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Paper How to prevent bust-out card fraud

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DES MOINES, Iowa (9/30/11)--Bust-out fraud, a form of first-party fraud also known as "sleeper fraud," is breaking out in a major way, and card-issuing credit unions and other financial institutions must pay closer attention to the risk, according to a white paper from The Members Group (TMG). Bust-out fraud occurs when a card applicant with criminal intent applies for credit using a false, partially false or even legitimate identity, said Karen Postma, senior cards risk manager for TMG and author of "Are Your Cardholders About to Bust Out?" Once approved, the cardholder behaves normally, flying under the radar for as long as a year. During that time, the cardholder receives credit line increases and makes normal transactions and over-the-minimum payments each month. Then suddenly, the bust-out artist defaults, Postma said. The bust-out artist doesn't work alone but may be part of a ring of as many as 20 people, systematically targeting credit unions and community banks. "They know exactly how long it will take and the kind of behavior they will need to exhibit in order to get their credit up to the highest limit possible before striking," she wrote. The typical financial institution (FI) relegates accounts like this to a collection team, which is unsuccessful in recovering the balance due. As a result, the loss is never classified as a fraud, and the con artist moves on to the next financial institution victim. "Community-based FIs are particularly vulnerable to bust-out fraud," wrote Postma. "That's because losses stemming from this and other forms of first-party fraud are typically as much as 40% higher than losses from third-party fraud." She noted that first-party fraud accounts for at least 25% of total U.S. consumer credit charge-offs. Postma examines red-flag warnings and prevention methods, including education, cohesion among departments at the institution on application procedures, and frequent refreshing of credit scores. TMG, a wholly owned subsidiary of the Affiliates Management Co., which is owned by Iowa credit unions and their members, provides card processing and payment solutions to credit unions and financial institutions. To access the entire report, use the link.

CU System brief (09/29/2011)

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* HARRISBURG, Pa. (9/30/11)--Although Pennsylvania experienced near record flooding recently, credit unions there are reporting to the Pennsylvania Credit Union Association (PCUA) they haven't had to activate their business continuity plans (Life is a Highway Sept. 29). PCUA said 75% of credit unions polled in its "Highway Quick Poll" said they did not have to access their business continuity plan this year. Of the 68 credit unions responding, 22.1% said they activated their plan, and 2.9% reported they did not have a business continuity plan but could have used one …

CUNAs IPlan ItI IMoneyMixI blog national award finalists

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MADISON, Wis. (9/30/11)--Plan It and Money Mix Spending Blog--two popular personal finance education resources from the Credit Union National Association (CUNA)--are finalists for the 2011 Eddie and Ozzie Awards, a national competition sponsored by FOLIO: magazine. Eddie Awards are for editorial content, while Ozzie Awards are presented for design. Plan It, CUNA's website for preretirees 40-60, is among three finalists for the Best Consumer Website Eddie award in the "Association/Non-Profit, Frequency six or more times a year, Consumer" category. The other finalists in that category are American Rifleman from the National Rifle Association of America, and VISI from New Media Publishing. MoneyMix "Spending Blog" is among three finalists for "Best Blog" in the "Column or Blog, Best Online Column or Blog, Consumer" category of Eddie Awards. Other finalists in this category include "SELF" in HealthySELF in SELF Magazine and "Joe Posnanski's Curiously Long Posts" in Sports Illustrated. MoneyMix is CUNA's website for young adults, ages 18-30. FOLIO: said it received more than 2,000 entries in this year's competition. The annual award program, which spans all corners of the magazine publishing industry, recognizes the best in editorial and design. Gold, silver and bronze award winners will be presented the awards in New York City on Nov. 1.

CUs focus of special IN.J. BusinessI magazine issue

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HIGHTSTOWN, N.J. (9/30/11)--The strong and steady nature of credit unions, and differences between them and banks, were highlighted in a special feature article in the September issue of New Jersey Business magazine. “New Jerseys’ credit unions have weathered the country’s financial crisis and ensuing recession, exhibiting a small, but steady growth in assets, as well as increased lending that can help boost the state’s economy, industry experts say,” wrote Sharon Sheridan in the article, “Credit Union Crescendo.” Lending at New Jersey credit unions increased 7.6% from December 2007 to September 2010, while it fell 6.5% at the state’s banks, Paul Gentile, president of the New Jersey Credit Union League, said in the article. “Credit union member business lending was up 12.7% in New Jersey last year, double the national average,” Gentile added. “It was up 52% in 2009. The average member business loan at a credit union is $123,455, making them true mom-and-pop small-business loans. This small-business lending can be vital to helping the economic recovery come faster here in New Jersey.” Not only will people benefit from lower loan interest rates and higher dividend interest rates on their savings at credit unions, they also will benefit from credit unions’ overall approach to their members, Andrew Jaeger, president/CEO of Credit Union of New Jersey, Ewing, told the magazine. “A credit union’s No. 1 goal is to serve our members; provide the highest level of value to our members,” Jaeger added. “That means we’ll accept lower levels of profit margin to give back to our members. We will make loans to people that other lenders aren’t able to, for reasons of constraints and having to answer to stockholders.” By staying conservative and not getting involved in the subprime market, Affinity FCU, Basking Ridge, was able to maneuver through the recession, Patrick McDermott, Affinity’s assistant vice president for business solutions, told the magazine. “During the recession, we helped a tremendous amount of members,” McDermott said. “We were in the business of keeping our members in their homes.” Editor’s note: The Credit Union National Association (CUNA) and credit unions are pressing 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 loans into the economy and create as many as 140,000 new jobs, with no cost to taxpayers, CUNA said. To read the article, use the link.

WOCCU launches professional fellows program

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MADISON, Wis. (9/30/11)--Education and networking opportunities will be provided through a new program offered by World Council of Credit Unions (WOCCU) to as many as 40 young credit union professionals from the Dominican Republic, Guatemala and the U.S. The Professional Fellows Program, funded in part by a grant from the U.S. State Department’s Bureau of Educational and Cultural Affairs, will allow 10 young professionals each from the Dominican Republic and Guatemala to interact with 20 of their counterparts from Iowa and North Carolina. Through the new 18-month, $386,000 program, participants can pursue ways their credit unions can better serve members. “Our ongoing mission has been to facilitate exchanges between credit unions from various countries,” said Brian Branch, WOCCU president/CEO. “This grant will help us reach farther in fulfilling this mission.” The program is designed to facilitate idea exchanges, promote foreign language skills and cultural diversity, and improve problem-solving skills in credit union development and management on a global basis. Also, participants will focus on finding new ways to attract younger members to credit unions. Fellows will travel to partnering countries, with four visits scheduled between June 2012 and January 2013. Part of the U.S. participants’ experience will include a study of Hispanic cultures to more effectively serve Hispanic members back home. Other participating organizations include the Asociación de Instituciones Rurales de Ahorro y Crédito (AIRAC), which represents rural credit unions in the Dominican Republic, and the Federación Nacional de Cooperativas de Ahorro y Crédito (FENACOAC), Guatemala's national credit union trade association. U.S. participant groups include the Credit Union National Association (CUNA), the North Carolina Credit Union League, the Iowa Credit Union League ( ICUL) and Coopera Consulting--ICUL’s subsidiary focused on serving Hispanic credit union members in the U.S. AIRAC, FENACOAC and CUNA are WOCCU members. The program operates in conjunction with WOCCU’s International Partnerships Program, but the funding allows WOCCU to focus on the needs of younger credit union participants, according to Victor Miguel Corro, vice president of WOCCU’s Worldwide Foundation for Credit Unions who also oversees the partnerships program. “The Professional Fellows Program will enable us to add a new dimension to the educational and networking services we provide to the global credit union movement,” Corro said. “The program also supports our initiative of improving people's lives through credit unions.”

Court dismisses defunct CUs members claims vs. NCUA

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BRIDGEPORT, Conn. (9/30/11)--A U.S. District judge in Connecticut has dismissed claims against the National Credit Union Administration (NCUA) in a $4 million negligence lawsuit brought by five former members of the defunct New London (Conn.) Security FCU. Senior U.S. District Judge Warren W. Eginton, in a decision filed Sept. 14, granted NCUA's motion to dismiss and rendered as moot a motion to consolidate the case with another lawsuit that the five members filed against brokerage firm Wells Fargo Advisors. Other claims against a local accounting firm and former credit union board members are pending. Eginton noted in his opinion that the case had not been filed by the statute of limitations deadline, which would have required the suit to be filed within six months of NCUA's denial of their claims for compensation. In its role as liquidating agent, NCUA paid all New London depositors, including those who filed the lawsuit, the balance in their accounts up to the federal deposit insurance limit at the time, which was $100,000 per account. For those with balances over the limit, NCUA provided a certificate for claim in liquidation for uninsured shares. An attorney for the five members--Melvin Goldblatt and Douglas C. Antupit of New London, Joan Lazerow of Waterford, Mark D. Fletcher of Florida and Gloria Johnston of California--told local media that the group would retain the right to seek damages from others and would likely appeal the dismissal (The Day Sept. 29). NCUA shuttered the $13 million asset credit union in July 2008 after a routine audit discovered $12 million in irregularities. The credit union's long-time investment adviser and former A.G. Edwards brokerage firm branch manager, Edwin F. Rachleff, 82, who allegedly stole investments from 1988 to July 2008, committed suicide when the credit union was closed , said the court documents. Wells Fargo acquired A.G. Edwards and has been named in a separate lawsuit.

Three CUs claim Tech Council Best Practices award

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MADISON, Wis. (9/30/11)--Three credit unions were honored as winners of the 2011 CUNA Technology Council Best Practices Awards at the council’s 16th Annual Conference this week in San Antonio.
Click to view larger image The CUNA Technology Council presented its Best Practices Awards to representatives from three credit unions during the council’s 16th Annual Conference in San Antonio. From left, Cary Tonne, vice president information technology, Affinity Plus FCU, St. Paul, Minn.; Dan McGowan, senior vice president/chief information officer, Pioneer West Virginia FCU, Charleston, W. Va.; and Chris McGee, manager/assistant information technology, Pen Air FCU, Pensacola, Fla. (Photo provided by CUNA)
The CUNA Technology Council award recognizes outstanding approaches to technology challenges with potential for universal application across the credit union movement. The three credit unions recognized are:
* Affinity Plus FCU in St. Paul, Minn., for its creation and implementation of an e-contract workflow process that allows business contracts to be efficiently located, accessed and stored. * Pen Air FCU in Pensacola, Fla., for its business continuity plan and failover site development. * Pioneer West Virginia FCU in Charleston, W. Va., for developing a daily dashboard with key metrics to proactively identify potential business risks and opportunities.
Winners were selected based on strategy, process, application and results, without regard to asset size.

IKiplingersI fin ed article highlights school CU branches

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MADISON, Wis. (9/30/11)--Credit union branches placed in schools to help students increase their level of financial literacy were highlighted in a Sept. 21 article posted on Kiplinger.com. WESTconsin CU, a $727.5 million asset, Menomonie, Wis.-based credit union,leads off the first few paragraphs of the article, “Teaching Savings to Kids in Schools,” by Chris Farrell, a contributing columnist to Kiplinger.com. “Unlike in many schools, its students can stop at a credit union branch housed in a narrow, windowless former storage closet,” he wrote. “The high school branch of the WESTconsin credit union is open for business three days a week from 11:30 a.m. to 1 p.m., and some 100 students have an account there.” The student credit union at Hudson High School in Hudson, Wis., is “a way to promote financial literacy at a young age,” Jim Wookey, WESTconsin vice-president, said in the article. “The branch makes saving real,” Melisa Hansen, the district’s school career counselor, told Kiplinger. Credit unions have hundreds of school-based branches nationwide, and the fact that they are making a comeback is “heartening,” Farrell wrote. There are 250 credit unions with 953 in-school branches nationwide. Those 250 credit unions represent 44 states, according to the Credit Union National Association. To read the article, use the link.

NWCA to SBA roundtable Let CUs lend more

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SEATTLE (9/30/11)--Puget Sound-area credit unions stressed the need to make more make business loans and the burden of overregulation during a recent roundtable sponsored by the Small Business Administration (SBA) and the Northwest Credit Union Association (NWCUA). The event was organized after the Obama administration directed federal agencies to ask business leaders for ideas on job creation (Puget Sound Business Journal Sept. 23). It is one of about 100 similar roundtables to be held nationwide. Credit unions seek to raise the member business lending cap to 27.5% of assets from the current 12.25%, a point stressed during the roundtable. Credit unions could lend as much as $13 billion and create as many as 140,000 jobs nationwide, said Bill Anderson, chairman of the NWCUA, citing data provided by the Credit Union National Association, which also is pressing Congress to raise the cap. During the roundtable, credit unions also cited an increasingly burdensome regulatory environment. At least one NWCUA member has four executives dedicated to compliance, Anderson said. Because credit unions dedicate more to compliance, they have fewer resources to make loans, Anderson said. Calvin Goings, regional administrator of the SBA, which hosted the roundtable, will share the credit union concerns with the White House, Anderson said.

CUNA Tech Council exec committee elections held

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MADISON, Wis. (9/30/11)--The CUNA Technology Council announced its executive committee and officers during the council’s 16th Annual Conference this week in San Antonio. Heather Moshier, executive vice president, information technology, San Diego County CU, San Diego, is the new executive committee chair. Rudy Pereira, senior vice president, operations and technology for Alliant CU in Chicago will step down as chair but will remain on the executive committee. Jeff Johnson, senior vice president, information technology, Baxter CU, Vernon Hills, Ill., is the committee’s new vice-chair. Chad Graves, senior vice president, information technology, Ent FCU, Colorado Springs, Colo., is second vice-chair. During the recent elections incumbents Robert Reh, chief information officer, Nassau Financial FCU in Westbury, N.Y.; Moshier; and John Best, chief technology officer, Wescom CU in Pasadena, Calif., were re-elected. Todd Dauchy, chief information officer, Corning FCU, Corning, N.Y., was elected to his first three-year term, replacing Tom Gessel, senior vice president technology officer, TruWest CU in Scottsdale, Ariz., who did not seek re-election. The Technology Council’s executive committee includes:
* Jennifer Weiss, vice president, information technology, Sandia Laboratory FCU, Albuquerque, N.M.; * Belinda Caillouet, vice president, information technology, Spokane Teachers CU, Spokane, Wash.; * John Drago, vice president, information technology, California and Nevada Credit Union Leagues; and * Butch Leonardson, senior vice president/chief information officer, BECU, Tukwila, Wash.