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CUSO sues CU over participation loan deals

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DALLAS (5/7/09)--Credit Union Liquidity Services (CULS), a Texas-based credit union service organization (CUSO), has filed a lawsuit against a credit union in North Carolina, saying it owes money because CULS overpaid interest from participation loan deals related to Lincoln Mall in Chicago and a project in Pennsylvania. CULS, formerly known as Texans Commercial Capital LLC, a member business lending CUSO affiliated with Texans CU, filed the complaint Friday in the U.S. District Court for the northern district of Texas in Dallas against Coastal FCU, based in Raleigh, N.C. The complaint alleges that on Aug. 30, 2006, CULS and the credit union entered into two participation agreements on loans CULS was making to finance the Lincoln Mall in Chicago and Mockingbird Commons in Pennsylvania. On June 6, 2007, a third participation agreement was signed for the Mountain Village in Pennsylvania. In 2007, CULS and the mall amended the agreement's terms. CULS maintains it did not need Coastal's consent to make material amendments to the loan participation agreement terms. Coastal paid $5 million for an "all in" participation in the Lincoln Mall loan, with its participation interest initially set at 24.75%. As the loan commitment increased, the interest was to be reduced to 12.68%. However, the court documents say, CULS "inadvertently continued paying" Coastal the original interest of 24.75%. CULS also alleges it overpaid Coastal by more than $486,909 for the Lincoln Mall participation and more than $558,163 for the Mockingbird Commons project. Texans CU, a $1.7 billion asset credit union in Richardson, Texas, sold off most of Texans Commercial Capital LLC in 2007 as losses mounted from the Lincoln Mall project. In February, CULS filed to foreclose on a $39 million balance of its $62 million loan on the Lincoln project.

Pa. SECU sues Heartland over data breach

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HOUSTON (5/7/09)--Pennsylvania State Employees CU (PSECU) filed a class action lawsuit Friday in a U.S. District Court in Texas against Heartland Payment Systems, seeking to recoup losses from the card payment processor's massive data breach revealed in January. In the complaint filed, the Harrisburg, Pa.-based credit union said Heartland violated the Payment Card Industry (PCI) Data Security Standards required by Visa and MasterCard. Heartland had a duty to comply with the PCI standards, properly secure Visa and MasterCard credit card and/or debit card magnetic stripe information and not disclose the information to unauthorized third parties, said the complaint filed in Houston. The breach exposed all Visa and MasterCard accounts processed by the Princeton, N.J.-based Heartland between May 15, 2008, and Nov. 13, 2008. As a result of the breach, more than 105,000 Visa cards issued by PSECU to its members were compromised, cancelled and reissued. The suit alleges breach of contract, negligence, equitable indemnification (in which the credit union says Heartland benefited from the credit union cancelling and replacing cards for its members), restitution, unjust richment and violations of the New Jersey Consumer Fraud Act. The credit union is seeking actual damages related to the costs of reissuing members' cards and administrative expenses related to monitoring and preventing fraud, notifying members and dealing with member confusion, and other losses. The $3.4 billion asset credit union also is seeking injunctive relief requiring Heartland to boost the security of its systems, and attorney's fees, and court costs. U.S. District Judge Lee H. Rosenthal ordered an initial pretrial and scheduling conference for the case on Sept. 25.

Going green means happier employees members

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MADISON, Wis. (5/7/09)--Keep your credit union employees healthy, and they’ll be good to your members. That’s the motto that Michigan State University FCU (MSU FCU) in East Lansing has embraced with the construction of its new green headquarters building. “Our CEO [Patrick McPharlin] is firmly committed to keeping employees happy and making their surroundings nice,” Joyce Banish, MSU FCU vice president of university and community public relations, told News Now. “He thinks they will better serve the membership and raise the level of service.” The headquarters building opened in September and is seeking Leadership in Energy and Design (LEED) certification, which should be decided shortly, Banish said. MSU FCU is confident it will receive at least a silver rating, but is aiming for gold. MSU’s building uses an air purification system, thermapane windows and recycled materials such as low toxicity paint on the walls and bamboo floors. Lights automatically turn off if there is enough natural light in the room--and because all of the offices are located on the outside of the building, 75% of the workday’s light comes from the sun, Banish said. “People who are exposed to natural light are happier,” Banish added. The credit union also reduced its water use by 40% with waterless urinals and low-water toilets. Landscaping around the credit union requires little water and the plantings actually filter out oil and runoff, Banish said. MSU FCU offers employees a cafeteria so they don’t have to drive to get lunch, and an exercise room, a walking path and a shower area to encourage them to walk or bike to work. The credit union recommends carpooling and gives employees are given an incentive to drive compact cars by offering them parking spaces near the front of the building. Besides leaving a smaller footprint, the building has increased energy savings and has made happier, healthier employees. Employees that are happier and healthier will be more productive and have less sick time, and the credit union has better retention, Banish said. MSU FCU members also “love” the new building, she added. “The university and community are very dedicated to preserving the planet.” A green building can be more costly than a non-green building, but it depends on a building’s quality and size. The cost difference between LEED and non-LEED buildings could be a difference of 1% for large buildings, and 5% for smaller buildings. “The costs are minimal when you consider the energy savings,” she said. Banish said credit unions wishing to go green should:
* Use e-statements and e-mail instead of direct mail; * Cut out disposable items--such as styrofoam coffee cups; * Encourage healthier lifestyles for employees to cut down on sick time; and * Upgrade or remodel using recycled materials and low toxicity paints;
In California, Redwood CU (RCU), Santa Rosa, also has embraced green concepts. RCU’s administrative office and Santa Rose branch is LEED-certified. The building received a silver rating after RCU remodeled the 1960s-era building. After purchasing the building in 2005, RCU modified it to make it more light and energy efficient. Some of the features include:
* Recycled and/or renewable construction materials, including carpeting, linoleum, hardwood flooring and lighting fixtures, and a recycling program for materials removed from the building during the remodel; * Low-VOC (volatile organic compounds) and formaldehyde-free paints and finishes; * Environmentally sound water-based adhesives for carpet and flooring; * Automatic stepped lighting to maximize the use of natural light, and motion sensors that turn off lights when they detect that a room is unoccupied; and * Water-efficient restrooms, landscaping and irrigation.
“The result of this remodel has not only been an environmentally sound and positive workplace for nearly 200 of RCU’s 350 employees, but the facility also provides a comfortable and healthy atmosphere for members to conduct business at the on-site branch and two ATMs,” RCU said on its website. The remodel allowed RCU to consolidate its administrative work force from three buildings into one, reducing the need for cross-town travel. The new facility has a 200-seat community room that provides space for company meetings and events, and events for nonprofits and community groups at no charge. RCU also pursued green friendly efforts in its new Cloverdale branch, which opened last year. The credit union used green materials for the paint and carpet. RCU has been recognized for its sustainability efforts by the City of Santa Rosa, the Sonoma County Business Environmental Association and the California Credit Union League. Robin McKenzie, Redwood CU senior vice president of marketing and public relations, also noted that at a recent annual meeting, the credit union hired a green caterer who offered an environmentally friendly food setup. RCU also participated in a recent parade in Petaluma, Calif., where it provided a hybrid vehicle and handed out recycled shopping totes to attendees. “We offer a website for tips and resources for members to go green,” McKenzie said. RCU encourages e-statements and use of online banking. It also offers “green” loans, hybrid vehicle loan discounts and socially responsible investments where members can invest their money in funds that maximize return on investment and social responsibility. "RCU's members, employees and communities are interested more now than ever before in doing business with or working for organizations they can trust, who do the right thing, and who are committed to their communities and the environment," McKenzie told News Now. "RCU is very committed to all of these things, and we work hard to demonstrate our commitment in many ways. We consistently hear from members and employees that they appreciate and feel proud of RCU for our green efforts. "Being a true partner in sustainable practices and hearing positive feedback from our members, employees and communities is the true reward--even more so than the awards we've received in this area," she said. For more information, use the links.

Beach addresses branching after the bailout

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LAS VEGAS (5/7/09)--Bank closures are presenting credit unions with great opportunities in serving former bank customers, according to Carroll Beach, president/chief operating officer of CO-OP Shared Branching. In "Branching after the Bailout," a session at the National Association of Credit Union Service Organizations (NACUSO) Annual Conference in Las Vegas this week, Beach shared information and insights to help credit unions better serve their members and take advantage of opportunities in the current market. With today's financial climate, events in the movement and banking industry will impact the future for credit unions, particularly their branching strategies, he said, adding that shared branching can help in tumultuous times. "With all the bank closures and mergers going on right now, credit unions are presented with some great opportunities," he said. "The customers of these banks must go somewhere. Why not your credit union? You can send a powerful message to potential members about the strength of credit unions" and gain new members, he said. However, "some credit unions are responding to the economic crisis by shutting down branches to cut expenses. Experts warn that the key is to make sure operational cuts aren't leading to losses in member service. Closing branches can send a negative message to members. For credit unions, where member retention and service take priority, account accessibility must remain in place," Beach said. "Just because your credit union may have to close a branch, it does not mean you can't be in the neighborhood anymore. When proprietary branches are being shuttered, credit unions can direct members to a nearby shared branch, where they can continue to conduct transactions just as if they were in their home credit union." Nearly 1,300 credit unions offer shared branching in 3,600 locations through CO-OP Shared Branching.

Irish league elects Bailey president

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DUBLIN, Ire. (5/7/09)--Mark Bailey was elected president of the Irish League of Credit Unions after a vote by delegates attending the league’s conference at the end of April. Bailey had served two years as league vice president and is a board member of Dunshauglin CU (Business and Finance Daily News Service April 28). “The credit union movement is facing into an important period where the challenges facing the economy and financial sector will require the league to have very clear priorities to ensure that we can continue to serve our 2.9 million members in line with our founding ethos,” Bailey told the newspaper. “Chief among our priorities for the year ahead will be the need to proactively engage with the government and its agencies to ensure that any regulatory framework drawn up for credit unions is appropriate,” he added. The league “aspires … to maintain a strong and properly managed credit union movement. We support and welcome regulation, but regulation that takes account of the credit union's unique, not-for-profit and member service ethos.”

Wis. CUs to study investment eds effect on behavior

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PEWAUKEE, Wis. (5/7/09)--A study launched Wednesday that will involve Wisconsin credit unions aims to prove that as little as 10 hours of education can motivate consumers to seek and use the investment tools they need to build wealth. The prescription can not only improve personal finances but also heal a much-weakened national economy, said the Wisconsin Credit Union League. “The investment scams and frauds that worsened the economy over the past year could have been avoided with better financial education,” said John Hoffmire, director with the Puelicher Center for Banking Education at the Wisconsin School of Business, University of Wisconsin-Madison. Hoffmire is spearheading the study. “Americans appear apathetic when it comes to investing, when in fact a small amount of education may be all it takes to stimulate the kind of positive action that will help heal our nation,” he said. The 18-month study will provide up to 30,000 hours of online investment education to 4,000 participating employees, starting with those at credit unions. The study is funded by a $200,000 grant from Investor Protection Trust--and coordinated and promoted by the league, Wisconsin Gov. Jim Doyle’s Council on Financial Literacy and the Wisconsin Department of Financial Institutions. The Educated Investor University provides an online investment education program in which each employee will complete up to 10 hours of online learning. Many will receive additional information about investment products and opportunities, and have access to an educational coach--a formula Hoffmire says is critical to stimulate positive behavioral change in investing. Although Americans save more now because they fear imminent job loss, Hoffmire says it shouldn’t be this level of economic pain that pushes the average person to do what’s in their best interest. Saving is just part of the remedy. Americans are seriously under-prepared in investing for retirement and commonly fail to use investment vehicles such as savings programs for health care and higher education, he added. “We need to identify what can be done consistently to motivate the average household to take advantage of the investment opportunities they’ll need--in addition to just saving--to reach future goals,” Hoffmire said. A prime “teachable moment,” Hoffmire says, is during tax season. Filers often spend tax refunds instead of investing these dollars. The study, therefore, will focus heavily on converting tax filers to investors. Many credit union employees help prepare and file taxes, facilitate refunds via direct deposit and educate about available tax credits and wealth-building opportunities in free tax-preparation programs. The study will seek to determine a preferred approach for coaching and what mix of information works best to encourage investment behavior for different types of filers--based on age, income, education level, geographic location and other attributes. Pre- and post-tests will measure participants’ investment knowledge, and behavior will be tracked quarterly for one year to determine whether participants have initiated investment activity. “We expect that the participating employees will emerge from the study better informed to serve their members’ needs,” Hoffmire adds. “If you understand the importance of investing on a personal level, you’re better positioned to direct members to those resources more effectively.” A steering committee for the study is being assembled from Wisconsin credit unions. Participating credit unions also are being identified so that participant education can begin late this summer. Credit unions’ participation in the program is part of their ongoing REAL Solutions initiative, which strives to help Wisconsin families improve their financial position over time by encouraging saving and investing, improved creditworthiness and long-term wealth building.

Take responsibility for sustainability says NACUSO CEO

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LAS VEGAS (5/7/09)--Sustainability of credit unions and the credit union industry is the most critical issue facing credit unions today, and individuals must take responsibility for their credit union's growth and survival, said Thomas C. Davis, president/CEO of the National Association of Credit Union Service Organizations (NACUSO). Davis made the comment in a speech Monday at NACUSO's Annual Conference in Las Vegas. The conference ended Wednesday. "Today's credit union industry is in the mature phase of its growth cycle and experiencing some of the most significant challenges of any time in its history," he told the conference. "We are confronted with an economic malaise unmatched since the Great Depression and an unprecedented credit union corporate bailout that will adversely impact credit union capital positions. "Coupled with these issues are the industry woes of the past several years associated with slow member growth, rapid consolidation and minimal market differentiation. When we consider the aggregate impact of all of these challenges, the most critical issue facing us today is the sustainability of credit unions and the credit union industry," Davis said. A key factor in addressing that challenge involves establishing opportunities for collaboration and getting credit unions to work together in business networks to create scale and meet shared needs, he noted. "Now is the time for credit unions to transform themselves and the industry by embracing innovation and the unique advantages of collaboration and networked business models," he added. "'Business as usual' is reaching an evolutionary dead end. When the going gets tough, the tough collaborate," Davis said. "Economic downturns provide an opportunity to create a gap between credit unions and their competitors." Collaboration, he concluded, "is the furnace that will drive credit union and industry sustainability."

NACUSO conference stresses collaboration innovation

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LAS VEGAS (5/7/09)--Collaboration and innovation were stressed by speakers at the National Association of Credit Union Service Organizations (NACUSO) annual conference held Sunday through Wednesday in Las Vegas. More than 280 participants attended. They learned what some credit union service organization (CUSO) lenders think credit unions can do to stand out as low mortgage rates lead to a refinancing boom during a presentation, “Innovative Mortgage Practices and Opportunities.” Credit union leaders must break the traditional lending rules and step outside of their comfort zone if they want to see growth in mortgage originations, Cory Mackwood, co-founder/president/CEO, CUSO Development Company, and Keith Varney, chief operating officer, TruHome Solutions, told the conference attendees. One effective way to exceed member expectations and generate earnings is to partner with an experienced mortgage lending CUSO, they said. They cited a study that indicated credit unions operating as a part of a multi-credit union CUSO benefit from more loans, increased assets and growth in membership. Other highlights of the conference:
* A breakout session titled “Positioning CUSO Value Propositions to Raise Capital” identified the key strategic funding differences between single focus and multi-purpose CUSOs and highlighted the processes that exist for raising capital. Jon Jeffreys, president/CEO of Credit Union Student Choice and vice president of Callahan Financial Services, and Jeff Russell, president/CEO of TMG Financial Services and chief information officer and vice president of strategic development for The Members Group, made the presentation. * A preview of NACUSO’s first Executive Certification Program, scheduled for Oct. 4-7, was provided by Randy Karnes, CEO of CU*Answers and faculty member at Pepperdine University. The event will combine the educational weekend with year-long networking, featuring university programs with distance learning, collaborative project work, and an opportunity to build relationships with CUSO leaders. * A session on ways to improve a credit union’s performance immediately while strategically positioning it to succeed in the future was presented by Bill Winter of Winter & Associates and Jeff Pflipsen of HTG Architects. By examining key factors from branch location and building design to merchandising, Winter and Pflipsen shared research findings and strategies to improve the performance of a credit union branch. The session included credit union case histories and programs in place.

CUs with strong MBL programs will lead future

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LAS VEGAS (5/7/09)--Credit unions with strong member business lending programs will be the industry’s leaders of the future, according to Kent Moon, president/CEO of Member Business Lending LLC. Moon spoke to attendees of the 2009 National Association of Credit Union Service Organizations (NACUSO) Annual Meeting in Las Vegas Monday. Moon, a former Small Business Administration (SBA) official, noted that if credit unions do not take advantage of the new opportunities presented to them under a new presidential administration, they will miss a “period of tremendous growth.” Moon also noted the impact that President Barack Obama’s stimulus plan will have on credit union member business lending programs. “The temporary elimination of borrower fees has made the SBA programs increasingly attractive to borrowers. And with the 90% guaranty, cap issues have virtually been eliminated,” Moon said. He also provided a “reality check.” SBA 7(a) loan product is down about 56% compared with this time last year, yet total volume is up 24% compared with 2000, Moon said.

West Virginia attorney general shuts down bogus CU website

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CHARLESTON, W. Va. (5/7/09)--West Virginia has shut down a bogus website that claimed to be operated by a Charleston, W.Va., credit union. State Attorney General Darrell McGraw's office worked with GoDaddy Group Inc., a domain registration company, to shut down the site, named (Charleston Daily Mail May 6). The site falsely claimed it represented the "West Virginia State Credit Union." There is no such credit union; however the name is similar to The State CU, a $37 million asset legitimate credit union. Its website is at Consumers who applied for loans through the bogus site received e-mails identifying the company as the fake credit union and were told that to qualify for the loans, they had to pay $1,250 for "insurance." The fraudsters directed the victims to wire the money to a location in Canada. After sending the money, the victims never heard from the "credit union" again.

CUs are so smart its obvious--Oregon ad campaign

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BEAVERTON, Ore. (5/7/09)--Credit unions are so smart, it’s obvious, according to a Credit Union Association of Oregon (CUAO) ad campaign with animated TV spots that will run through the end of June. The spots, launched late last month, feature several situations that could get one into trouble--such as salmon fishing next to a grizzly bear. Each spot ends with the question, “So why would you do your banking anywhere besides a credit union?” “Making the choice between a bank and a credit union has always been clear to those of us in the [credit union] movement and members who have been with us their whole lives. And our economy is only making the distinction more clear,” said Laura Wieking, CUAO director of communications. “But we still have a lot of work to do to make consumers understand that credit union membership is available to everyone.” The campaign was funded by voluntary contributions from 49 Oregon credit unions. CUAO has incorporated pre- and post-campaign measurement to gauge the campaign’s effectiveness in raising credit union awareness. To view the spots, use the link.

CU System briefs (05/06/2009)

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* ANNISTON, Ala. (5/7/09)--Answering nature's call has led to the arrest of a former convict who escaped the Calhoun County Substance Abuse Center April 20 and allegedly robbed Fort McClellan CU in Anniston, Ala., a day later. Glasco Stephens, 43, was arrested after a Columbia, S.C., woman found him using a toilet in her home. Stephens, who was apprehended Tuesday, had been living in an uninhabited house nearby. South Carolina authorities likely will extradict him to Alabama to face robbery charges (The Anniston Star May 5) … * FARMINGTON, Mich. (5/7/09)--LOC FCU President/CEO Dennis A. DeWitt will retire in August after serving in the position since 1983. At that time, announced LOC FCU's board of directors, James R. Dickinson Jr. will become the new president/CEO. Dickinson was executive vice president/chief financial officer (CFO) and has been with the credit union since 1988. When he assumes the helm, Kari L. Hassa will become the executive vice president/CFO. Hassa has been with the credit unit union since 1994. During DeWitt's tenure, the credit union's assets grew from $4 million to $110 million, and products expanded from standard savings and loans to a full range of savings and loan products, home loans, and 24/7 electronic services that include home bank, bill pay and e-statements …
* MADISON, Wis. (5/7/09)--Col. Howard M. Buenzli (Ret.), a former CUNA Mutual Insurance Society vice president of personnel, died Saturday at the age of 93. Buenzli was in the position from 1957 to 1979. During his retirement, he was active with the National Association of Retired Credit Union People (NARCUP) and the American Red Cross, and volunteered his legal expertise to write wills and tax preparation for senior citizens. He is survived by two daughters, six grandchildren, and three great-grandchildren. Services will be Friday at Our Lady Queen of Peace Catholic Church in Madison, Wis. (The Capital Times and Wisconsin State Journal May 5) …

Filene studies single-regulator issues

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MADISON, Wis. (5/7/09)--Regulatory restructuring of the financial services industry appears to be on the horizon. One potential component of the changes being considered is a single regulator for the entire financial services industry, says the Filene Research Institute. What would such a development mean for credit unions? That’s the question addressed in Filene’s new report, “Evaluating the Single Financial Services Regulator Question,” by Filene Chief Research Officer George A. Hofheimer. Hofheimer suggests that political, economic, and social trends foreshadow the potential for a single regulator, even though credit unions stand against the creation of such an entity. Hofheimer also advises credit unions to be constructive in shaping the changes to come. Credit unions have an opportunity to influence the new public policy structure to benefit “simple” banking organizations like themselves. Paradoxically, credit unions may have the opportunity to benefit in a new, more limited regulatory structure. While it would be premature to predict what the exact regulatory structure will look like, the probability of a more consolidated structure is high, Filene said. The report notes that financial regulation is a constantly shifting standard due to changes in the economic environments and the current U.S. financial regulatory system is replete with regulatory gaps. The current economic crisis is viewed by many, in part, as a failure of regulation, suggesting that major changes are necessary, the report said.
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The worldwide trend in financial services regulation has been toward a more consolidated structure, even though the link between financial regulatory structure and safety, soundness, and/or performance is weak, Hofheimer added. Due to credit unions’ difference from other financial institutions--their not-for-profit nature--little efficiency would be accomplished by including credit unions under a combined bank regulatory scenario, the Credit Union National Association (CUNA) has maintained and specifically said in a comment letter to the U.S. Treasury. CUNA also mentioned in the letter to the Treasury that the National Credit Union Administration--in its dual role as regulator and insurer of credit unions--has effectively served the best interests of credit unions and their members for nearly 40 years. For credit unions, the message is that public and political opinion seems to be pushing for a major regulatory overhaul, Hofheimer said. If the tide of change is too strong, credit unions should be proactive in getting what they want. “Credit unions may be the only major financial institutions that continue to have reputations for honesty, integrity and fairness. As such, credit unions have a unique opportunity to help lead the political process that results in a new financial regulatory system for the U.S,” said Filene Fellow William E. Jackson III, of the University of Alabama, in the report’s foreword. For more information about “Evaluating the Single Financial Services Regulator Question,” use the link. For information about Filene studies or becoming a member, call 608-231-8550.

Smart appointed to Lending Council exec committee

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MADISON, Wis. (5/7/09)--Gary Smart, vice president of business services and lending for Crane FCU in Odon, Ind., was recently appointed to a vacant seat on the CUNA Lending Council executive committee. The council is a source of best-practices information for lending professionals in the credit union industry. Smart began his career in the financial services industry in collections and most recently focused on consumer and small business lending. He is also a four-year member of the council and active on its conference committee. “Gary's background and experience will be a valuable addition to the executive committee as credit unions become more involved in business lending,” said Lloyd Gill, council chair and executive vice president and chief operations officer of City County CU in Margate, Fla.