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CU System briefs (08/21/2012)

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  • CHARLESTON, W. Va. (8/22/12)--Doris Cunningham, who retired earlier this year as manager/CEO of  Members Choice WV FCU, Charleston, W.Va., died Aug. 19, according to the West Virginia Credit Union League. She had worked with the credit union for 42 years. She was active in the Kanawha Valley Chapter, and was chapter president prior to being elected to serve on the league board in 1990. Cunningham served two terms as league chairman and for the past 14 years served as treasurer of the league.  In 1992 and 2005, Cunningham was awarded the William Bryan Hawkins Award for her volunteer service at the chapter and state level. "With Doris' passing, credit unions lost a true friend and the state lost a real leader," said league President Ken Watts. "However, if you were fortunate, as I was, to have known and worked with her, you realize that her invaluable contributions will be felt for many, many years to come." Funeral services are today at 1 p.m. ET at Highlawn Baptist Church, St. Albans, W.Va. …
  • PHOENIX (8/22/12)--A woman dubbed the "Color Me Bad Bandit" because of her colorful disguises is wanted in connection with four credit union robberies in the Phoenix area, said the Federal Department of Investigation (TMCNet.com Aug. 21). Credit unions robbed were AZ FCU, Mesa, Ariz., on July 11; Mountain America CU, Mesa, on July 19; Sun West FCU, Mesa, on July 31; and Arizona FCU, Tempe, on Aug. 16. She is described as white or Hispanic with dark features, in her late 20s or early 30s, 5'4"-5'5" tall, 140 lbs., with full lips. The woman enters the credit unions with a large bag and uses a note to demand money and threaten employees. She flees on foot. The suspect also consistently attempts to conceal her identity with large scarves or hats and sunglasses. On her most recent robbery, the robber wore a long, leopard print cape and carried a large black bag …
  • BREA, Calif. (8/22/12)--Evangelical Christian CU (ECCU) has teamed with CapinCrouse LLP to offer a series of financial seminars to help churches and nonprofits do a better job stewarding their resources and people entrusted to their care.  The seminar aim to help churches and nonprofits understand financial risks, tax risks, legal risks and operational risks. The seminars will be Oct. 2 in Littleton, Colo.; Oct. 3 in Fort Worth, Texas; and Oct. 4 in Plano, Texas …
  • ALBUQUERQUE, N.M. (8/22/12)--The Credit Union Association of New Mexico's Governmental Affairs department hosted two congressional candidates in town hall meetings on Aug. 14.  Janice Arnold Jones, a Republican, and Michelle Lujan Grisham, a Democrat, were the guests. Both are running for the position of representative for New Mexico's First Congressional District. They talked about their positions on credit union issues such as member business lending, the state's economy, and more …

FirstCorp members OK PandA of assets by Catalyst Corp.

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PHOENIX, Ariz. (8/22/12)--Members of Phoenix-based First Corporate CU voted Friday to approve the purchase and assumption (P&A) of the majority of its assets by Catalyst Corporate FCU.

FirstCorp and Catalyst are on schedule to complete the necessary transitions of products and services in time for their consolidation to take place Oct. 29, it was announced at the special meeting.

"We proposed this type of consolidation with Catalyst because it offers many benefits to our member credit unions," said FirstCorp Chairman David Doss, noting that "we have taken a major step forward toward completing the transition to Catalyst.

"All the members support the concept of a sustainable model, which will allow us to continue to enjoy low-cost, comprehensive wholesale financial services well into the future," Doss added.

The transition is unique because it takes the form of a P&A of certain FirstCorp assets and share accounts, said FirstCorp. Legacy assets will not be acquired by Catalyst, but will remain in the FirstCorp charter until they mature or are sold at a later date.

"This approach protects FirstCorp's membership capital, which will remain at FirstCorp, and will also immunize Catalyst's members against the risk of future losses on these assets," said Catalyst President/CEO Kathy Garner.

Roughly 93.48% of FirstCorp's eligible members cast votes, with 100% of those approving the transactions.  As with all corporate consolidations, this proposal will require approval from the National Credit Union Administration and the Arizona Department of Financial Institutions.

In a press release, the corporates said they do not anticipate any obstacles in completing the proposal because the solution is advantageous for the corporates' members, the regulatory agencies, and credit unions impacted by the status of the National Credit Union Share Insurance Fund.

FirstCorp's offices and final operations will be shut down in the weeks following the closing of the P&A. The Catalyst Corporate's official capital offering period for FirstCorp members begins now and continues through Oct. 26.

WesCorp trial date postponed settlement talks continue

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LOS ANGELES, Calif.  (8/22/12)--Court hearings and the trial date have been postponed while settlement talks continue amongst the parties in the National Credit Union Administration's  (NCUA's) lawsuit against former Western Corporate FCU senior executives over losses from mortgage-backed securities that led to the corporate's collapse.

The U.S. District Court for the Central District of California had issued a recent order postponing the case while the remaining parties continue negotiations. A hearing that had been scheduled for Tuesday has been reset for Sept. 25 at 1:30 p.m., according to court documents.

NCUA, as liquidating agent for WesCorp, had filed a negligence lawsuit against former WesCorp senior executives. Three have entered settlement agreements with NCUA, while two others have not settled.

The NCUA's suit alleges that officials were negligent in monitoring mortgage-backed security investments that were made by the corporate, and that there was a breach of fiduciary duty and fraud related to these investments, which resulted in $6.8 billion in portfolio losses. The WesCorp employees filed counterclaims and affirmative defenses against NCUA, alleging the agency was aware of WesCorp's investment strategies and approved of and encouraged the strategies.

New scams surface across the nation

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MADISON, Wis. (8/22/12)--Several new, trickier scams have surfaced at credit unions and banks nationwide. They attempt to access consumers' accounts through the different channels they use to conduct financial transactions.

The scams include:

  • An e-mail sent to customers and non-customers of Citizen National Bank, in which scammers pose as the bank's information technology department, claiming to be in the process of updating new servers. They ask recipients to update their account information by clicking on a bogus link. The e-mail asks recipients to provide complete, correct personal information to be part of a secure login, claiming that otherwise their accounts will have to be temporarily closed.  The e-mail spells the bank as both Citizen and Citizens and has grammatical errors.
  • Automated cell phone calls to area residents, purporting to be Royal CU (RCU), a $1.27 billion asset credit union based in Eau Claire, Wis. The callers tell them their RCU debit card had been blocked or deactivated (WQQW Aug. 20). Recipients also were instructed to enter their debit card number to solve the problem.  When RCU became aware of the scam, it placed warnings on its website, Facebook page and other venues.
  • Fraudulent automated calls to mobile phones claim to be from WhiteFish (Mont.) CU and state their credit union cards have been compromised and their personal information is needed to rectify the problem. The voice on the recording falsely claims to be a representative of the $1.22 billion asset credit union. The credit union distributed a press release immediately about the scam.

VolCorp elects board officers

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NASHVILLE, Tenn. (8/22/12)--Volunteer Corporate CU (VolCorp) last week named two new credit union executives to its board of directors, and re-elected another current member to a new term on the board.

Tom Brewer, president/CEO of Peoples FCU, Nitro, W. Va., and Rick Mikels, CEO of ETMA FCU, Louisville, Tenn., were elected to new three-year terms on the corporates' board of directors. Ken Swann, CEO of City of Memphis CU, Memphis, Tenn., was also reelected to a three year term. Swann is the current board of directors chairman.

Other board members include:

  • Vice Chairman Gary Land, CEO, Chattanooga (Tenn.) Area Schools FCU;
  • Secretary Janice Jones, CEO, United Southeast FCU, Bristol, Tenn.;
  • Treasurer John Jacoway, executive vice president/chief financial officer, Southeast Financial CU, Franklin, Tenn.;
  • Wade Stapleton, CEO, LifeWay CU, Nashville;
  • Todd Swims, CEO, Leaders CU, Jackson, Tenn.; and
  • Bonnie Sensing, Nashville Fireman's CU, Nashville, Tenn.
VolCorp is a not-for-profit financial cooperative that serves natural person credit unions nationally.

Court CUs security gap loses insurance claim

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LOS ANGELES (8/22/12)--The California Court of Appeals has ruled that a financial institution's  insurance claim for losses stemming from fraudulent wire transfers is not covered because the institution failed to follow security procedures mandated by its insurance policy.

The appellate court affirmed on July 31 a ruling by Los Angeles County Superior Court Judge Terry A. Green in favor of the insurance company, CUMIS Insurance Society, which was the insurer for the California-based credit union. The new ruling was published on Aug. 17, according to court documents.

CUMIS had provided a bond for coverage to the credit union for more than 10 years. The coverage was typically renewed in February of each year and the bond in question was effective from February 2007 to February 2008. 

In January 2008, the credit union transferred nearly $243,700 from a member's account to a bank account in Hong Kong, according to the ruling's document. A man identifying himself as the member called the credit union to change the telephone number associated with the account. He provided the member's Social Security number, birthdate, mother's maiden name and current transition activity and the telephone number was changed.

Five days later on Jan. 14, the credit union received a fax of a completed wire transfer request form, directing the credit union to transfer funds from the member's homeowner's line of credit to the Hong Kong account. The credit union determined the signature on the fax and information matched that of the member and that no legal impediments prevented the transfer. The credit union called the new phone number and a man identifying himself as the member confirmed the transfer request. The man answered correctly a series of security questions and the credit union completed the transfer, said the court documents.

The member learned of the transfer two weeks later when his wife contacted the credit union about refinancing a loan. He submitted a sworn statement he had not requested the transfer and had not authorized anyone else to do so.

The credit union could not recover the funds and submitted a claim to CUMIS. On April 8, 2008,  CUMIS informed the CEO that the bond did not cover the loss because the credit union had not verified the wire transfer request by using a "secure telephone number" as outlined in its policy. "Secure telephone number" means a "replacement telephone number for the member…that the credit union received at least 30 days prior to the receipt of the [wire transfer] instruction.  Instead, the credit used the telephone number that had been changed five days earlier.

In the appellate court opinion, Presiding Justice Robert Mallano agreed with the lower court that the credit union's failure to comply with the security procedure entitled the insurer to deny payment under the bond.  He noted the insurer had notified the credit union in October 2006 of changes taking effect in  February 2007, including a callback verification procedure. The company said it would pay for a fraudulent wire transfer if a credit union performed the specific call back verification requirements.

The court rejected the credit union's argument that it was not required to use the callback because it used an alternative security measure permitted under the bond, namely a "written funds transfer agreement, signed by the member or the member's authorized representative."  The court  noted that "the alternative security procedure required the signature of the member or an authorized representative. A forged signature, as here, did not suffice."

CUNA Mutual Group, of which CUMIS is a member, declined to comment on the case.

Mich. league obtains reg OK for biz-investing CUSO

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LANSING, Mich. (8/22/12)--The Michigan Commissioner of Financial and Insurance Regulation has signed an order authorizing credit union service organizations (CUSOs) to provide small-business equity investments to Michigan credit unions and their members. That is a landmark move for the credit union industry, according to the Michigan Credit Union League (MCUL).

The action comes after months of proactive advocacy by the league on behalf of the state's credit unions and CUSOs.

"This is an unprecedented step forward for credit unions," said David Adams, CEO of MCUL. "Business investing authority has tremendous potential benefits to credit unions and to the small business community at large. It is further proof that there is nothing small about the credit union commitment to supporting small businesses. MCUL and CUcorp plan to work aggressively with our credit union community on a structure and business plan that will take advantage of this new opportunity. CUcorp is well-positioned to facilitate this."

"It is necessary and proper for CUSOs to offer small-business equity and venture-capital- investment administration and related services to its member credit unions and their respective members," noted Commissioner R. Kevin Clinton in his ruling, based on a review of applicable laws, and considering safety and soundness.

In October, MCUL began the process necessary to achieve the new authority through the existing regulatory process, without any statutory amendments.

The new authority allows state-chartered credit union investment in CUSOs that provide investment administration and other services related to small-business equity or venture-capital funding.

The Credit Union National Association (CUNA) and credit unions are urging Congress to increase credit unions' MBL cap to 27.5% of assets from 12.25%. Doing so would open up more opportunity to offer MBLs, inject $13 billion in business loans into the economy and create as many as 140,000 new jobs, with no cost to taxpayers, CUNA said.

65 of adults polled oppose credit card surcharges

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AUSTIN, Texas (8/22/12)--If retailers start charging extra fees for paying with plastic, nearly two-thirds of U.S consumers say they would stop using their credit cards, according to a new CreditCards.com poll. This is important to credit unions trying to market their own credit card programs.

Sixty-five percent of consumers who use credit cards would pay another way if a fee were charged, no matter how small, the survey found.

Visa and MasterCard have long banned such surcharges at businesses that accept their cards, but they agreed in July to abolish that rule as part of a settlement of a longstanding class-action lawsuit. If finalized, the settlement will free up retailers to impose a fee on their customers, possibly in early 2013, to help recoup the so-called "swipe fees" they pay every time a customer purchases with a credit card.

Retailers can charge customers no more than the amount of the swipe fee, which typically ranges from 1.5% to 3% of the purchase, according to the settlement, which still needs judicial approval. However, when asked in the survey if they were willing to pay a surcharge in that range--2%--Americans said "no way," said CreditCards.com.

Only 2% of Americans would be willing to pay a fee that was capped at 2% of the purchase price.

The CreditCards.com poll also indicated that those least likely to balk at paying a surcharge are those under age 35--the younger the respondents, the less willing they were to stop using their card. Credit unions are trying to penetrate this market. 

Only about half (52%) of 18- to 34-year-olds would use a different payment method to avoid a fee, compared with  63% of those age 35 to 49, and more than 70% of those older than 50. Also, one in four in the younger group said they would pay up to $1 extra to use plastic, while only 13% of those over age 65 were willing.

"The younger you are, the more accustomed you've become to electronic transactions and having credit," said Ken Manning, a marketing professor at Colorado State University. "Young people don't go to banks, and they tend to see dealing with cash as a hassle. So they might be willing to pay a fee."

Other highlights of the poll:

  • The groups who say they use credit cards "always" or "frequently" for retail purchases were more likely to report they would stop using their cards when faced with a fee-- 69% versus 60% of those who "sometimes" or "rarely" use plastic.
  • Income makes a difference in how willing consumers say they are to put away their plastic if faced with a fee. Of those earning $30,000 to $39,900 a year, about 42% said they'd stop using a credit card if they saw a surcharge. Of those making $75,000 a year or more, 71% would stop using credit cards.
The telephone survey of 1,005 adults was conducted Aug. 3-5 by GfK Roper Custom Research North America, using random digit dialing.

To read the all the findings of the poll, use the link.

CUs offer energy loans in tough summer

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MADISON, Wis. (8/22/12)--Record-setting summer heat has brought not only increased energy costs but additional wear and tear on appliances such as air conditioners and on homes' electrical circuits. Credit unions have launched loan initiatives to help their members finance the additional costs associated with the hot summer.

To help pay for energy efficiency upgrades, members of Elevations CU, Boulder, Colo., have access to a new suite of loans.

The program for businesses and homeowners is a part of the Elevations Energy Loan, which is the result of a partnership with Boulder EnergySmart and the Denver Energy Challenge.

The initiative is designed to provide property owners with a financing mechanism that is easy to access and cost effective, allowing for the installation of energy upgrades and improvements, the credit union said. Loan rates for energy upgrades and improvement on residential properties start at a 2.75% annual percentage rate (APR). Commercial rates start at a 3.75% APR.

With several terms, the Energy Loan Program extends the benefits beyond short term rebates, making almost any upgrade affordable, the credit union said.

In Maine, about 70% of credit unions offer some type of specific loan to finance home weatherization or steps to make homes more energy efficient, according to a survey conducted by the Maine Credit Union League (Weekly Update July 6).

Of the Maine credit unions that offer energy efficiency loans, rates range from 3% to 9%, with an average rate of 5%.

Judge rules in favor of CUs on taxi medallions

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NEW YORK (8/22/12)--A New York Supreme Court judge Friday blocked a state law that would have allowed the sale of more New York City yellow taxi medallions. The ruling supports a claim by credit union lenders that the state violated the "home rule" provision of the State Constitution.

Taxicab Service Association (TSA)--an association of credit union lenders that finance the yellow taxi medallion purchases in New York--had asked the court to invalidate the Street Hail Livery Law, or Hail Act, which was passed in 2011 to shore up an insufficient supply of taxis in the city and its outer boroughs. The Hail Act allowed up to 18,000 new taxi licenses in the city and its outer boroughs, according to court documents.

New York Supreme Court Justice Arthur F. Engoron ruled that the legislation violated the home rule provision of the State Constitution because New York City taxi service is not a matter of substantial state interest or concern and "a law that shifts power from the city's legislative branch to its executive branch, and micro-manages the exercise of that power, fails to bear a reasonable relationship to any such interest or concern."

The state legislature passed the law at New York Mayor Michael Bloomberg's urging after the plan was rejected by the City Council, which holds the power to issue new medallions.

Engoron also cited the State Constitution's "double enactment" clause. "If plaintiffs are correct that a substantial State interest does not support the subject legislation, then the subject legislation violates the 'double enactment' clause, because it repeals, diminishes, and/or impairs powers granted in the Statute of Local Governments but declares itself to take effect immediately, without a 'double enactment,'" Engoron wrote in his ruling.

On June 1, Engoron issued a temporary restraining order blocking the measure (News Now June 13). New York's Supreme Court is a lower trial court.

The individual credit unions joining TSA's suit include Lomto FCU, Melrose CU, Montauk CU and Progressive CU--all from the New York area.

Taxi medallions are symbols that are usually attached to the hood of New York City cabs. The medallions are licenses that are regulated by the city and allow drivers to pick up curb-side passengers who hail a cab. Credit union service organizations may originate business loans that are used to purchase taxi medallions, the National Credit Union Administration said in a legal opinion released in October 2010 (News Now Nov. 1, 2010).