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CU System brief (04/10/2012)

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  • SACRAMENTO, Calif. (4/11/12)--Ricky Flemings, 28, of Antelope, Calif., a member of Sacramento, Calif.-based Schools Financial CU,  pleaded guilty Friday to two counts of mail fraud stemming from a plan that involved claiming identity theft and allegedly getting credit reporting agencies to remove legitimate loans from his credit report to increase his credit score. The plan deceived Experian and other credit reporting agencies.  Flemings allegedly exploited provisions of the Fair Credit Reporting Act by taking out fraudulent loans from Oct. 1, 2005, through Nov. 12, 2009. He allegedly contacted Experian on multiple occasions, falsely reporting he was a victim of identity theft and demanding entries be removed from his credit report.  Experian blocked 162 inquiries and 40 trade lines from his report, which enabled Flemings to seek more credit. He received financing between July 9 and Sept. 5, 2009, from Schools Financial for a vehicle and a boat.  He allegedly then contacted Experian and asked for the entries to be removed from his credit report.  Sentencing is set for July 6 (Sacramento Bee April 7) …

Ruiz gets two years in prison for fraud at AEA FCU

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PHOENIX, Ariz. (4/11/12)--A Yuma, Ariz., businessman was sentenced to 24 months in prison and three years' supervision for one count each of conspiracy and transactional money laundering for his role in a $50 million fraudulent business loan scheme that helped put Yuma-based AEA FCU into conservatorship.

Frank Ruiz, 62, who had pleaded guilty in June to the charges allegedly received $4.75 million in fraudulent business loans from William Liddle, AEA's former vice president of lending. Ruiz initially faced 68 felony counts but the charges were reduced in a plea bargain and because he gave "substantial" assistance in the case against Liddle (KYMA.com and Loansafe.org April 10 and LSWT.com April 9).

In February Liddle was found guilty of 54 counts of conspiracy, fraud and transactional money laundering. His wife, Rhonda Liddle, was found guilty on 36 counts. Their sentencing is set for May 21.

AEA FCU, with $229 million in assets, was placed into conservatorship by the National Credit Union Administration (NCUA) in December 2010. In August, NCUA said the credit union's financial situation was improving.

CUNA Mutual Data breach ups exposure to phishing

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MADISON, Wis. (4/11/12)--CUNA Mutual Group is advising credit unions to warn their members about the potential for increased phishing attacks on the heels of a recent data breach at Atlanta-based Global Payments Inc.

In a risk alert to its credit union policyowners , CUNA Mutual also said the attacks could target members who were not impacted by the data breach.  The company also has posted a video update to Google+ and YouTube featuring  Risk Manager Ann Davidson discussing the alert. (To access the video, use the link.)

Global Payments "contained" the breach to less than 1.5 million debit and credit cards, Global said in a press release on April 1. Track 2 data may have been stolen, the company said. Track 1 and Track 2 data include names, card numbers and validation codes. Cardholder names, addresses and Social Security numbers were not obtained by cyber criminals who hacked part of its system. The hacking called Visa to drop the company from its "compliant service providers" list (News Now April 3).

Credit unions should alert members to be aware--especially in the next several days or weeks--of any suspicious e-mails, text messages or phone calls requesting any personal or financial information, especially card data, said CUNA Mutual's risk alert, the second issued since the Global Payments breach.

Card information that may be requested includes cardholder billing address, three digit CVV2/CVC2 code found on the back of the card, or enrollment criteria/passwords for Verified by Visa or MasterCard SecureCode.  "This card information was not part of the recent Global Payments breach. Criminals may ask members for this information to add to the other card data they may have obtained from the breach to perform card present (key entered) or card not-present (mail/telephone/internet) non-magnetic stripe transactions," the alert said.

Continue to advise members to never respond to e-mails, text messages or phone calls requesting this type of information.  If members receive suspicious requests advise them to contact the credit union, said CUNA Mutual.

CUNA Mutual offered these risk mitigation tips:

  • Educate the membership on phishing e-mails, text messages and phone call scams.
  • Record warnings on your telephone system and post notices on the credit union's website, in newsletters, and in branch lobbies stating the credit union will never solicit personal or financial information.
  • Advise members to not open unsolicited e-mails or text messages, or any links in unsolicited e-mails and text messages.
If a member has responded to a phishing scam with the requested information, take these steps:

  • Block and reissue the credit/debit card number;
  • Flag the member's account;
  • Advise the member to report the incident to the credit bureau, order a credit report, report the incident to the Federal Trade Commission, and file a complaint with the Internet Crime Complaint Center at www.ic3.gov;
  • Advise members to monitor their financial accounts closely and report any discrepancies.
CUNA Mutual will continue to monitor the Global Payments breach and notify its policyholders when new information becomes available.

Alloya Central Corporate signal intent to merge

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WARRENVILLE, Ill. And SOUTHFIELD, Mich. (4/11/12)--The boards of Alloya Corporate FCU and Central Corporate CU have signed a non-binding letter of intent to merge the two corporates.

In an announcement Tuesday, the Warrenville, Ill.-based Alloya and the Southfield, Mich.-based CenCorp said the action allows for ongoing discussions, due diligence and joint planning.  The new organization would serve nearly 20% of the nation's credit unions, primarily in a 10-state region spanning from the Midwest to the East Coast.

The combined corporate would continue under Alloya's federal charter and operate under the Alloya name.  CenCorp's current CEO, Bill Walby, would become CEO of Alloya with the headquarters located in Warrenville.  Board and committee representation would reflect the combined membership.

Given the geographic distribution of the combined memberships, the boards envision significant operations to remain in Alloya's current locations in Warrenville and Albany, N.Y., as well as CenCorp's Southfield, Mich. location.

"While very successful in its own right, the current and future operating environment  for corporates has prompted CenCorp to consider alternatives, including merger, that would enhance member value and better serve its members," said Walby.  "A merger with Alloya would create enhanced value for both memberships in the form of significantly increased scale, additional revenue growth, reduced operating costs, and additional financial strength," he added.

"With the enactment of the amended corporate regulations in 2011, corporates have needed to orient their business plans to a new paradigm," said Chuck Furbee, Alloya's CEO. "This merger would result in a corporate credit union with core markets in 10 states. With a strong reputation for service through a local presence in the regions served, the combined corporate will be staffed by an experienced team that is dedicated to serving the needs of the membership first and foremost," Furbee said.

Credit Union Association of New York President/CEO William J. Mellin said the association supports the planned merger, noting that the "unification of these two corporate credit unions is in the best interest of our credit unions here in New York and beyond. It will provide long-term strength and viability, not to mention long-term value and a continued service presence in New York."

The merger also "will help ensure the health and well-being of the credit union movement, as it provides a stronger credit union-owned solution to service credit unions--one that will bring more efficiencies and lower costs to natural person credit unions."   The partnership would  put into practice the cooperation advocated by not-for-profit financial cooperatives, Mellin added.

After due diligence is completed, the next step would be to execute a definitive merger agreement by both corporates.  The merger would be subject to approval of members of CenCorp and regulators.

Wachovia court filing claims MBS risks were clear

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KANSAS CITY, Kan. (4/11/12)--Wachovia Capital Markets filed a motion Friday in a federal court in Kansas to dismiss the National Credit Union Administration's (NCUA)  lawsuit to recoup losses from residential mortgage backed securities (RMBS) that corporate credit unions bought from Wachovia before the financial crisis.

In its motion to dismiss, filed in the U.S. District Court for the District of Kansas, Kansas City,  Wachovia argued that the MBS bought by U.S. Central FCU and Western Corporate FCU before they were placed into conservatorship by NCUA fell into a category known as "Alt-A" or mortgages that are neither "prime" nor "subprime" and that  its prospectuses for the investments outlined clearly the risks involved.

In its motion, Wachovia says that "approximately 73% of the loans were reduced documentation or no documentation loans, i.e., loans for which the borrower was not required to submit proof of his or her income, assets, or both."

Wachovia issued, underwrote and sold the funds, which were originated by four lenders: National City Mortgage, Accredited Home Lenders Inc., Wachovia Mortgage Corp., and American Mortgage Network.

NCUA's original complaint against Wachovia alleged that originators of the RMBS had systematically abandoned the stated underwriting guidelines and resulted in riskier RMBS that the corporates would not have bought, had they known.  Wachovia representatives sold about $100 million in RMBS to the corporates in 2006. U.S. Central purchased about $80 million in RMBS underwritten by Wachovia, according to the complaint NCUA filed Nov. 28 (News Now April 3).

Wachovia's motion included "the extensive risk disclosures" in the prospectuses for two offerings, the Wachovia Mortgage Loan Trust and the NovaStar Mortgage Funding Trust. They included:

  • " If the residential real estate market should experience an overall decline …delinquencies, foreclosures and losses could be higher than those now generally experienced;
  • "Most of the loans in the pools would not meet the requirements of Fannie Mae and Freddie Mac;
  • "As a result of the underwriting guidelines used …these mortgage loans are likely to experience rates of delinquency, foreclosure and bankruptcy that are higher, and that may be substantially higher, than those experienced by mortgage loans underwritten to Fannie Mae and Freddie Mac conforming guidelines;" and
  • "There is no assurance that the ratings [by rating agencies] …will not be qualified, lowered, or withdrawn."
Wachovia also said the complaint lacked any allegations specific to the originators of the mortgage loans underlying the offerings and said that "generic allegations" are not enough for a claim.

The crux of Wachovia's motion to dismiss focused on NCUA's meeting requirements for statute of repose and statute of limitation deadlines for filing the lawsuit and whether an extender statute applies to the case. Wachovia noted that the three-year statute of repose extinguishes NCUA's federal claims and that the extender statute, which would grant an extension to the deadline for filing in some cases, does not apply.

Those arguments followed a tentative ruling set in a U.S. District Court in California on a similar RMBS case, NCUA vs. RBS Securities, and said a case cited by NCUA, American Pipe Tolling, does not apply.

News Now contacted NCUA for a comment. NCUA's policy is to not comment on pending litigation.

CUs announce trio of mergers in Calif. Conn.

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SAN JOSE, Calif. and SHELTON, Conn. (4/11/12)--Three credit union mergers have been announced, two in California and one in Connecticut.

San Jose, Calif.-based Pacific Postal CU, with $188 million in assets, announced Monday it will absorb East Bay Postal CU, an $8.2 million asset credit union based in Oakland, Calif. (Silicon Valley/San Jose Business Journal Online April 9).

Pacific Postal has four branches and 14,600 members. East Bay has one branch and 1,700 members. The merger could be completed by July 1, East Bay CEO Cynthia La Croix told the publication. 

El Camino Hospital FCU, an $8.3 million asset credit union based in Mountain View, Calif., has been approved to merge into Provident, CU, a $1.52 billion asset credit union, based in Redwood City, Calif., according to the California Department of Financial Institutions.   

Mutual Security CU, a $235 million asset credit union in Shelton, Conn., plans to absorb $3.1 million asset, Bridgeport, Conn.-based Connecticut Energy Employees CU--formerly SoConn Gas Employees CU (CEECU) Inc.

CEECU employees are slated to vote on the merger April 23. CEECU has 600 members. Mutual Security CU has 34,405 members.

California DFI State CU assets up 1.7

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SACRAMENTO, Calif. (4/11/12)--California state-chartered credit unions assets went up 1.7% to $73.1 billion in the fourth quarter 2011 from $71.9 billion a year earlier, according to the California Department of Financial Institutions (DFI).

Shares at $62.9 billion rose 2.5% from $61.4 billion during the same period. Loans declined 4.8%, going to $40.5 billion from $42.5 billion.

State-chartered credit unions net worth was up 7.3%, hitting $7.3 billion from $6.8 billion a year earlier. That caused the net worth to asset ratio to increase to 9.95% from 9.43% a year ago, said DFI.

The fourth-quarter loan loss allowance totaled $1.1 billion, a 13.5% decline from $1.3 billion one year prior, while delinquent loans at $920.7 million dropped 15.3% from $1.1 billion at year-end 2010. Delinquent loans as a percentage of total loans were 2.27%, down from 2.55% a year earlier. Other real estate owned increased 14.7% to $152.3 million from $132.8 million the previous year.

Net margin to average assets was at 4.18% down from 4.38%, while the provision for loan losses decreased 45.2% to $419.6 million from $765 million.

Fourth-quarter net income rose 52.2% to $510.6 million from $335.4 million at year-end 2010.

The number of credit unions declined 2.5% to 158 from 162.

Georgians will hit the road but monitor vacation budgets

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DULUTH, Ga. (4/11/12)--Georgians will hit the road this summer, after years of economizing and staying close to home with "staycations," according to a survey by the Georgia Credit Union Affiliates (GCUA). Although higher gas prices aren't likely to be an impediment, the added cost may cause some people to alter the lengths of their vacations or find cheaper alternatives. That mirrors national trends, said GCUA.

Sixty-three percent of respondents to the GCUA Consumer Survey said they plan to spend more or the same on travel in 2012 than they did last year. That's up from 49% who said the same thing in 2010 (GCUA's Consider This April 3).

Traveling on a budget remains a priority. The GCUA survey found that 31.7% of respondents worked harder to find deals and save on travel in 2011 than they did in previous years.

With many travel bargains and regional destinations to choose from, people can still find the money-- and the time--to take trips this year, GCUA said.

On a national level, travel experts expect people to change the type or length of their travel rather than opt to cut out travel entirely, according to a CBS.com report in March. Many travelers have found that remaining flexible with timing and destination can help. Travelers can search for discounts on several destinations and choose the one with the best deals, GCUA said.

Regional destinations are expected to be popular this year, reducing the fuel costs associated with vacations. Thetravelguide.com suggests vacationers book their vacations in bundles instead of booking airfare, hotel and attractions separately. The site also recommends asking lots of questions when making plans. Sometimes booking for a particular day of the week can result in savings.

During the past few years, family camping trips have seen a resurgence, especially in national parks and forests, with that trend seeming to continue into 2012 (prweb.com April 3). 

Many national parks are seeing a consistent rise in the number of visitors, which makes it harder to find campsites in a park's campgrounds and to enjoy solitude and the appeal of the outdoors. Once in the park, visitors likely will find attractions crowded, roads congested and campgrounds full, prweb.com said.   

Camping in a national forest is a good alternative because there are 175 national forests located in 43 states--many within a day's drive from most big metropolitan areas, and many surrounding a national park, prweb.com added.

Many of her members are still approaching vacations cautiously, Tina Burkhalter, president of Nashville (Ga.) CU, told GCUA. "I believe rising gas prices will certainly affect our members' decisions on where to go and how far to travel," she said.

To save money, she suggests that people consider taking shorter vacations. A shorter trip costs less, but still provides the chance to relax and get away. "Most of our members rely on loan proceeds to fund their vacations," Burkhalter said.

A better option is for people to prepare in advance for their vacations by saving a little at a time throughout the year in a vacation club savings account, and funding it through payroll deduction, she added. With a small amount saved each week, people can give themselves the freedom to take the trip they want, Burkhalter concluded.

Guatemalan CU professionals intern in California Iowa

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MADISON, Wis. (4/11/12)--Ten Guatemalan credit union professionals arrived in the U.S. last week to begin the first phase of a month-long internship program with credit unions in California and Iowa. The interns, all under the age of 40, are the first cohort of World Council of Credit Unions' (WOCCU) new International Credit Union Leadership Program.

Victor Manuel Garcia Salazar (right), a Guatemalan intern with Des Moines (Iowa) Metro CU, shakes hands with Iowa Democratic state Rep. Bob Kressig during a visit to Iowa's capitol while Linda Gibbs, business development specialist for Greater Iowa CU in Ames, looks on.
The program, funded by a grant from the U.S. Department of State, Bureau of Educational and Cultural Affairs, Office of Citizen Exchanges, is part of the State Department's larger Professional Fellows Program.

With assistance from the California and Nevada Credit Unions Leagues, six interns were placed in credit unions in the Los Angeles and San Francisco metro areas. The Iowa Credit Union League has helped place the remaining four interns at credit unions in Des Moines and Ames.

During the program's second cohort, 10 young professionals from the U.S. will intern in Guatemalan credit unions to further broaden international relations and establish higher levels of credit union professionalism worldwide, according to Brian Branch, WOCCU president/CEO.

"The goal of the Professional Fellows Program is to increase networking among young professionals and foster higher performance levels," Branch said. "For participants in the International Credit Union Leadership Program, this will translate into a stronger global credit union network and better member service delivered by credit unions in participating countries."

Interns traveling to California will focus on gaining skills in credit union management including greater marketing awareness, training in financial disciplines and techniques for new product and service delivery methodologies, while improving their English.

Guatemalan intern Roberto Monge (right), human resources director at the Guatemalan credit union trade association (right), learns new strategies from Fernando Arias of Patelco CU in Pleasanton, Calif. (Photos provided by World Council of Credit Unions)
Although the program is not part of the WOCCU International Partnerships Program, the California and Nevada leagues view the internships as a natural extension of their existing relationship with credit union trade association Cooperativas Federeadas de Ahorro y Crédito de Guatemala, their Guatemala partner organization, according to Diana Dykstra, the leagues' president.

"This is another great example of our partnership with Guatemala--to share expertise and experiences, and improve the credit union movements in both countries," Dykstra said.

Interns in Iowa will gain expertise in many of the same areas, and will seek potential solutions to operational challenges they're facing at their credit unions back home. Also, the exchange program allows host credit unions to gain a greater perspective on Hispanic culture and business practices that may have practical applications in helping the credit unions better serve their own Hispanic populations, according to Patrick S. Jury, president/CEO of the Iowa league.

"Our credit unions will provide a unique perspective and training environment for our guests looking to take home new experiences," Jury said.

At the conclusion of their fellowships, all participants will travel to Washington, D.C., where they will take part in the Professional Fellows Congress, May 3-5. The congress marks the culmination of the U.S. exchange experience, providing a forum for participants to discuss best practices, meet other young leaders within their profession, and develop concrete projects and networks they can implement upon their return home.

In October, WOCCU's International Credit Union Leadership Program will pair interns from the Dominican Republic with credit unions in Wisconsin and North Carolina. The Wisconsin Credit Union League also is paired with the Asociacion de Instituciones Rurales de Ahorro y Creditor Inc., the Dominican Republic's credit union trade association, as part of the program. In January 2013, the next group of U.S. program participants will intern with credit unions in the Dominican Republic.

WOCCU's International Credit Union Leadership Program, which promotes internships for young credit union people from various countries, is designed to facilitate idea exchanges, promote foreign language skill development, enhance cultural diversity and improve problem-solving skills as they relate to credit union development and management on a global basis.

The program's second cohort, which will involve choosing 10 Spanish-speaking U.S. applicants to intern in Guatemala credit unions, begins in June. The deadline for applications is April 20.

For more information, use the links.

iKiplingeri slideshow features 7 CUs anyone can join

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MADISON, Wis. (4/11/12)--An online slideshow on kiplinger.com features "7 Credit Unions Anyone Can Join," and directs consumers to a link for asmarterchoice.org, the online credit union locator tool.

The tool, asmarterchoice.org, also compares average rates and fees at credit unions vs. banks, highlights the latest "good news" on credit unions appearing in the media, and presents real-life comments submitted by people who belong to credit unions. It is presented by the Credit Union National Association and the leagues.

"[Credit unions] tend to charge lower loan rates, pay higher savings yields and 'treat borrowers who are struggling more sympathetically,'" said Stephen Brobeck, executive director of the Consumer Federation of America, in the kiplinger.com article.

The seven credit unions included in the slideshow are:

  • Alliant CU, Chicago;
  • Connexus CU, Wausau, Wis.;
  • Consumers CU, Waukegan, Ill.;
  • Lake Michigan CU, Grand Rapids, Mich.;
  • NASA FCU, Upper Marlboro, Md.;
  • Pentagon FCU, Alexandria, Va.; and
  • Navy FCU, Vienna, Va.
 To view the slideshow, use the link.

Minnesota CUs launch Bankziety campaign

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ST. PAUL, Minn. (4/11/12)--The Minnesota Credit Union Network (MnCUN) has launched its "Bankziety" campaign, a response to consumer frustration with banks and a showcase for credit unions as an alternative.

The campaign includes SeeYouLaterBank.com, a website offering events, contests and promotions to provide consumers with tools and resources that highlight the benefits of credit union membership. The site also features a credit union finder, information comparing banks and credit unions, and money management tips.

"Our credit unions have been telling us that they're seeing more and more new customers coming through their doors because people are ready for something different," said Mark Cummins, MnCUN president/CEO. "Based on what we were hearing, the time is definitely right to capitalize on this 'bankziety,' a term we use to describe the anxiety and frustration consumers are feeling right now about banks."

The "Bankziety" campaign also includes a Facebook contest asking Minnesotans to share their stories of banking anxiety, money stress or how credit unions have been the bankziety cure. Up to 12 entrants will win cash prizes and gift cards, with the top four entrants awarded $2,000 and a chance to tell their stories as part of a video series.

Stories can be submitted through May 7 on the MnCUN Facebook page.

NCUFICUF grant finances Iowa fin ed projects

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DES MOINES, Iowa (4/11/12)--Through grants from National Credit Union Foundation and the Iowa Credit Union Foundation (ICUF), 43 Iowa credit unions have received training and technical assistance to provide financial education to members living below the poverty level.

Click to view larger image Pictured are Iowa Credit Union Foundation (ICUF) board members and credit union CEOs who received a 2011 financial education grant from ICUF through a Financial Education Grant from the National Credit Union Foundation. From left, Paul Lensmeyer, Ascentra CU, Bettendorf; Pat Drennen, 1st Gateway CU, Camanche; Debbie Whittie, Village CU, Des Moines; Becky DeVries, Midland CU, Urbandale; Dale Owen, ICUF president of the ICUF; Helen Pearce, ICUF vice president; and Marybeth Foster, ICUF executive director. (Photo provided by the National Credit Union Foundation)
"Financial education is key to building the financial assets of low-income populations," said Marybeth Foster, ICUF executive director. "Our goal is to strengthen the capacity and build leadership in credit unions to deploy financial education."

The financial education training was delivered by Adam Carroll, president/CEO of National Financial Educators.

Highlights of financial education project included:

  • Eleven webinars were developed for credit unions on financial education topics;
  • Fifty credit unions were provided with a financial education toolkit, which included a binder of flyers, handouts, worksheets, and materials on all webinars produced by ICUF for use with credit union members and the general public; and
  • Sixteen credit unions received financial education grants from ICUF to fund financial education programs.
The project is closely tied to the ICUF's Credit Union Family Partnership Individual Development Account program (CUFPP), which empowers building assets for individual development account (IDA) savers wanting to buy a first home, pursue education or a small business.

The project's focus is on financial education to families at or below 300% of the federal poverty level, who typically qualify for the federally funded Children's Health Insurance program. ICUF chose this target market because these families can be served by CUFPP under legislation passed in Iowa. Families have a household net worth of less than $10,000 at the time of application to the IDA program.

Financial education is a core component of the IDA program because savers must complete financial education to receive matching funds. Before the program began, participating credit unions did not have the resources to offer financial education programs.