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CU System briefs (08/03/2012)

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  • BENSENVILLE, Ill. (8/6/12)--An Illinois woman was  indicted Tuesday in a $200,000 theft from her former employer, the Bensenville (Ill.) Community CU. Desiree Cortes, 31, of Bensenville, is charged with five counts of misappropriation of financial institution property and one count each of theft and continuing a financial crimes enterprise (Chicago Daily Herald Aug. 2). Cortes is accused of secretly opening five unauthorized credit card accounts at the credit union, where she worked in mortgages, and accumulating $194,000 in debt from May 2008 and December. She allegedly concealed the thefts by manipulating the credit union's computer system. Her arraignment is scheduled for today …
  • WILMINGTON, Del. (8/6/12)--Theodore Gray, 55, was arrested July 26 in connection with a July 25 robbery at the Wilmington, Del., branch of Dover-based Del-One FCU. He was charged with second-degree robbery. The incident occurred at about 11:20 a.m. when a man walked up to a teller with a note demanding money, was handed $100, and fled the credit union (The News Journal July 26). No one was physically injured in the robbery, according to the Delaware Credit Union League (Together July 31) …
  • BABYLON, N.Y. (8/6/12)--Bryan Fuge, 30, of Yaphank, N.Y., was arrested and charged by Suffolk County Police with robbing the West Babylon branch of Medford, N.Y.-based Suffolk FCU on June 22. Fuge is charged with third degree robbery. He is accused of entering the credit union, handing a teller a note demanding money, and fleeing the building with the money (Associated Press via The Wall Street Journal Aug. 3) …

Mass. CU reserve fund among 31 bills sent to governor

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BOSTON (8/6/12)--Among the 31 bills sent to Massachusetts Gov. Deval Patrick last Monday and Tuesday was H 2073, a bill establishing a reserve fund for credit unions.

The state bill, sponsored by Rep. James M. Murphy (D-Weymouth), was filed by the Massachusetts Credit Union Share Insurance Corp. (MSIC), which has provided excess insurance to some state and federally chartered credit unions in the state since 1961.  H 2073 would allow MSIC to form a voluntary liquidity fund for its member credit unions.

The fine-tuning bill states the corporation "may establish a separate and distinct fund to be known as the Reserve Fund for the purpose of promoting liquidity and elasticity and flexibility of the resources of its members. The Reserve Fund shall be funded with term and regular deposits voluntarily made by regular members and excess members. No member shall have on deposit more than 10% of its assets in the Reserve Fund." 

Once the fund attains a $30 million total asset basis, deposits of any one member shall not exceed 10% of all deposits in the fund. No member may borrow from the fund in excess of 10% of its assets unless the loan is secured by the directors of the corporation.

MSIC used to be the primary deposit insurance for state-chartered credit unions but has carved a niche in excess coverage, according to the Massachusetts Credit Union League.

According to MSIC's website, it insures excess shares and deposits above the federal insurance limit of $250,000 at its member credit unions.

The governor has until Friday to sign, veto or seek amendments to the bills sent to his office last Tuesday, which was the final day for formal legislative sessions in 2012, according to the Boston Herald (Aug. 1).  The state House and Senate will meet twice a week for the rest of the year in informal sessions where bills need unanimous support to advance.

Study Deposits at large CUs outpacing banks

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CHARLOTTESVILLE, Va. (8/6/12)--Consumers were moving money out of banks and into credit unions long before Occupy Wall Street protests and Bank Transfer Day, according to a study by financial research firm SNL Financial.

The SNL report indicates deposits at banks and credit unions from year-end 2006 remained steady until about the beginning of 2009, when credit union deposit levels increased from 2006 levels.

Big banks have made few adjustments to stop the exodus of customers, said an article in the Huffington Post Thursday. However, the article also noted that small and mid-size banks are closing their doors as they struggle with low interest rates, weak loan demand, and compliance costs for regulations.

The Huffington Post article highlighted East Windsor, N.J.-based McGraw Hill FCU's latest video campaign asking potential members to make video testimonials about leaving big banks, in a program called "We Hear You."

Credit union advertising after 2008 and before the fall of 2011 may have positioned credit unions to gain members as individuals searched for an alternative to banks, Adam Denbo, a credit union consultant and managing partner at Samaha & Associates, told SNL. The U.S. has shifted from a net-spending country to a net-savings country, resulting in more deposits and all financial institutions, Denbo said.

But there has been a growing dissatisfaction with banks and thrifts in general and steady faith in the nonprofits, Mike Schenk, Credit Union National Association vice president of economics and statistics, told SNL via e-mail. During the financial crisis and credit crunch, deposit rates at credit unions remained consumer-friendly.

Credit unions opened up their lead in deposits when banks such as Washington Mutual and Wachovia ran into trouble during financial crisis, said SNL.

BECU, Tukwila, Wash., saw an increase in deposits in the fall of 2008 through the end of the year after Seattle-based Washington Mutual Inc. failed and its banking operations were purchased by JPMorgan, said Tom Berquist, senior vice president of member strategies, told SNL. BECU grew deposits 9.44% between 2007 and 2008, from $7.2 billion to $7.88 billion, according to SNL. Since 2006, deposits have grown 54.80% at the credit union.

Bank of America Corp.'s attempt to charge a $5 monthly debit card fee also contributed to BECU's deposit surge, Berquist told SNL. BofA has the largest market share in the state. BECU conducted no marketing campaigns about BofA's fee or the National Bank Transfer Day movement, but membership still spiked to 16,000 that month, up from an average between 6,000 and 7,000 a month.

State Employees' CU, Raleigh, N.C., spokeswoman Leigh Brady attributed its growth to a flight to safety from Wall Street banks. The credit union is also accessible: It has branches in every county of the state. Deposits grew 11.27% from 2007 to 2008 and 19.34% between 2008 and 2009. Since 2006, deposits increased 78.20%.

In spring 2011, SECU's frontline staff began informing members about additional services and encouraged them to switch checking accounts to SECU. The campaign helped grow checking accounts for the year.

SECU has lowered its deposit rate for several years because lending remained tight. Deposits continue to grow, although more slowly, Brady said. SECU tries to lend 85% of deposits, but is currently lending 60% and invests the rest in U.S. Treasuries, Brady told SNL. To offset the lost margin, the credit union emphasizes its noninterest products and services, and capitalizes on its being the primary financial provider for 70% of its members.

To read the SNL report and the Huffington Post article use the links.

Kids draw what cooperation looks like

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FARMERS BRANCH, Texas (8/6/12)--By providing a forum for children to express their artistic talent through drawing, SICREDI, one of Brazil's credit union organizations and the Texas Credit Union League's (TCUL) "People to People" partner, has come up with a way to celebrate the International Year of the Cooperatives this year.

SICREDI created a website (use the link) and is encouraging children to draw an image depicting cooperation and then to upload that image to the website, said the league (LoneStar Leaguer Aug. 3).

Several drawings already have been posted, and visitors can view the images by clicking on the "Desenhos" tab on the website. SICREDI is inviting children worldwide to participate.

TCUL and SICREDI in 2010--through the World Council of Credit Unions--signed a "People to People" partnership, opening the door for the exchanges of ideas and best practices between the two organizations.

Twelve representatives from SICREDI are expected to attend TCUL's Marketing & Business Development Conference Sept. 4-6 and the Leadership Conference & Expo Sept. 6-8. Both conferences will be held in San Antonio.

The 12 SICREDI executives will "shadow" credit union employees after the conferences. The 12 will split into three groups, and each group will spend one week with one credit union and another week with a second credit union. TCUL will identify credit unions to host the group.

Two Oregon CUs finalize merger

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PORTLAND and SPRINGFIELD, Ore. (8/6/12)--UFCW Northwest CU in Portland, Ore., has merged into the bigger Northwest Community CU, based in Springfield, Ore., to provide UFCW members with more financial resources, Northwest Community said Wednesday.

The $24 million asset UFCW's lone branch in Portland started operating Wednesday as one of $689 million asset Northwest Community's branches (Portland  Business Journal  and OregeonLive.com Aug. 3).

Northwest Community has 16 branches in 12 Oregon cities. 

At the time of the merger, UFCW served 3,500 members, and Northwest Community had 73,000 members. 

Northwest Community will offer UFCW members additional services such as auto loans on location at participating dealerships, a full-service mortgage department with first-time buyers' programs, and a wider range of deposit accounts, the Journal said.

Personal business bankruptcy filings continue decline

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MADISON, Wis. (8/6/12)--Filings for business and personal bankruptcies continued their year-over-year decline in the second quarter, according to information from U.S Bankruptcy Courts. Credit unions' experiences--regarding loan delinquencies and capital ratios--support this trend, per data from the Credit Union National Association (CUNA).

Overall bankruptcy filings for the 12 months ended June 30 totaled about 1.31 million petitions, which is 14% less than the roughly 1.53 million in the 12 months ended June 2011.

The majority of bankruptcy filings involve predominantly non-business debts. For the 12-month period ending June 30, non-business filings--where the debts are predominantly personal or consumer in nature--totaled about 1.27 million, down 14% from the roughly 1.47 million nonbusiness bankruptcies filed in the 12-month period ending June 30, 2011.

Personal bankruptcies decreased 14.2% from second quarter 2011. Business filings went down 15.7%.  For more information, use the link.

At credit unions, the loan delinquency rate as a percentage of total loans in June (the most recent month for which data are available) declined to 1.32% from a high of 1.60% in December, and a 1.58% level in June 2011, according to CUNA's June 2012 Monthly Credit Union Estimates (MCUE).

Credit unions' capital ratio has remained between 10% and 10.4% during the past year, and was 10.1% in June, the MCUE indicated.

To see the most recent credit union data in CUNA's June MCUE, use the link.

Dismissal of ATM disclosure suit provides lessons

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NEW YORK (8/6/12)--A federal court's dismissal in New York of a cookie-cutter ATM surcharge-disclosure lawsuit related to a credit union's ATM shows other credit unions how being prepared and in compliance helped the credit union win its case.

The class-action lawsuit was filed in the U.S. District Court for the Eastern District of New York, Brooklyn, by Brooklyn resident Yehudah Katz against Atlanta, Ga.-based Delta Community CU.

The credit union owns an ATM at La Guardia Airport in New York that Katz allegedly used on Feb. 15, according to court documents.  His complaint, filed March 9, alleged the ATM had no external notice of the fee and was in violation of the Electronic Funds Transfer (EFT) Act.  He was charged $2.50 after agreeing to the machine's on-screen ATM disclosure.

U.S. District Court Judge William F. Kuntz II dismissed the case on July 25 "with prejudice, and on its merits, as to the named plaintiff only and without costs as to either party as against the other." The ruling did not state his reasons for the dismissal.

The Credit Union National Association has urged credit unions to be prepared to prove their compliance with the EFT Act  in the wake of multi-lawsuits filed by a few individuals suing banks and credit unions in several states for not having external notices posted on their ATMs.  The ATMs typically have an on-screen notice of the surcharge fees and give consumers the option of not incurring the surcharge by backing out of the transaction.

The multiple law suits use a similar template for unrelated cases. For example, the complaint document in this case involved a male plaintiff but referred to both "himself" and  the "plaintiff, on behalf of herself."

In its response to the lawsuit, the credit union provided photos of the machine taken by Automated Teller Accessories Corp., doing business as ATA Services, which services the ATM for the credit union.  Their agreement provides for ATA to provide photos and proof of notices, logos and signage and to check for, and immediately report, missing stickers and vandalism.  "No such report was received by the credit union respecting the ATM in question," said court documents filed.

The credit union's response also pointed out that the plaintiff voluntarily "consented to the fee by accepting it in response to the on-screen notice of the fee and had the opportunity to cancel the transaction without incurring the fee but chose not to do so."  It cited the principles of waiver, ratification and estoppel on the grounds that the plaintiff voluntarily incurred the fee.

The nuisance lawsuits have prompted legislation in Congress that would ease burdensome ATM fee disclosure regulations that have created legal and financial issues for many credit unions. A bill that would require disclosures only on an ATM's screen is working its way through the Senate.

NIHFCU helps Va. Biomed research grow business

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ROCKVILLE, Md. (8/6/12)--The National Institutes of Health FCU (NIHFCU), Rockville, Md., recently helped finance a member business loan (MBL) for a biomedical researcher and member of the Virginia Biomedical Association.

The National Institutes of Health FCU, Rockville, Md., recently helped finance a member business loan for Tom Galati, the owner of a biomedical research firm. (Photo provided by National Institutes of Health FCU)
Tom Galati used the financing to expand the research laboratory he founded in 1999. Histo-Scientific Research Laboratories Inc. provides histology, pathology and archive services to biotechnology firms, medical device and pharmaceutical companies, contract research organizations, government interests and university researchers.

"We recognize that small businesses are critical to our local and national economies," said Juli Anne Callis, NIHFCU president/CEO. "We are actively supporting the goals and aspirations of dedicated biomedical professionals, like Tom Galati, with our solutions that can help provide outstanding service to this cutting edge community."

Galati has originated four loans with the $563 million asset NIHFCU--two commercial property refinances and two others to help him expand his company and finance new equipment purchases.   

"I am always looking for opportunities to diversify my services and showcase my ideas," said Galati. "Of all the lenders I contacted, it was NIHFCU that truly recognized my track record and earned my business. Until I spoke with NIHFCU, I felt like a supermodel that could not get a date."

The Credit Union National Association (CUNA) and credit unions have been urging the 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.