-year-old group surveyed cared more about sending and receiving money quickly than any other age group (39%), but it was only 11% likely to use the mobile service. For consumers aged 18 to 23, about 23% said that avoiding cash and checks was the primary motivation to adopt the service. The report outlines two key consumer segments that remain largely untapped: unbanked consumers without checking or savings accounts, and consumers who send remittances to other countries. Other key findings:
* Consumers must have a strong sense of security in the mobile channel before they will adopt additional mobile banking services like mobile P2P. * Financial institutions, through consumer education, must provide convincing evidence of the safety and security of member/customer information across the mobile channel. * Mobile bankers and tech-savvy consumers will be early adopters of mobile P2P payments and will be critical in driving overall adoption because recipients of their transfers will also be pulled into the market. * These payments could lead to mobile merchant payments and mobile shopping, and with advances in mobile browser technology, mobile devices could eventually replace the use of credit or debit cards for purchases.

Fitch assigns AA rating to U.S. Central

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LENEXA, Kan. (3/19/08)--Fitch Ratings has assigned U.S. Central a long-term debt rating of “AA+,” the credit union liquidity provider said in a press release Tuesday. Previously, U.S. Central had an “AAA” rating on long-term debt. U.S. Central’s short-term rating of “F-1+”, individual rating of “A” and support rating of “1” were affirmed at the highest levels given by Fitch. “U.S. Central is a strong, healthy financial institution with $2.4 billion in capital, access to more than $20 billion in available liquidity and a high-quality investment book,” said Francis Lee, U.S. Central president/CEO. “The ‘AA+’ rating is shared by only three other U.S. depository institutions.” Fitch’s report also stated that U.S. Central’s investment book is of high quality, with about 95% of the portfolio containing AAA-rated securities. “U.S. Central continues to exhibit sound credit fundamentals and its franchise remains solid. The company’s balance sheet has a low risk profile and its funding and liquidity positions remain quite strong,” Fitch said. U.S. Central is the nation’s only wholesale corporate credit union. U.S. Central and its 26 member corporate credit unions comprise the Corporate Network, which provides liquidity, lending and payment services to 8,400 credit unions.