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CU System briefs (09/06/2010)

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* DECATUR, Ill. (9/8/10)--An employee of Decatur, Ill.-based Earthmover CU was charged with five counts of theft by deception after auditors discovered more than $150,000 had been stolen from the accounts of members who were deceased or living in nursing homes. The employee, based at the Forsyth, Ill., branch, who was not identified, was a personal banker assigned to the accounts. The crimes took place from September 2008 until last Wednesday, when the woman was arrested. One member noticed discrepancies in the account and notified the credit union. The credit union is working with authorities in the investigation. The employee will be arraigned Oct. 5 (Herald-Review Sept. 3). News Now had previously stated Earthmover CU was located in Aurora, Ill. ... * MOSS POINT, Miss. (9/7/10)--Singing River FCU has launched a program that will award $10,000 to Moss Point and Gautier high schools and bring financial literacy training to their classrooms. The schools' students will compete to win the money by producing their own "Singing River Shuffle" hip-hop dance videos. The $152 million asset, Moss Point, Miss.-based credit union will post the videos on its website at www.srfcu.org, and the public will chose the winners. The winning school will receive $7,500 and the second-place winner will get $2,500. Singing River FCU will announce the winner at the Moss Point/Gautier football game on Nov. 5. The school also will present financial literacy classes at the schools' economics classes, where students will learn about budgets, credit cards and current data on salaries available to students who finish high school and pursue a college education ...

Alliant CU Continental FCU to merge by January

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CHICAGO (9/7/10)--Alliant CU in Chicago announced Thursday that it reached an agreement with Continental FCU of Tempe, Ariz., to merge operations following recent approvals from each institution’s board of directors. The combined entity will go forward under the Alliant CU name once the merger receives regulatory approval and the integration is complete, which is projected to be in January, Alliant said in a news release. Alliant CU President/CEO David W. Mooney will continue in his role. Alliant has more than $7 billion in assets and about 260,000 members nationwide. Its members include employees, family members and retirees of United Airlines and other select employee groups, as well as qualifying communities. Continental FCU’s main sponsors are Continental Airlines and US Airways. Continental FCU’s separately branded US Airways CU will also be included in the merger. Through the merger, Alliant will gain about 24,000 members and assets of $170 million. Alliant Chief Operations and Technology Officer Rudy Pereira will serve as interim CEO of Continental FCU, managing the day-to-day operations of Continental and its seven branch locations during the merger process. Thomas J. Martin, Continental president/CEO, will be retained in a consultant role to assist Pereira during the transition.

Proponents of MBLs take message to media

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MADISON, Wis. (9/7/10)--Proponents of increased credit union member business lending (MBL), including several state credit union leagues, took their messages to the media in recent weeks. If lawmakers pass pending legislation to raise credit unions’ MBL cap to 27.5% of total assets from 12.25%, it would boost Sacramento, Calif.- area businesses, said a lengthy article in comstock’s magazine (September ) titled “Where credit’s due, lifting the lending cap on credit unions.” “We’ve been a proponent of this change since 1998,” Bob Arnould, senior vice president of government affairs for the California Credit Union League, told the magazine. “Prior to 1998, there was no cap on small-business lending. There’s an economic situation now where banks are not lending, and it is the right time to raise the cap.” Increasing the cap could add $2 billion in additional investment in California, the league told the magazine. The magazine also mentioned Travis CU, Vacaville; The Golden 1 CU, Sacramento; SAFE CU, Sacramento; and Sierra Central CU, Yuba City. To read the article, use the link. John Murphy, president of the Maine Credit Union League, said MBL received strong support from two guests on the Aug. 22 edition of Mainebiz Sunday TV Show, which focused on what to do about tight credit for small businesses in Maine and feature three guests. Guests Rosa Scarcelli, CEO of Stanford Management and a former gubernatorial candidate in Maine, and Nicole Witherbee, former federal policy analyst the Maine Center for Economic Policy and now principal owner of her own consulting business, supported raising credit union’ MBL cap (Weekly Update Sept. 3). “It was nice to receive strong support from two pretty savvy business people on a show that is watched by many small-business owners and consumers across Maine,” Murphy said. Brett Thompson, president of the Wisconsin Credit Union League, wrote a letter to the editor of The Milwaukee Business Journal (Aug. 27), in which he said most of state residents support raising credit unions’ MBL cap. “The vast majority of Wisconsin voters polled by the Wisconsin Credit Union League, 75%, say they would support an amendment that’s been proposed to the U.S. Congress to make more credit available to Wisconsin companies through credit unions,” Thompson wrote. “The measure would be a boon for small businesses with modest credit needs--the very businesses that often find it difficult to find financing. Because credit unions strive to meet their member-owners’ credit needs regardless of profit, they’ll grant smaller loans,” Thompson concluded. To read the letter, use the link.

AVCU forming compliance council

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BURLINGTON, Vt. (9/7/10)--The Association of Vermont Credit Unions (AVCU) is creating a Compliance Council open to any employee or volunteer of an AVCU member credit union. The council will serve as an exchange forum among credit unions on state and federal compliance topics. It also will serve as a sounding board to represent Vermont credit unions in response to state and federal regulatory proposals. The council will first meet Oct. 4 to discuss changes to the Fair and Accurate Credit Transactions (FACT) Act. AVCU will provide a webinar presentation followed by a question-and-answer period, a follow-up discussion among participants and an open-ended discussion about future plans for the council. “Regulatory compliance has become an enormous burden for credit unions of all types and sizes,” said Joe Bergeron, AVCU president. “There are many resources available to help credit unions, including AVCU’s Compliance InfoSight website, webinars, listserves, teleconferences, and much more. What we hear from the majority of credit unions, however, is not about a lack of information, but the time to review and understand it.” Bergeron said he envisions the Compliance Council meeting once each quarter, using webinars and teleconferences as informational resources, jointly sharing sample documents, and cooperatively creating new ones via a council website.

NCUA contests another participation-loan ownership

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CLEVELAND, Ohio (9/7/10)--The National Credit Union Administration (NCUA) filed suit in a U.S. District Court in Ohio Thursday, seeking an injunction to stop arbitration of a participation loan agreement that involved a credit union it placed into liquidation in May. NCUA is contesting the ownership of the participation loan, which was sold by the now defunct St. Paul's Croatian FCU of Cleveland, to Lormet Community FCU, Amherst, Ohio. Lormet had filed a suit before the American Arbitration Association (AAA) for emergency relief over the portfolio against NCUA and its Asset Management and Assistance Center, the liquidating agent. According to the court documents, Lormet claims it owns 90% of a portfolio of more than $8 million in outstanding loans that St. Paul Croatian held and serviced. "LorMet has been shut out both from information concerning and control of the loans that it principally owns, and has reason to fear that the asset is deteriorating or has been improperly combined with other assets in St. Paul's estate," said the credit union's complaint. It cites a provision of the May 7, 2007 loan-participation agreement that gives it the right to the entire loan upon "insolvency, liquidation or appointment by any public or supervisory authority of any person or firm in charge of St. Paul's assets." NCUA filed its request for an injunction in the U.S. District Court for the Northern District of Ohio--Eastern Division in Cleveland to stop AAA from proceeding with Lormet's claim. The agency said it is not bound by the arbitration provision in the agreement because it is not party to the agreement and the agreement provides that federal law controls on the issues. The injunction request also said that Lormet's sole remedy is to pursue its claims with the liquidating agent, and that LorMet had waived any rights to pursue its claims through arbitration because it filed its claim first with NCUA's liquidating agent. Participation loans have prompted several lawsuits related to defunct credit unions recently. The latest occurred in August, when a suit was filed related to the loans from Eastern Financial Florida CU.

42 new CU development educators trained

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BAINBRIDGE ISLAND, Wash. (9/7/10)--Forty-two credit union professionals were guided by eight program facilitators and mentors through a week-long Credit Union Development Education (DE) training session on Bainbridge Island, Wash. Bob Schumacher, credit union development educator (CUDE) and president/CEO, Mountain Crest CU, Arlington, Wash., gave the keynote address. As one of the ambassadors of the DE program, Schumacher told of his journey to becoming a DE and challenged the group to get involved and stay involved.
Click to view larger image Forty-two credit union professionals became the latest credit unions development educators (CUDE) at a week-long Credit Union Development Education (DE) Training held on Bainbridge Island, Wash. (Photo provided by the National Credit Union Foundation)
“As new DEs it is completely up to each of you to make a difference,” Schumacher said. “You have the tools, you have the resources and you have the passion. You just need to put it all together and get it done.” “Credit union philosophy, development issues, collaboration, differentiation, credit union cooperation … these are concepts I now understand on a world-wide level as a result of my DE Training,” said Josh Allison of Horizon CU, Spokane Valley, Wash. “I understood the difference credit unions made here in the U.S., but I now understand how valuable our movement is on an international platform as well.” Participants were involved in group exercises, encouraged to ask questions of visiting lecturers and completed team projects proposing solutions for credit unions to help alleviate or eliminate challenging situations. “We continue to update our program case studies and group activities each year to address relevant challenges faced by credit unions today,” said Lois Kitsch, DE training facilitator and national program director of REAL Solutions, a program of the National Credit Union Foundation. “We then demonstrate ways to capitalize on the opportunities created in overcoming these challenges to benefit our members.” The summer 2010 graduating class included credit union movement representatives from 17 states across the U.S., two from the Philippines and one from Zimbabwe participating through the African DE Scholars Program. (To see the class list, use the link.) The next scheduled DE training class will take place April 6-13, in Madison, Wis. DE training is open to everyone from new employees who need a credit union orientation to seasoned executives who need to recharge. Scholarships are available through NCUF’s DE Fund and through several state credit union foundations and leagues. For more information, use the link.

CU in Hawaii to open branch in Las Vegas

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LAS VEGAS (9/7/10)--Aloha Pacific FCU, Honolulu, is opening a branch in Las Vegas, according to local media reports. The credit union was lured to the area by tens of thousands of former Hawaiians in the state, said The Las Vegas Review-Journal (Sept. 2). On Nov. 1, Aloha Pacific will take over the lease for a branch location that Silver State Schools CU intends to close, Aloha Pacific CEO Wallace Watanabe told the newspaper. This will be the first time a Hawaii-based credit union opens an out-of-state branch, Aloha Pacific said. Aloha Pacific has $725 million in assets and is the third-largest credit union in the state. About 140,000 former Hawaiians live in the Las Vegas area, Watanabe said. Aloha Pacific intends to accept alumni of the University of Hawaii and other Hawaii groups at its Las Vegas branch.

Heartland Discover agree to 5M breach settlement

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PRINCETON, N.J. (9/7/10)--Card payment processor Heartland Payment Systems has agreed to pay Discover Financial Services $5 million as a settlement in its massive data breach case, which forced credit unions and other financial institutions across the country to reissue credit and debit cards. Heartland announced the agreement--the fourth and final one it has made in a series of lawsuits--on Thursday. Heartland announced the data breach in January 2009. The breach involved malicious software that compromised card numbers, expiration dates and in some cases names of the consumers using the debit or credit cards at Heartland's network of 250,000 businesses. The breach exposed 130 million credit and debit cards (News Now July 20). Heartland had set aside $140 million to cover lawsuits from the break-in (Bank Systems & Technology.com Sept. 3). The latest settlement brings its settlement costs with card companies and class action suits to a total of $112.1 million. In May, Heartland entered a $41.1 million settlement with MasterCard (News Now July 20 and May 21). In January it agreed to pay up to $60 million to issuers of Visa-branded credit and debit cards (News Now Jan. 11 and July 20). Earlier it entered into a $3.6 million settlement with American Express and a $2.4 million settlement in a consumer cardholder class action (News Now Dec. 21 and Dec. 29). When settlements were announced in the Visa and MasterCard cases, attorneys for a small group of credit unions and banks indicated the settlements amounted to card-issuing institutions receiving only "pennies on the dollar." Last month the hackers responsible for the Heartland breach--including American Albert Gonzalez and two Russian accomplices--were indicted in a U.S. District Court in New Jersey on charges they carried out the largest hacking and identity theft in U.S. history. The group allegedly stole information about more than 130 million debit and credit cards by hacking into computer systems of Heartland, Hannaford Bros. supermarkets, and 7-Eleven. Gonzalez was sentenced to 20 years in prison.