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CUs celebrate UBIT victory await resolution

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APPLETON, Wis. (5/18/09)--The Wisconsin credit union that won its lawsuit against the government's interpretation of three insurance products as falling under the unrelated-business income tax (UBIT) took some time Friday to assess the impact of Thursday night's decision by a federal jury. "We're thrilled," said Cathie Tierney, president/CEO of Appleton, Wis.-based Community First CU, after she admitted being "a little numb" from the four-day ordeal before the U.S. District Court in Green Bay, Wis. The trial involved over more than 100,000 documents and 15 depositions requested by the government, she told News Now. "It was the culmination of years and hundreds of hours and days and weeks' effort. It was an incredible team effort by partners such as the UBIT Steering Committee and their organizations, and all the attorneys," she said. She noted that "it meant so much to have the Credit Union National Association (CUNA) and CUNA Mutual Group there supporting us." When Community First filed the suit in January 2008, it was with the support of the UBIT Steering Committee--CUNA, the American Association of Credit Union Leagues, CUNA Mutual Group and the National Association of State Credit Union Supervisors. CUNA General Counsel Eric Richard and CUNA Counsel for Special Projects Michael Edwards were present during the trial. The collective effort "shows credit unions are very special places in the way that they come together with their resources and ideas," said Tierney. The Wisconsin Credit Union League also supported the effort, and league President/CEO Brett Thompson testified on behalf of the credit union Tuesday morning. He told News Now that he testified about the history of Wisconsin credit unions, how the league services its member credit unions, and how products such as the insurance and GAO products contribute to the purpose of credit unions in serving their members. During the trial, the judge ordered witnesses outside the courtroom and told those in the courtroom not to talk about the testimony because other witnesses hadn't testified yet. "It's strange to testify with a (gag) order in place because you don't know what has been said in the courtroom," Thompson told News Now. "We are pleased by the jury's decision …that the credit insurance and GAP products sold by Community First CU are substantially related to the purpose of credit unions so that income earned from those sales is not taxable," Thompson said in a statement released by the league. "These products provide credit unions' member borrowers with greater peace of mind and so can be instrumental in re-starting our economy. This decision ensures consumers won't be denied this opportunity or be forced to pay more for the protection they want," he added. "But even more important, today's ruling clarifies that these loan-related products are part of the everyday mission and purpose of credit unions. The jury agreed that these services help mitigate losses to the credit union, enabling Community First to make more loans--a central task related to credit unions' mission of serving members." Thompson said the league was grateful to Tierney and the board and members of the credit union "for challenging the IRS and championing this case for the credit union movement." The ruling, he said, "strengthens the credit union movement's position in other pending litigation related to UBIT issues." Community First's Tierney told News Now that "we were fortunate to find a jury that was very familiar with credit unions." The jury--three men and five women--took less than two hours to find that all three products at issue were substantially related to the purpose of the credit union's mission--and therefore were not taxable under UBIT. The trial went "better than expected" in terms of timing and it was a smooth process. But it was hard to hear some of the government's accusations, said Tierney. "It was difficult to listen to the government saying for all intent and purposes that credit unions were 'rip-off artists' and that their [insurance] products were not good," she said. "We are totally grateful to the two members [Yurri Sauerhammer and Robin Jorde] who testified. They are everyday people willing to tell their story. It was very heartwarming and it shows what special places credit unions are--that we're not a typical financial institutions but are cooperatives serving the best interests of members. Sauerhammer and Jorde testified about their experiences with the credit life and disability life and guaranteed asset protection products. One of the widows told the court she would have lost her home after her husband died, if it hadn't been for the product. After the verdict, the government's attorney asked the judge to set aside the verdict in a special oral motion. "My guess is that that is not going to happen," said Tierney. "It was a very decisive victory." The government's attorney has 10 days in which to file a written motion to set aside the jury's verdict, according to CUNA's Edwards. Tierney expressed "thanks to everybody in the movement and all the credit unions that supported us in their thoughts. Now we're getting back to running the credit union," she added.

CU System briefs (05/15/2009)

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* SAN DIEGO (5/18/09)--Thirty-six men and women--part of the 60 suspects in a Lincoln Park Gang counterfeit ring that defrauded Navy FCU in San Diego of more than $500,000--pleaded not guilty in San Diego Superior Court to the fraud charges. Most of those charged are students, members of the military and new parents. Sixteen are believed to be members of the gang. Authorities say the gang recruited credit union members to give their account number information and personal identification numbers. They would deposit counterfeit checks into the accounts, then withdraw thousands at an ATM in a casino. The accountholders allegedly received a percentage of the payoff. California Attorney General Jerry Brown and county District Attorney Bonnie Dumanis said the arrests were the first time a gang in California was targeted for its alleged involvement in bank fraud (Union-Tribune May 15 and News Now May 15) … * NEW YORK (5/18/09)--A former credit union treasurer was sentenced to roughly three years in prison for stealing more than $100,000 from St. Charles Borromeo Church FCU, Harlem, N.Y. The theft, which the credit union discovered in December 2005, led to the credit union’s collapse and insolvency. Former manager and treasurer Chinithia Bills pleaded guilty to bank fraud in January (Associated Press May 14). Bills took the money using various schemes and used the funds for personal expenses, according to prosecutors ... * PERRY, Ga. (5/18/09)--A 29-year-old Perry, Ga.-man was sentenced to life in prison for a 2007 armed robbery of Robins FCU, a $1.122 billion asset, Warner Robins, Ga.-based credit union. Anthony Scott Chairmont won’t be eligible for parole for 30 years, said Houston County District Attorney Kelly Burke. Chairmont was sentenced as a recidivist due to two prior felony convictions. Under Georgia law, the required sentence after a conviction of a “capital offense” such as an armed robbery of a credit union, is life in prison, Burke said (Macon Telegraph May 15) …

Keep cash in CUs for higher returns says expert

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MOUNTAIN VIEW, Calif. (5/18/09)--A financial expert and author speaking at Intuit's Town Hall series at the company's California headquarters about personal finance lists credit unions as one of her "seven ways to make money." "Look beyond your regular bank" is Farnoosh Torabi's fifth tip to Intuit employees (Business Wire May 15). Torabi notes that while the Federal Deposit Insurance Corp. is guaranteeing balances up to $250,000, "don't be afraid to look beyond your regular bank. Consider keeping that cash in online banks or credit unions for higher returns. Compare rates at BankingMyWay.com or Bankrate.com." Torabi is author of "You're So Money," a best-selling personal finance book. Mountain View, Calif.-based Intuit provides business and financial management solutions for financial institutions such as credit unions, small and mid-sized businesses, consumers and accounting professionals. To review the seven ways to save money, use the link.

Illinois state senator receives Desjardins

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NAPERVILLE, Ill. (5/18/09)--Illinois State Sen. Jacqueline Collins (D-Chicago) was presented with the 2009 Desjardins Youth Financial Literacy Award for State Lawmakers by the Illinois Credit Union League during the league's Legislative Day in Springfield.
Illinois Credit Union League President/CEO Dan Plauda presents the 2009 Desjardins Youth Financial Literacy Award for State Lawmakers to state Sen. Jacqueline Collins (D-Chicago) during the league's annual Legislative Day in Springfield. (Photo provided by the Illinois Credit Union League)
Collins, who chairs the state Senate Financial Institutions Committee, was nominated for her active leadership role in working to create enhanced opportunities to promote financial literacy throughout Illinois schools. During the 95th Illinois General Assembly, she helped enact four legislative measures:
* S. B. 2098 (P.A. 95-920), which authorizes the state treasurer to create the State Treasurer Financial Education and Savings Not-for-Profit Corp. to promote financial literacy and savings, and to issue grants and scholarships; * S.B. 2378 (P.A. 95-0863), which amends the School Code to add these topics to the financial literacy component of consumer education: home ownership, how to obtain a mortgage, fixed- and adjustable-rate mortgages, subprime loans and predatory lending; * H.B. 1662 (P.A. 95-0358), which creates the Illinois Children's Savings Accounts Act and a task force to come up with a plan to implement a savings account at birth for every child born in Illinois to state residents; * S.B. 2191 (P.A. 94-0929), which amends the School Code and State Finance Act and requires the State Board of Education to develop and adopt curricula, materials and guidelines for school boards in implementing financial literacy instruction within courses offered in the state's public high schools. It also creates a Financial Literacy Fund in the Treasury for grants to school districts for financial literacy.
The Desjardins award is sponsored by the Credit Union National Association (CUNA). "Senator Collins has shown great leadership in helping to promote financial literacy education for students and residents across Illinois," said Dan Plauda, league president/CEO. "We are pleased that CUNA has chosen her for this award and that we had the opportunity to honor her in front of so many credit union political activists.

The Golden 1 announces 25 layoffs at headquarters

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SACRAMENTO, Calif. (5/18/09)--The Golden 1 CU, Sacramento, announced Thursday that it has reduced its headquarters staff by 25 full-time back-office positions in response to weak local and national economic conditions. The layoffs represent 1.7% of the credit union’s total work force, Teresa Halleck, The Golden 1 CU president/CEO, told News Now. The credit union has had a 7% total reduction in work force with attrition. “These are difficult times that call for difficult decisions,” Halleck said. “Our hearts go out to those affected by these changes.” The Golden 1 CU does not have plans for more layoffs. “We’ll see what happens the rest of the year,” Halleck said. “I’m hoping there won’t be any more, but I can’t make any promises.” California has been “battered” by the economic conditions. The Sacramento area has a 11.3% unemployment rate as of March, compared with the state average of 11.5%. California is leading the nation in foreclosures, she said, citing local economic statistics. The credit union has experienced an increase in loan delinquencies as members continue to lose their jobs. As of March 31, The Golden 1 had a loan delinquency rate of 1.51%, compared with a 2008 year-end rate of 1.26%. “Others have higher delinquencies, but that’s a lot for us,” Halleck said. However, The Golden 1 CU remains strong, she added. The credit union recently received its highest member service score to date. “The members’ perception of The Golden 1 is wonderful,” Halleck said. “They knew we weren’t part of the trigger that melted down the economy. We’ve done really well.” The credit union also will add two branches in Salinas from a merger with Steinbeck CU soon. “It’s a good addition to Golden 1,” Halleck said. “It’s a long-term growth opportunity for us. It fills in the areas [in which] we had a hole.” The Golden 1 will continue to do everything it can to manage the financial storm, Halleck said. “These have been hard choices,” Halleck said. “We’ve eliminated anything we could that wasn’t impacting member service. We’re here--we will survive,” she concluded. The Golden 1 has 77 branches and $7 billion in assets.

Texas House fails to take up data security bill

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AUSTIN, Texas (5/18/09)--A Texas data security breach bill, House Bill 345, died late Thursday night, missing a deadline as the Texas House became bogged down in floor debates on bills preceding it on the House Calendar. The bill stipulated that merchants have a duty to safeguard the sensitive personal information they collect from plastic cards, the league said. “The league and Texas credit unions worked very hard, and are obviously very disappointed,” said Texas Credit Union League (TCUL) Chief Advocacy Officer Buddy Gill. “Since 2007, the retailers fought strongly against the bill every step of the way, yet every time this legislation has gotten to vote whether in committee or on the floor, lawmakers have unanimously favored the bill” (LoneStar Leaguer May 18). A recent Texas voter poll confirms overwhelming public support for legislative changes sought to address the problem, with 29% of Texas voters reporting having a debit or credit card canceled due to fraud or a merchant's lax security and resulting data breach, TCUL said. Three in four voters said retailers would safeguard their card data better if the merchants were held financially responsible for any losses. Four in five said the Texas legislature should pass a law requiring businesses to take reasonable steps to protect the data they collect from debit and credit card transactions. There is no question public opinion favors the credit unions’ position on the data security breach issue, TCUL said. Major retailers at the national level activated grassroots efforts, urging Texas House members to oppose the bill, the league said. “As long as data security breaches occur and lax security is determined to be the culprit, with major impacts on our credit unions and thus our members’ bottom lines, this issue is not going to go away,” Gill said. “If we see the same big, costly data security breaches occurring in the remainder of 2009 and in 2010, then you can bet in 2011 the gloves will come off again on this issue,” he added. “Until merchants have some ‘skin in the game’ and are on the hook for possible losses due to their own lax or lapsed security, they have no effective motivating incentive.”

Letter to editor CUs work to fill lending void

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MADISON, Wis. (5/18/09)--Wisconsin credit unions are working to fill the lending void, Wisconsin Credit Union League President/CEO Brett Thompson wrote in a letter to the editor that appeared in The Capital Times Wednesday. The Capital Times is based in Madison, Wis. Thompson wrote in response to a letter written by a banking trade group in Wisconsin that suggested banks can’t “immediately fill the entire void for loans and it is unfair for critics to suggest otherwise.” Credit unions can fill the lending void, Thompson argued, but are prevented from doing so because of a 12.25% member business lending cap. “Nearly half of credit unions’ member business loans go to households with incomes less than $50,000. Credit unions could do more, at no cost to taxpayers, but banks consistently oppose attempts to lift an arbitrary cap on business lending that only applies to credit unions,” Thompson said. The banking trade group’s letter also noted that some healthy Wisconsin banks have accepted taxpayer-provided Troubled Asset Relief (TARP) Funds “to take advantage of below-market cost of capital, something that may not fit with every bank’s growth plans, but it clearly does for some.” The Wisconsin league president argued that banks accepting TARP money may be doing so as a growth strategy to spur lending, instead of using the money as a bailout. Last week, Wisconsin business people addressed a congressional oversight panel to express their frustration at the lack of credit available from banks. The panel said only 29% of small business owners can meet their borrowing needs, Thompson noted. “We suggest that consumers and businesses look to their locally owned, democratically operated credit unions for the funds they need,” Thompson added. “And we suggest it is ‘unfair,’ to use Kurt Bauer’s word, for banks to block a ready source of increased funds for small businesses.”

Crown Prince of Spain to open World CU Conference

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MADISON, Wis. (5/18/09)--His Royal Highness The Prince of Asturias, Felipe de Borbon y Grecia, will welcome attendees of this year's World Credit Union Conference in Barcelona, Spain, July 27 during the Opening General Session. The only son of King Juan Carlos and Queen Sofia, Prince Felipe is the heir apparent to the Spanish throne. He will introduce the Monday keynote speaker, former president of Mexico Vicente Fox. Prince Felipe's international education includes attending high school in Ontario, Canada, and Spanish military, naval and air force academies; receiving an undergraduate in law from Autonomous University, Madrid; and receiving a master's degree in international relations from Georgetown University, Washington, D.C. He married Princess Letizia, a journalist, in 2004. Their wedding in Madrid was the capital city's first royal marriage in almost a century. They have two daughters. King Juan Carlos is a direct descendant of European rulers, including Queen Victoria of the United Kingdom through his grandmother, Victoria Eugenie, and Louis XIV of France through the House of Bourbon. The World Credit Union Conference, presented by the World Council of Credit Unions, will be July 26-29 at the Barcelona Convention Centre and will attract credit union leaders from more than 40 countries. The early bird deadline for discounted registration ends Wednesday. For more information, use the link.

Valdov Perkins receive Virginias top awards

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RESTON, Va. (5/18/09)--Former Credit Union National Association (CUNA) Chairman Juri Valdov and Charles Perkins were presented with top honors by the Virginia Credit Union League during the league's 75th Annual Meeting in Reston, Va. earlier this month.
Valdov, retired president/CEO of the $1.5 billion, Herndon-based Northwest FCU, received the league's Eugene H. Farley Jr. Award of Excellence. As CUNA chairman from 2005 to 2007, Valdov championed credit union involvement in financial education efforts, especially for young people. He retired the CEO position at Northwest in December 2007 after a 36-year career in the credit union movement. Until March this year, Valdov served as the credit union's senior vice president of external affairs. That position allowed him to continue promoting credit unions' participation in charitable and community-based projects and financial education initiatives, such as Credit Union Miracle Day Inc. and the annual CU Cherry Blossom 10-Mile Run in Washington, D.C. Perkins, a longtime credit union leader in Virginia and retired president/CEO of Roanoke-based Freedom First FCU, was awarded the league's James P. Kirsch Lifetime Achievement Award. Perkins worked for several credit unions and credit union trade associations. In addition to Freedom First FCU, he served with Woodbridge-based Belvoir FCU, two Washington D.C.-based credit unions--Walter Reed Army Medical Center FCU and Agriculture FCU--and Ohio-based Schiable Employees CU. He also worked for the Virginia and Michigan credit union leagues.

NACUSO announces board election results

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NEWPORT BEACH, Calif. (5/18/09)--The National Association of Credit Union Service Organizations (NACUSO) announced the results of its 2009 Board Directors at its annual membership meeting May 4. The meeting was part of NACUSO’s 2009 Annual Conference in Las Vegas. Under NACUSO's by-laws, the board of 11 directors--four from Platinum Partner members, three from credit union service organizations members that are not Platinum Partners and four without qualifying representative connection. Re-elected were Mike Hales, partner in the Rochdale Group, a credit union consulting firm, and Judy Sandberg from Gateways Services Group, a CUSO providing insurance services and investment and trust program management services.
Valorie Seyfert, president/CEO and co-founder of CUSO Financial Services, a broker/dealer CUSO in San Diego, and Mark Zook, president/CEO of MaPS CU in Salem, Ore., were newly elected to the board. Board member Tom Davis did not run for re-election because he is now CEO of NACUSO. Due to the resignation of a director and the change of another from one category to another, there are two vacant director seats on the board. Both directors must be persons representing members that are CUSOs, but not Platinum Partners. The board can appoint persons to fill the vacancies until the 2010 election. Officers for the NACUSO 2009 board of directors are:
* Chairman--David Serlo, president/CEO, PSCU Financial Services; * Vice-Chairman--Pete Snyder, president, SCS, Snyder Consulting Solutions LLC; * Treasurer--Lisa Renner, president/CEO, CU Holding Company LLC; and * Secretary--Judy Sandberg, senior vice president of strategic direction, Gateway Services Group LLC.

Wisconsin league board exec committee named

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PEWAUKEE, Wis. (5/18/09)--The Wisconsin Credit Union League’s board of directors and executive committee were announced at its annual convention May 6-9 in Milwaukee.
Elected to the 2009-2010 Wisconsin Credit Union League Executive Committee are, from left: Chair, Kevin Hauser; Secretary, Mike Mallow; Treasurer, Jack Gill; and Vice Chair, Pat Lowney. (Photo provided by the Wisconsin Credit Union League)
The 2009-2010 League Board of Directors are:
* Region 1--Kevin Hauser, Westby (Wis.) Co-op CU; * Region 2--Jack Gill, First Community CU of Beloit; * Region 3--Jennifer Schilling, Empower CU, Milwaukee; * Region 4--Pat Lowney, Lakeview CU, Neenah; * Region 5--Mike Mallow, Sheboygan (Wis.) Area CU; * Class A--Carol Pecsi, First CU, Oak Creek; * Class B-- Kimberly Youngblood, Focus CU, Menomonee Falls; * Class C--Daryl Gessler, Connexus CU, Wausau; * Class D--Paul Kundert, University of Wisconsin CU, Madison.
The 2009-2010 Executive Committee are:
* Chair--Hauser; * Vice Chair--Lowney; * Secretary--Mallow; and * Treasurer--Gill.

Virginia league board elections announced

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LYNCHBURG, Va. (5/18/09)--Four incumbents were re-elected to the Virginia Credit Union League’s board of directors during the league’s annual meeting May 8 in Reston, Va. Directors re-elected to three-year terms are:
* Michael Guida, Members Trust CU, Virginia Beach; * Suzanne Hughes, University of Virginia Community CU, Charlottesville; * Joe Blevins, Mountain Empire FCU, Marion; and * At-Large Director Bill Cook, Northwest FCU, Herndon.
Guida was elected to Region 1, which includes Greater Hampton Roads and the Virginia Beach area. Hughes will represent Region 3, which includes Northern Virginia, Charlottesville and the Shenandoah Valley. Blevins will serve Region 4, which includes Roanoke, Lynchburg, Danville and Southwestern Virginia. The league also re-elected officers:
* Chairman--Stan Leicester, BayPort CU, Newport News; * Vice Chairman--Robert Petty, Bronco FCU, Franklin; * Treasurer--Hughes; and * Secretary--Guida.