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Five Indicted In Biggest Card Theft Scheme In History

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NEWARK, N.J. (7/26/13)--Five men--four Russians and a Ukrainian--have been indicted in a U.S. court in Newark, N.J., as conspirators in a worldwide hacking and data breach scheme that targeted major corporate networks, stole more than 160 million credit and debit card numbers, and resulted in millions of dollars in losses in what authorities called "the largest such scheme ever prosecuted in the U.S."
Many of the victims included credit union members--and credit unions themselves, who bore the costs of replacing members compromised credit and debit cards accounts and fraudulent charges on those accounts. Financial institutions, credit card companies and consumers suffered hundreds of millions in losses, including $300 million reported by three of the corporate victims, said a press release.

The group charged is allegedly responsible for breaches of Hannaford Brothers, Heartland Payment Systems, NASDAQ, 7-Eleven, Carrefour, JC Penney, Wet Seal, Commidea, Dexia, JetBlue, Dow Jones, Euronet, Visa Jordan, Global Payment, Diners Singapore and Ingenicard, according to U.S. Attorney Paul J. Fishman, who announced the charges Thursday with representatives from the U.S. Secret Service and Department of Justice. NASDAQ's trading platform was not impacted.
Charged are:
  • Vladimir Drinkman, 32, of Sykatyykar and Moscow, Russia;
  • Alexandr Kalinin, 26, St. Petersburg, Russia;
  • Roman Kotov, 32, Moscow,;
  • Mikhail Rytikov, 26, of Odessa, Ukraine; and
  • Dmitriy Smilianets, 29, of Moscow.
Drinkman and Kalinin allegedly specialized in penetrating network security and gaining access to corporate victims' systems. Kotov, also a hacker, allegedly specialized in mining the networks Drinkman and Kalinin allegedly compromised to steal data. Rytikov provided the anonymous Web-hosting services where the hackers hid their activities, and Smilianets sold the information stolen by the others and distributed the proceeds, said the U.S. Attorney's Office.

Kalinin and Drinkman were previously charged in New Jersey as "Hacker 1" and "Hacker 2" in a 2009 indictment that charged Albert Gonzalez, 32, of Miami with five breaches including the Heartland Payment Systems Inc. breach, which at the time was the largest ever reported. Gonzalez is serving a 20-year prison sentence.
Kalinin also is charged in the NASDAQ hacking and is charged, along with another Russian hacker, Nikolay Nasenkov, in an international scheme to steal bank account information by hacking U.S.-based financial institutions.
Drinkman and Smilianets were arrested in the Netherlands. Smilianets was extradicted in September and remains in federal custody. Drinkman is still in the Netherlands awaiting extradition proceedings. Kalinin, Kotov and Rytikov remain at large.

For the actual charges and maximum potential penalties, use the link.

CU System Briefs (07/26/2013)

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  • DES MOINES, Iowa (7/26/13)--A man and a woman have been charged with confiscating a bag of money that fell off an armored van Wednesday as it left Johnstown, Iowa-based Community Choice CU (Associated Press July 24). Samantha Jackman of Des Moines and Tyler Critchlow of Dallas Center, both 20, were arrested and charged with first-degree theft after their car was found in a shopping mall parking lot. The bag fell out after a door malfunctioned as the armored van turned a corner. A car stopped and someone picked up the bag and fled. Police tracked the car through its license plate to a shopping mall parking lot ...
  • ST. LOUIS (7/26/13)--A bag of money found Wednesday on Highway 40 in St. Louis is believed to be the loot from a robbery of a credit union earlier that morning (South County Times and Associated Press via The Sacramento Bee July 24). A man entered First Missouri CU on Lemay Ferry Road in St. Louis at about 10:16 a.m. and escaped in a small to mid-size yellow Chevrolet.  He did not display a weapon and no one was injured, said police. About 15 minutes later, drivers on Interstate 64 reported seeing a bag tossed from a yellow Chevrolet. Police recovered a "substantial amount" of money and are searching for the suspect ...
  • BALTIMORE  (7/26/13)--Johns Hopkins FCU introduced two new Visa credit cards to its products lineup, and as of June 30, it has opened more than 1,500 cards, including 784 Visa Credit Cards, 538 Visa Platinum Credit Cards and 246 Visa Platinum Rewards Credit Cards, the Baltimore-based credit union reported. After a "soft" rollout in December, the credit union began promoting the cards heavily last spring. The Platinum card offers a non-variable rate as low as 7.9% Annual Percentage Rate (APR), while the Platinum Rewards card offers a rate as low as 9.4% APR. Both cards have no annual fee, no balance transfer fee and no minimum finance charge, and they offer online account access and free e-statements. Rewards card members earn points for every purchase, excluding balance transfers and cash advances, and redeem the points for merchandise, trips, tickets, gift cards and more ...
  • HARRISBURG, Pa. (7/26/13)--Pam Stein has been named director of education and professional development at the Pennsylvania Credit Union Association, PCUA announced Thursday (Life is a Highway July 25). She will oversee PCUA's education and training efforts for credit union professionals and volunteers. Stein previously worked for the Harrisburg Area Community College as marketing and sales manager of the Wildwood Conference Center ...

Dakota CUs Deliver: More Than 33,000 Don't Tax Messages Sent

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BISMARCK, N.D. (7/26/13)--
Click to view larger image Credit Union Association of the Dakotas staff donned their "Don't Tax" t-shirts and gathered for a group photo with some of the 12,821 postcards that are going to the offices of U.S. Rep. Kevin Cramer (R-N.D.)and Sens. Heidi Heitkamp (D-N.D.)  and John Hoeven (R-N.D.). From left are: Norita Kress, Deb Kruckenberg, Jeff Olson, Steve Rahrich, Shawn Brummer and CUAD President/CEO Robbie Thompson. (Photos provided by the Credit Union Association of the Dakotas)
North and South Dakota Credit Unions presented more than 33,000 "Don't Tax My Credit Union" postcards to the Dakotas' legislators in Congress as of Thursday, said the Credit Union Association of the Dakotas.
The number is "a conservative estimate," said CUAD.
"While we are still working on complete numbers as we continue to get information from credit unions, we presently have counted that North Dakota as delivered 12,821 postcards while South Dakota has delivered 20,701," reported CUAD President/CEO Robbie Thompson.
Click to view larger image South Dakota credit union representatives--Jay Kruse of Service First FCU, Darla Erb of Voyage FCU and Joey Rotert of Sioux Falls FCU--delivered postcards directly to the offices of U.S. Rep. Kristi Noem (R-S.D.) and Sens. John Thune (R-S.D.) and Tim Johnson (D-S.D.). They are shown here at Sen. Johnson's office.
"As long as we have postcards left, we hope to keep them trickling in so our elected representatives know that we are passionate about this issue, and that we aren't going away," said Jeff Olson, CUAD vice president of advocacy and awareness.
Olson added he hopes credit unions will continue to send the post cards with their outgoing mail until the supplies run out.
Leagues across the nation are in the process of tallying up the results so far of their state's grassroots efforts aimed at sending the Don't Tax My Credit Union message to Congress.
The message was delivered loud and clear Tuesday to more than 875,397 people, including members of Congress and their followers on Twitter during the Credit Union National Association's DontTaxMyCU Tuesday national grassroots campaign.
Roughly 2,171 tweets specifically mentioned a member of Congress' Twitter handle and the #DontTaxMyCU hashtag. Another 500 messages tweeted the hashtag without mentioning a specific legislator.
Two members of Congress--Rep. Lloyd Doggett (D-Texas) and Rep. David Scott (D-Ga.)--joined in and tweeted their agreement with the Don't Tax My Credit Union message.
Members can go to CUNA's site and send an e-mail to Congress. For more information, use the links.

CU's Goal: Reach Out To Those Without Basic Financial Literacy

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SAN ANTONIO (7/26/13)--Select FCU (SFCU) in San Antonio is using its community roots to meet its primary goal of reaching out to people who lack basic financial literacy skills.
When staff of the $32 million asset credit union attended a meeting of 75 parents at a local elementary school and asked parents who had a basic checking or savings account, they were surprised only six people raised their hands, Belinda McDaniel, SFCU CEO, told (July 22).
In reaching out to members--many of whom live from paycheck to paycheck--the credit union tries to steer members clear of predatory creditors such as same-day lenders who charge 400% interest on their loans, with payment due when the borrower's next paycheck arrives, McDaniel told the publication.
SFCU said it is developing an alternative to same-day payday lenders who take advantage of its members.
The alternative product will feature a greatly reduced interest rate of 28%, a four-to-six month repayment period and fewer fees, McDaniel told the publication.  
SFCU also tries to be a more useful alternative to large banks. Its employees perform community service such as helping with fundraisers, painting houses and setting up tables at fairs. Roughly nine out of 10 of its employees are bilingual, speaking English and Spanish.

CUs Collaborating More On Back-Office Ops

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RALEIGH, N.C. and WARRENTON, Va. (7/26/13)--Unlike banks, credit unions often collaborate to offer better service to their memberships. Two recent examples of how large credit unions are helping smaller ones can be seen in North Carolina and Virginia.
In North Carolina, State Employees' CU (SECU), with $26 billion in assets and based in Raleigh, N.C., will provide full back-office support to help Greater Kinston (N.C.) CU minimize operational expenses and focus on strengthening and revitalizing its efforts for creating growth opportunities.
The conversion to SECU's systems and services will provide the platform to enhance the $11 million asset GKCU's full service offering of member products and services with greater convenience and accessibility, the credit unions said. 
"SECU's expertise, proficiency, and standard have made them the proven-leader of the credit union movement in our great state," said Shawn Wilson, GKCU manager/CEO. "With their assistance and support, GKCU will be able to focus more on servicing membership, community outreach and expanding awareness to the surrounding communities within our field of membership." 
SECU provides similar operational services to the Durham-based Latino Community CU, which has $128 million in assets.
Greater Kinston CU is one of the last three African-American credit unions in North Carolina continuing to primarily serve its demographic member population. 
In Virginia, $246 million asset Partners 1st FCU and $21 million asset Northern Piedmont FCU have forged a partnership based on each credit union's needs.
Partners 1st FCU is based in Fort Wayne, Ind., but has offices throughout the East Coast due to mergers and community development expansion.  Most recently, the credit union sought to expand into the Culpeper, Va., area. 
Northern Piedmont FCU, Culpeper, Va., has offices in Culpeper and Warrenton serving several select employer groups and representatives.
In June, Northern Piedmont FCU informed Partners FCU that it was streamlining its operation by concentrating on branches in Warrenton and leaving the Culpeper area. Since there were no other credit unions in the immediate vicinity, North Piedmont representatives inquired if Partners 1st would be interested in a business venture that would allow Partners 1st to expand into the area and assist Northern Piedmont in ensuring that its members continued to have credit union products and services as a financial option. 
"To streamline our operation, we made the decision to concentrate on Fauquier County," said Dortha Johnson, Northern Piedmont, president. "That's where we began, but it was extremely important to us that our Culpeper members continued to be served by a credit union and Partners 1st was the logical choice."
Partners 1st is now in the process of buying Northern Piedmont's building in Culpeper.  To make the transition easier, the credit unions will share the building for about two months. Northern Piedmont's business development representative is introducing Partners 1st representatives to North Piedmont's employer and community contacts.
Partners 1st will add five jobs to the area during the next few months and also will expand office hours.

Filene Adds Three To Research Council

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MADISON, Wis. (7/26/13)--The Filene Research Institute Wednesday announced the addition of three new members to its research council.
The research council's 38 members help plan the organization's research topics, volunteer to pilot Filene innovations at their credit unions, and work with Filene's outside researchers to provide access and insights to the credit union system.
"When searching out new candidates for the research council, we look for credit union leaders with a clear track record of innovation," said Mark Meyer, Filene CEO. "These three leaders play integral roles in continuing the advancement of the credit union movement. There's no better way for us to set and adjust our research agenda than by doing it with those who will use the research."
New members of the council include:
  • Linda Bodie, chief + innovator at Element FCU, Charleston, W. Va. Since joining Element in 1998, Bodie developed processes such as digitizing 99% of the credit union's paper, streamlined business processes with technology, and implemented electronic check deposit services. She also co-developed and deployed the world's first remote-deposit capture iPhone app.
  • Bob Morgan, CEO, NorthCountry FCU,  Burlington, Vt. Morgan joined the credit union in 2000 as a branch manager, working his way to vice president of lending and administration, executive vice president and then CEO in 2012. Morgan also served on the Association of Vermont Credit Unions' board, as chair of the association's social responsibility committee and government relations committee. Morgan is a Filene i3 alum.
  • Eileen Rivera, president/CEO, SkyOne FCU, Hawthorne, Calif. Rivera has worked at SkyOne FCU for 25 years, including 20 years as the president/CEO. She is on the California Credit Union League's board, serving as chairman in 2011 and was on the association's search committee to hire the league president. She also serves on the RMJ Foundation's board, which promotes financial literacy, and as vice chairman of the Credit Union Advisory Board for the Children's Hospital Los Angeles. Rivera is a member of the Credit Union National Association awards committee.

NCUA Files Appeal In Goldman Sachs RMBS Lawsuit

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LOS ANGELES (7/26/13)--The National Credit Union Administration filed a notice of appeal Monday in its lawsuit against Goldman Sachs over residential mortgage-backed securities (RMBS) in the U.S. District Court for the Central District of California-Western Division in Los Angeles.    
A federal judge in Los Angeles July 12 ruled NCUA waited too long before filing some of its claims against Goldman Sachs over $491 million in losses from RMBS sold to U.S. Central FCU and Western Corporate FCU, which no longer exist (News Now July 16).
U.S. District Judge George Wu granted NCUA's request for an interlocutory appeal, or an appeal on certain issues while other aspects of the case are still pending. This sends the case to the Ninth Circuit Court of Appeals on the question of whether NCUA's federal claims are time-barred, or whether an "extender statute" applies that NCUA argues would make the claims still valid. Judge Wu's decision did not dismiss NCUA's state-based claims, which will still move forward.
NCUA and Goldman continue to dispute the scope of the appeal and what happens to the remaining claims in the district court while the case is on appeal. NCUA and Goldman have both filed papers with Judge Wu this week regarding these issues. 
In the suit, the agency noted that U.S. Central and WesCorp purchased 21 RMBS from Goldman Sachs, which also acted as the underwriter (News Now July 16).
The Tenth Circuit Court of Appeals in Kansas also is reviewing the time-barred issues in a separate suit NCUA filed against RBS Securities.