Idaho issues second desist order vs. fake CU

BOISE, Idaho (3/29/04)--Idaho Department of Finance has issued its second cease and desist order against entities posing as a fake credit union.

Gavin Gee, director of the department, issued the order against five individuals and a company, "The Co-Operators," for fraudulently using the name "Credit Union One." Individuals named in the order were Melanie Simmons, Kile Davidson, Natalie Powell, Janet Howland and Alcott Douglas.

The order says the group advertised in Idaho newspapers using the name of "Credit Union One," purportedly from Toronto, Ontario. The Canadian company is not related to nor endorsed by Credit Union ONE, a legitimate credit union based in Ferndale, Mich. The legitimate Michigan credit union does not do business in Idaho, says Gee. Nor has the department issued the fake entity a required lending license.

"This is apparently an attempt by these individuals to obtain personal information, unlawful advance-fees from Idaho consumers, or otherwise illegally part Idahoans from their money," says Gee.

Some Idaho residents saw the ad and contacted the company. They were told that as a condition to receiving a loan, they must provide copies of their driver's license or social security cards and pay $1,450 to the company. The residents did so but did not receive a loan. Instead they were asked to ante up another $465 as an "international border tax" premium. The consumers refused to do so and did not receive the loan.

"Unfortunately, because these companies are stealing the names of legitimate credit unions, consumers are given a false sense of security in providing money and information to them," says Gee.

Similar scams involving fake credit unions or stolen credit union identities have occurred in other states. CUNA, NCUA, and the National Association of State CU Supervisors (NASCUS) are monitoring the scams. CUNA asked the U.S. Justice Department for assistance in ending the frauds. The Federal Bureau of Investigation also is investigating.

The bogus credit unions were discussed at a Assessing Emerging Risks Seminar held by NASCUS in Salt Lake City March 9-12, according to NASCUS' website. Missouri state credit union regulator and NASCUS Vice Chairman John P. Smith told attendees of the lessons learned when similar fraudulent credit unions surfaced in Missouri--one of the first states to be hit by the scam.

Smith stressed the importance of partnering with local news media outlets to make sure the fraudulent ads aren't published in newspapers. To stem damage, it is also critical to rapidly share information through state and federal regulators and trade press, which can warn other states, he said.