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CU System briefs (08/20/2012)

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  • TAMPA, Fla. (8/21/12)--Two women and a man were arrested Wednesday in connection with opening false accounts at three branches of Suncoast Schools FCU and obtaining $152,000 in fraudulent loans.  John Fitzgerald Hartley, 47, and Laura Jean Hall, 51, of Georgia, and Jodi Summers, 21, allegedly opened the accounts between Aug. 2 and Aug. 8 with counterfeit identities of victims from three states, and applied for three loans using the Internet. Detectives traced the Internet protocol addresses in the applications to a hotel in Tampa. They contacted each suspect and told them to return to the credit union to get the loan funds. One suspect allegedly went to a branch. Detectives followed the suspect back to the hotel and arrested the trio. They are charged with fraudulent use of personal information and grand theft in the second degree. Hartley also was charged with marijuana possession (Tampa Bay Times Aug. 17) …
  • PORTLAND, Ore. (8/21/12)--Bob Corwin, currently CEO of Meritrust CU in Wichita, Kan., has been named president/CEO of Portland, Ore.-based Advantis CU, said the Northwest Credit Union Association (Anthem Recap Aug. 17). He will succeed President/CEO Ron Barrick, who plans to retire. Corwin became CEO of what was then Boeing Wichita CU in 2008 after 30 years at First Tech CU in Beaverton, Ore. During his tenure Boeing changed its name to Meritrust, and assets rose to more than $830 million from $550 million. Advantis is the fourth-largest credit union in Oregon, with $930 million in assets and representing 48,000 members. Barrick, who led Advantis for more than 25 years, was named Oregon's Credit Union Advocate of the Year in 2010. Last fall he announced his plans to retire and worked with the board to find a successor …

Special recall meeting highlights a vocal few

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MADISON, Wis. (8/21/12)--As credit unions make decisions such as whether to merge with another credit union, attract new members who are fee sensitive, and open Facebook pages and blogs that encourage commentary, they also may open a Pandora's Box that could expose them to well-meaning members who take up a cause and become a "vocal few."

This past year, credit unions saw what people's protests--both on site at the branch and on websites--over fees did to banks. Credit unions also saw the power of members who provided unsolicited testimonials on websites and media comment pages. There might be an occasional snarky comment, but overall, credit unions have been on the good end of the exchanges, thanks to their member-centric philosophy.  But how should a credit union handle it when a vocal few attempt to drown out the rest of the members? Apparently the answer is to stay member centric.

"Management should consider the balance between the membership at large and the discontent of a small group of members," Brooke Van Vleet, the new CEO of St. Helens Community FCU in St. Helens, Ore., told News Now.

The $160 million asset credit union's board on Aug. 7 was presented a petition with 492 validated signatures out of its more than 15,000 members. The petition seeks a recall of five of its seven board members who supported a proposal to merge with another credit union and terminate a previous CEO's contract. The credit union, after having an independent auditing firm validate the signatures, did what its bylaws called for: scheduled a special meeting at 6 p.m. PT  Sept. 4 at the Scappoose High School Auditorium to address the issues.

"The board stands by its decisions and believes they were made in the best interest of the credit union," said Van Vleet. "They are disappointed the recall has occurred but are moving forward with the process in accordance with the credit union bylaws."

The credit union, like the petitioners, uses its website to help obtain the consistent and clear communications.   One of her first acts as CEO was to communicate the announcement that she was dedicated to being transparent with members and employees.  She recommended the board terminate the letter of intent to discuss a possible merger at this time because it was a distraction, she said in a letter to members on St. Helens Community FCU's website.

In discussing the balance of the vocal few and the membership at large, Van Vleet told News Now that "The bylaws are in place to govern such a petition process, and it is important that the entire membership have the opportunity to voice opinions and not just the vocal minority.  At the same time, it is critical to present a balanced viewpoint and be consistent and clear in communications to the membership and staff."

She noted that "we respect the right of members to voice their opinions through this process, but as the CEO I do not support the recall effort. I believe this is a baseless and impulsive recall that is only intended to be disruptive to the credit union."

Credit unions as well as other organizations "see more of this happening, with a few members more vocal," she said.

Other credit unions are encountering similar situations.  In some, members may go to the media to get their opinions across. For example, Thomas Leone of Vero Beach, Fla., wrote a letter Aug. 19 to the editor of, telling why he was opposed to Indian River FCU's proposed merger with Lakeland, Fla.-based MidFlorida CU:  "If it ain't broke, then don't fix it," he said, noting he is "quite satisfied" with the credit union as it currently exists and the credit union "serves our community better than a larger one."  He urged members to attend a special meeting today to cast their vote on the merger proposal.

And last week, 15 or so members of the more than 70,000 members of Technology CU, San Jose, Calif., rallied for two hours to show their opposition of the credit union's proposal to change its charter to a mutual savings bank.  They were allowed to protest outside the front of the credit union so long as they didn't block entry and exits. The credit union even sent an employee out with bottled water during the event.

Vocal members also go to social media, where the credit union has no control of how its brand is used. For example, the brother of a woman killed in an auto accident wrote a blog complaining about the insurance company that refused to pay the death benefit. The message went viral (American Banker Aug. 20).

Although it is not new to see customers of companies "taking control of a brand via social media, what is new is the growth in social media--that's what brands should be thinking about, Frank Eliason, Citi's senior vice president of social media told the Banker (Aug. 20). "The customer owns the company message via social media."

CUs sue owner of defunct Central States Mortgage

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MADISON, Wis. (8/21/12)--Fifteen credit unions have filed a suit in a Wisconsin circuit court against Dick Jungen, former CEO of the defunct Central States Mortgage Co. (CSMC),  and others, alleging that they were involved in a secret loan pool that caused millions in losses to credit unions.

The Wauwatosa, Wis.-based Central States was 70% owned by credit unions and originated and sold residential and commercial mortgage loans as a credit union service organization (CUSO)  about 250 credit unions in the Midwest.

CSMC closed abruptly on March 9, 2008 and was appointed a receiver to oversee its liquidation in April 2009. The collapse resulted in several lawsuits by credit unions and CSMC's  parent company, alleging that Jungen and others had used another business, Interim Funding, to funnel bad mortgages to Central States, causing a $15 million loss (News Now April 10, 2009).

The newest suit, AM Community CU et al vs. M&D Investment Co. LLC of Hartland, Wis., was filed on June 12 in Dane County Circuit Court in Madison, Wis. Fourteen of the credit unions suing are based in Wisconsin; the 15th is in Illinois. The amended complaint alleges unjust enrichment/constructive trust and fraudulent transfer under a Wisconsin statute.

Specifically, the amended complaint alleges that Jungen and others had disclosed the existence, terms and identity of the investors in certain loan participation construction pools but failed to disclose their involvement as investors in another loan-participation pool, P-55. Also, P-55 contained a full recourse provision allowing the pool's participants to require CSMC to redeem their participation interested upon 90 days written notice to CSMC, said the complaint.

"The failure to disclose the identity of the P-55 Pool participants and the terms of the P-55 Pool participation agreements deprived plaintiffs of the opportunity to take measures to protect themselves against fraud and self-dealing, and to object to or establish oversight and/or control over the relationship between CSMC and the P-55 Pool," said the document.

The amended complaint also alleges that Jungen and the other defendants failed to disclose the terms of the contract that require CSMC to pay back investors of the pool and that they improperly liquidated the P-55 Pool without adequate notice. P-55 Pool participants were paid using CSMC corporate assets, including credit and cash causing monetary losses to the credit unions, said the court document.

News Now obtained the amended complaint from an attorney for the plaintiffs, Terrence M. Polich of Madison-based law firm Clifford & Raihala.

CU takes unusual route to growth

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BRADENTON, Fla. (8/21/12)--In attempts to bolster growth, Manatee Community FCU in Bradenton, Fla., earlier this year became the third credit union in Florida to be certified as a Community Development Financial Institution (CDFI) by the U.S. Treasury Department.

Known as Tropicana FCU until mid-2010, a select employee group credit union that served employees at beverage-maker Tropicana, Manatee Community saw its membership erode from a zenith of 4,200 to 3,141 today, largely as a result of the company's cutback on its Bradenton productions, said Cindy Barco, the credit union's president for the past 35 years (Herald Aug. 20).

The CDFI designation allows the credit union to expand its lending and other financial products to area residents who are underserved by other financial institutions, the newspaper said.

By focusing on low- to moderate-income residents with its programs, Manatee Community is seeing real growth, Barco told the paper. As of the middle of this year, loans were up 2.5%, compared with a decrease of 13% the year before, she added.

The credit union earned $15,000 in the first quarter, after losing $108,000 in 2011, the paper said.

By partnering with Suncoast Community Capital Corp., which offers credit-builder loan products, second-chance checking and financial education, Manatee Community can make business loans of less than $50,000, the paper said.

The credit union also will soon unveil an auto-purchase program that offers its low-income borrowers better interest rates than they normally would obtain. In October, it will introduce a program for homeowners who have no remaining equity in their homes, so they can obtain loans of $10,000 to $15,000 to make home repairs or energy-efficiency improvements, the paper said.

Dreamer Loan helps members in USCIS deferred action

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DURHAM, N.C. (8/21/12)--A Durham, N.C., credit union has announced a special loan to assist eligible members seeking educational and employment opportunities through the U.S. Citizens and Immigration Service (USCIS) deferred action process for young individuals who were brought to the U.S. as children.

Latino Community CU's Dreamer Loan will cover the $465 USCIS application expenses. The loan application process will be easy, low-cost, and available to members with or without credit history, said the $106 million asset credit union. Those under the age of 18 may apply for a loan with the help of their parents.

"Latino CU feels strongly about offering the Dreamer Loan to ensure that everyone who is eligible for deferred action has the means to apply in the hopes of increasing their educational and employment opportunities and ultimately improving their quality of life," said Luis Pastor, Latino Credit Union president/CEO.

To apply for a Dreamer Loan, an applicant must be or become a member of Latino CU and provide three documents:

1. A valid photo ID from any country, or a valid school ID;

2. Valid Individual Taxpayer Identification Number (ITIN); and

3. Proof of current physical address.

Latino CU will also offer loans for attorney fees; however those loans will be subject to the same requirements as a traditional personal loan.

Latino CU has 10 branches in North Carolina.

PSCU to host 24-hour Hackathon

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ST. PETERSBURG, Fla. (8/21/12)--PSCU is hosting a hackathon at the credit union service organization's (CUSO) MōPRO Innovation Lab in St. Petersburg, Fla. on Oct. 19-20.

The event, dubbed KnockOut 2012, gives design teams 24 hours to produce a viable proof of concept or working demo of a service, solution or process that promises to deliver real, cutting edge value for credit unions and/or their members.

Hackathons are typically all-night contests where team members collaborate to build or design a prototype of a product, which is then presented to a panel of judges to determine the idea with the greatest value.

For KnockOut 2012, PSCU judges will select up to three semifinalists, who will then present their concepts to PSCU's staff at one of the company's employee town hall meetings. PSCU employees will vote to select the winning team, whose members will receive an all-expense-paid cruise. Second- and third-place teams also will earn prizes.

PSCU KnockOut 2012 is open to all PSCU employees and employees of the CUSO's member-owner credit unions. KnockOut organizers also have arranged for competing teams to participate remotely if they cannot travel to the company's St. Petersburg, Fla. headquarters.

New report Card delinquencies down balances low

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CHICAGO (8/21/12)--U.S. credit card delinquency rates remain low, as does credit card debt, according to a new report from TransUnion, a global information and risk management company. This has implications for credit unions and other financial institutions.

The national credit card delinquency rate--the ratio of borrowers 90 or more days past due-- dropped to 0.63% in the second quarter from 0.73% the previous quarter, said TransUnion. The credit card delinquency rate is at its lowest level since reaching 0.60% in second quarter 2011. Prior to that, the last time the credit card delinquency rate was below its current level was in fourth quarter 1994 at 0.61%.

Average credit card debt per borrower increased the past year, moving up to $4,971 in the second quarter from $4,699 a year earlier. However, credit card debt continues to remain relatively low, more than $700 lower than the $5,719 in second quarter 2009.

"The national credit card delinquency rate continues to remain at the lowest levels we've observed in 18 years," said Ezra Becker, vice president of research and consulting in TransUnion's financial services business unit. "It's a positive situation because average borrower balances have increased over the past year as new card originations have grown. These low delinquency rates reflect both continued conservatism in lender underwriting and the ongoing prioritization of card payments among consumers."

Total card originations in the second quarter grew by roughly 4% from the same period last year. The share of non-prime, higher-risk consumers (with a VantageScore credit score lower than 700 on a scale of 501-990) was 26.1%. That is slightly lower than one year ago (27%), but still much higher than the 20.6% observed in second quarter 2010.

"While non-prime borrowers made up a slightly smaller percentage of all new trades in this latest quarter, they continue to gain more access to credit," Becker said. "In conjunction with the growth in the overall number of card originations in the last few years, it means that the credit card pie is bigger, and non-prime consumers are getting a bigger slice of that pie.

"This is important to note, because one would think delinquencies would rise as non-prime borrowers gain more access to credit," he added.  "We've found that consumers continue to value their credit cards more than ever and will likely do so at least until unemployment abates."

Only five states saw increases in their credit card delinquency rates quarter over quarter. On a smaller level, 20% of metropolitan statistical areas (MSAs) reported increases in their delinquency rates in the second quarter. This was down from first quarter, when 28% of MSAs experienced an increase.

Based on current economic assumptions, TransUnion is maintaining previous forecasts for credit card delinquencies to remain near current levels, with potentially some seasonal fluctuations, through the end of this year. The forecast is based on seasonal effects and other economic factors such as anticipated gross state product, consumer sentiment, disposable income and employment conditions.

The forecast changes as the economy deviates from a conservative economic forecast, if there are unanticipated shocks to the economy affecting recovery, or if lenders materially change their underwriting standards, TransUnion said.

This information is part of Transunion's ongoing series of quarterly analyses of credit-active U.S. consumers, evaluating how they are managing credit related to mortgages, credit cards and auto loans.

Miracle Jeans Day gathering steam

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MADISON, Wis. (8/21/12)--Credit unions and leagues nationwide are organizing support for Miracle Jeans Day, when credit union employees will wear jeans to work in exchange for a $5 donation to their local Children's Miracle Network Hospitals.

Miracle Jeans Day, set for Sept. 12, is a national campaign for Credit Union for Kids.

As of Monday, 343 credit unions signed up to participate in Miracle Jeans Day, according to Felicity Guerin, Credit Union for Kids liaison for the American Association of Credit Union Leagues.

"Our goal is 500 credit unions," Guerin said.

Credit union leagues taking part include:

  • Credit Union Association of the Dakotas;
  • Georgia Credit Union Affiliates;
  • Hawaii Credit Union League;
  • Kansas Credit Union Association
  • League of Southeastern Credit Unions;
  • Mississippi Credit Union Association;
  • Montana Credit Union Network;
  • Mountain West Credit Union Association;
  • Credit Union Association of New York; and
  • Pennsylvania Credit Union Association.
The Credit Union Association of the Dakota is holding a contest between North and South Dakota to see which state can enlist the most credit unions to take part in the event.

The states with the most credit unions signed up to participate in Miracle Jeans Day include:

  • Texas--40;
  • California--35;
  • Ohio--25;
  • New York--21;
  • Michigan--13
  • Oregon--13
  • South Dakota--12; and
  • Minnesota--11;
Four business partners are also supporting Miracle Jeans Day, Guerin said. They are:

  • Cooperative Trust;
  • CO-OP Financial Services;
  • Enterprise Car Sales; and
  • Mitchell, Stankovic & Associates.
Support materials are also available for Miracle Jeans Day. They include:

  • Miracle Jeans Day marketing packet;
  • League marketing calendar;
  • Newsletter articles;
  • Sample chapter president e-mail; and
  • Suggested tweets.
Credit Unions for Kids, a nonprofit collaboration of credit unions, chapters, leagues/associations and business partners nationwide, raises funds for 170 Children's Miracle Network Hospitals. Credit unions are the third-largest sponsor of the hospitals, and 100% of every dollar donated goes to support research and training, purchase equipment or pay for uncompensated care for children.