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CU System briefs (07/25/2012)

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  • HARRISBURG, Pa.(7/26/12)--An Adopt-A-Highway cleanup on a recent Saturday gave employees of Chalfont, Pa.-based Merck Sharp & Dohme FCU, a chance to show how a credit union will go an extra mile in its mission of People Helping People, said the Pennsylvania Credit Union Association (Life is a Highway July 25). During its cleanup, an employee discovered a padded bag in some brush. The bag contained an original birth certificate and a newly issued Social Security card.  On Monday, staff did some research and contacted the contents' owner--a 20-year-old woman who said her laptop was stolen recently.  The young woman's mother said, "Thank goodness someone responsible stumbled on this. We're very grateful."  …
  • SAN ANTONIO (7/26/12)--Security Service FCU announced its loans have surpassed the $6 billion milestone and its membership has grown to more than 900,000 members. Both consumer and business loans increased, with auto loans leading the pack.  The $6.7 billion asset credit union attributed the growth over the years to excellent member service, affordable products and convenient service delivery channels …
  • BLOOMINGTON, Ind. (7/26/12)--Howard "Rick" Warnick, retired president of Bloomington, Ind.-based WEPCO FCU, died Monday  at  Western Regional Medical Center in Cumberland, Ind. He was 58. He is survived by two sisters and several nieces and nephews. A graveside service was conducted Wednesday. (The Cumberland Times-News July 23) …

BECU combats fraud earns media attention

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FEDERAL WAY, Wash. (7/26/12)--A large credit union's efforts to combat fraud puts it on the forefront of law enforcement cases but also gains national media attention, and that sometimes leaves a mistaken impression in the public's perception, says the Northwest Credit Union Association (NWCUA).

Case in point:  In June, Tukwila, Wash.-based BECU was reported prominently in local and national media outlets when a Dutch man was charged with stealing 44,000 credit card numbers.  Only some of the numbers belonged to BECU's members. But local media reported it in headlines such as "Dutch man charged with stealing BECU credit cards," which was oversimplified and not quite accurate, said NWCUA (Anthem July 17).

Only a handful of stolen card numbers in that case were connected to BECU, John Snodgrass, security risk manager at the nearly $10 billion asset credit union, told NWCUA.  BECU's name showed up in the police report because of its proactive, hands-on approach to identifying and preventing fraud and identity theft.  BECU's name is unfairly connected to fraud cases in instances where it is part of the solution but not at fault in the breach itself, Snodgrass said.

The credit union spends considerable time analyzing cases. If there are at least two cases that arrive with like charges, "we start looking for a common point of compromise at that point," Snodgrass told the association.  The credit union takes the approach "that if we can identify it up front, then we can identify the window of exposure, and once we know the window of exposure, we can have our monitoring system start to look for these kinds of frauds and catch them early as opposed to five, six, seven charges down the line," he said.

As a result, the credit union works a lot with law enforcement on a number of levels, including the Secret Service's Electronic Crimes Task Force.  "Our relationships have built up to the point now with law enforcement that they will take our cases," he told NWCUA.  "They know that we've done our research, and they will investigate it, I would say 99% of the time."

BECU then sends the task force a list of victims and suspected breach points. "As a result, we tend to be on the forefront on a lot of these things, which is why our name is listed so prominently in some of these case filings."

Snodgrass noted that three major skimmers (people who insert devices on ATMs and gas pumps that collect information such as personal identification numbers keyed in to the devices) were arrested recently partly due to BECU's security team.  

The devices weren't just on BECU machines, they were on other financial institutions' devices as well, said Todd Pietszch, a spokesperson at BECU. Because BECU was the one working with law enforcement, its name appeared in police reports and became public information.

Visa shares conversion CUs wont see major impact

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SAN FRANCISCO (7/26/12)--Visa is adding $150 million to a litigation escrow by converting some of its Class B shares held by credit unions and banks to help fund its share of liabilities in the aftermath of a proposed $6.05 billion settlement announced earlier this month. The move will affect credit unions, but should not have a major impact.

"My sense is there is an impact on credit unions, but not a major one," Scott Waite, senior vice president/chief financial officer for Patelco CU in Pleasanton, Calif., told News Now. Waite also is the Credit Union National Association's accounting subcommittee chair. 

Visa, MasterCard and several large banks, defendants in a lawsuit brought by groups of merchants and their trade associations, on July 13 agreed to pay billions to merchants to settle a long-standing credit card interchange fee class action lawsuit. In addition, the settlement requires a reduction in credit card interchange rate fees (IRF) of 10 basis points for an eight-month period, likely beginning in mid-2013 (News Now July 16).

The rate reduction applies to all card issuers, including credit unions. Visa's newest deposit elevates the amount in its escrow fund to $4.4 billion--which is its share of payments to be given to merchants under the terms of the pending deal.

Created as part of Visa's 2008 initial public offering, the escrow is tied to its Class B shares held by credit unions and banks that issue cards for the payment network. Those financial institutions are responsible for providing funds for the account, which protects Visa's Class A shareholders from liability. 

VISA intends to take a $4.1 billion charge for the second quarter to formally reserve its part of the deal, which still needs court approval. 

There are essentially three areas of impact, Waite explained.

The first is that there will be a 10-basis-point reduction in credit card interchange income. Visa's move will impact credit cards, not debit cards, Waite emphasized. "Credit unions probably see more purchase volume on debit than credit because most members use debit cards," he added.  

So if a credit union has $10 million per month in purchase volume, with the reduction taking place for eight months in 2013, once the settlement is finalized, there would be $80 million in purchase volume with a loss of $80,000 in interchange income ($80 million x 10 basis points = $80,000 in loss of revenue for a credit union), he said. Most earn over 1.35%, so they still would recognize $1 million net in income on the purchase volume.

The second impact: There's further erosion in the conversion rate of the Class B stock that credit unions own. "Credit unions have that stock, but they can't get their hands on it until Visa is done with the litigation," Waite explained. "So credit unions cannot cash out until 2015."

Currently credit unions' Visa Class B stock redemption rate is valued at 42.5%. The $150 million that Visa is converting and putting into escrow will further reduce that percentage, Waite said. However, the litigation escrow account already has $4 billion-plus in it. That amount over the past few years is what had driven the redemption rate to 43% from 100%.  So 57% already has been devalued because it's in the litigation escrow, Waite said. 

"So the additional $150 million on top of the $4 billion already there won't drop the conversion rate much more--from 42.5% to 42%," he added. "Visa hasn't announced the official number yet, but it will be announced soon. The upshot is the value of the Class B Stock-- once credit unions get it--will be worth less."

The third impact is that the remaining value of that Class B stock still can be used for future litigation settlements--until this particular litigation has been resolved or until any other pending litigation has been resolved, Waite said.

"The big picture is we have to continue to wait and see what the stock will be worth, if anything, in the end," he concluded.

CO-OP to CUs BofA ATM cutbacks provide opportunity

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RANCHO CUCAMONGA, Calif. (7/26/12)--With Bank of America shutting down 9% of its ATM fleet, "credit unions should jump at the opportunity to get the message across" that they offer more convenience with access to nearly 30,000 surcharge-free ATMs, said CO-OP Financial Services, which is developing a new ad campaign to tout credit unions' ATMs.

The Charlotte, N.C.-based BofA said in a regulatory filing it has shut down 1,500 ATMs this year, leaving it with 16,200 ATMs as of the end of June (Los Angeles Times July 24).

BofA's cutback is "pretty significant" and "is more than just a cost-cutting measure," said Kimberly Hester, executive vice president of network services at Rancho Cucamonga, Calif.-based CO-OP Financial Services. "This shows that BofA is going in a different direction than the past of touting convenience," she told News Now.

The cutback puts BofA behind JPMorgan Chase & Co, which has more than 18,000 ATMs. Neither has as many as credit unions' ATM network, she added.

Most of the cutbacks are in off-premise ATMs located at malls and where shops are located.  CO-OP Network has off-premises ATMs too--at 7-Eleven, Costco and Walgreen's locations. "BofA is moving away from these to having full-service ATMs just at their branches. They look at it as an expense. We look at it as a convenience," Hester said.

"The bank is going after consumers with higher balances and who have more services with the bank and can make the bank a profit. It is serving less the people who need to access cash and who are less profitable," she added.

"We need to tout the opportunities and highlight the power of cooperation and advantages [of credit union surcharge-free ATMs] to consumers so they become [credit union] members," she said.  "We may have another Bank Transfer Day when consumers realize they are getting fewer convenience services. The banks are taking away, while the consumers keep giving back."

BofA's  cutback "is not  a beginning of a trend;  it's a continuation of a trend."  She noted that credit unions certainly won't follow suit in cutting out ATMs.  "It's an excellent opportunity to highlight the competitive advantage" of credit unions.  Of the surcharge-free credit unions CO-OP has in credit unions and in retail spaces, 9,000 take deposits.

"CO-OP has a brand new, free consumer marketing campaign promoting the convenience of its 30,000 ATMs.  Clients can access the campaign materials on CO-OP's Ad Lab next week," she told News Now.

Use the resource link below next week to check for it. At the top of the home page, in the red bar, hover over "For You" and click on "Marketing/Ad Lab" on the drop-down menu. Users will see a catalog of available materials and can click thumbnails of each campaign.  If they click to download, they will be prompted for their extranet user ID and password.

Study Families struggling financial plans help

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WASHINGTON (7/26/12)--The recent recession has left more Americans struggling to make ends meet, but those with a financial plan are more confident they can meet the challenges than they were 15 years ago, according to a new report released by the Consumer Federation of America (CFA) and Certified Financial Planner Board of Standards Inc.

According to several measures of financial well-being, those with a financial plan report feeling better about their situation than those without one:

  • By a margin of 50% to 32% and for all but the lowest income bracket (under $25,000) where few have a comprehensive plan, those with a financial plan are more likely to say they are on pace to meet all of their financial goals, such as saving for retirement or for emergencies;
  • By an even wider margin of 52% to 30% and across all income brackets, planners are more likely to feel "very confident" about managing money, savings and investments than nonplanners;
  • By a margin of 48% to 22%, planners are more likely to describe themselves as living comfortably; in addition, as many planners in the $50,000-$99,999 income bracket say that they live comfortably as non-planners in the $100,000 and above bracket.
The percentage of American families who have made a comprehensive financial plan--either on their own or with professional help--has not changed significantly from 15 years ago. Overall, 31% of decision-makers today report have ever put together a plan. About 35% report having a plan to save for emergencies, down from 39% in 1997.

Like its predecessor, the new survey asked decision‐makers about their saving and investments in six specific categories. (See table.) Fewer people today report having saved toward one or more of their goals than did so 15 years ago (80% vs. 84%).

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Most American families have a financial plan in place to help accomplish their savings goals, but few have ever put together the kind of detailed financial plan that money management experts recommend, said the report. When asked if they were implementing a plan to meet savings goals in six specific areas, 65% say they follow a plan for at least one of their savings goals.

Against the backdrop of a fluctuating stock market, a larger share of non-retired respondents report that they are behind on saving for retirement than did so in 1997. Today, about half of non-retired respondents, compared with 38% in 1997, say they are behind or should have already stared saving for retirement.

For the full report, use the link.

Financially challenged seniors will look to CUs--experts

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MADISON, Wis. (7/26/12)--A new study from AARP that found Americans age 50 and older are carrying more mortgage debt than ever before has repercussions for credit unions, experts say.

As of December, about 3.5 million mortgage loans held by people age 50 and older were underwater--they owe more than their home is worth, according to the study (News Now June 20). That means more seniors have no equity in their homes, which has long been considered as a source of financial security for the elderly.

Because the age of the average credit union member tilts toward this demographic some credit unions may be surprised how many of their members are at least on the edge of the group noted in the study, said Mike Schenk, Credit Union National Association (CUNA) vice president of economics and statistics.

"Credit unions might consider reaching out to older members--those with a mortgage at the credit unions and other older members that may have a mortgage elsewhere--to proactively offer financial counseling services," said Schenk.

Paying off a mortgage is especially critical for seniors because it affects the percentage of working income needed in retirement that financial planners so often quote, said Mark Lynch, a credit union consultant and REAL Solutions field coach, who is developing a retirement planning fair for the National Credit Union Foundation.

Seniors with high or underwater balances will require retirement incomes equal to nearly 100% of the working incomes, Lynch said.

"The best advice going forward is that credit unions should do whatever they can to help their members plan for retirement as early as possible," Lynch said.

With wealth lost as a result of the recession, financial planning is more important than ever, he added.

Among the policy solutions the study suggested was mediation, which often leads to loan modification.

"Credit unions have shown the ability or willingness to help borrowers explore options to foreclosure, including the policy solutions suggested in the paper, such as mediation, counseling and loan modifications," Schenk said.

Schenk noted that credit unions are usually agreeable with extending terms but would generally strongly object to any policy that would require principal reduction as a modification tool.

Former CU ad spokesperson Chad Everett dies

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LOS ANGELES and MADISON, Wis. (7/26/12)--Actor Chad Everett, who died Tuesday, was one of the celebrity spokespersons in the Credit Union National Association's (CUNA's) National Advertising Program during the mid-1970s.

Everett, 75,  was star of the 1970s TV series "Medical Center" as well as films and TV shows such as "Mulholland Drive" and "Melrose Place," said Associated Press (July 25).  He appeared most recently in the TV series "Castle."

The National Advertising Program ran from 1972 to 1999 and was supported by the state credit union leagues and associations. The program ads featuring Everett were created in 1973 and 1974 and, delivered the message: "Credit unions: It's Where You Belong."  He appeared in print ads, television commercials, national magazines, and brochures , urging consumers to "Join a CU. It's Where You Belong."

Former "Medical Center" star Chad Everett and Nurse Chris Hutson, a technical adviser on the program, helped credit unions celebrate International Credit Union Week in 1969 with its theme, "We Care, We Share." They were pictured taking up a collection for what was then called the CUNA International Foundation.  Everett died Tuesday at the age of 75. (CUNA photo)
Some of the lines he appeared with:

  • "My credit union taught me something you should know if you ever borrow money." (The lesson was not to compare apples and oranges in getting a loan.)
  • "Here's why a credit union is the best financial partner you can have."
  • "In times like these, your credit union can make a real difference."
Everett also helped celebrate International Credit Union Week in 1969 when he posed with a technical adviser to the "Medical Center"  program . They were shown collecting funds for the CUNA International Foundation, which aided in spreading the credit union idea around the world through charitable, scientific and educational activities.  The program's medical focus fit in with the week's theme that year--"We Care, We Share."

During his more than 40 years' acting, Everett guest starred on series such as "The Love Boat," "Murder, She Wrote," and "Without a Trace."  His film credits include "The Jigsaw Murders," "The Firechasers" and a remake of  "Psycho."

He died at his home in Los Angeles after a long battle with lung cancer.

Two New Hampshire CUs plan merger

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PORTSMOUTH, N.H. (7/26/12)--Two credit unions in New Hampshire have announced plans to merge, pending approval from regulators and members.

Berlin-based Woodlands CU, with $107 million in assets, will merge with Portsmouth-based Northeast CU, a $720 million asset credit union. Northeast will be the surviving credit union.

The combined credit union will have a combined $872 million in assets and 90,000 members served by 14 branches, with a 15th in the works (New Hampshire Union Leader July 24).

Northeast CU President/CEO Peter J. Kavalauskas will continue in that position and Woodlands CEO Timothy J. Collia will become executive vice president and chief operating officer of Northeast.

Kavalauskas told the Union Leader that the merger discussions began about a year ago. The credit unions hope to develop back office efficiencies and provide more and better services to the combined membership through the efficiencies, he said.

The merger is expected to be completed later in 2012. The credit unions will need approval from the National Credit Union Administration, the New Hampshire Banking Department, and Woodlands' membership (seacoastonline.com July 24).