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For Gen Y are you a lame CU Or a standing ovation

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BRAUNFELS, Texas (10/8/09)--One credit union service organization (CUSO) has hit on a way to drive the financial literacy message of credit unions home to Generation Y--through high school concerts from live musicians that incorporate the use of social networking to spread the news about the events and financial literacy. Eloquent Online is a "shadow CUSO" organized in 2006 by Chetco FCU, a $358.6 million asset credit union based in Harbor, Ore. It was intended to research and help the credit union understand the world of social networking as a marketing medium in the banking marketplace. The CUSO discovered right away that social networking was the new communications medium for Gen Y and the Millennials--the under 30 set-- and the credit union was determined to share what it found. It is helping credit unions to spread the word of financial literacy through music in terms of Concerts for Financial Literacy, YouTube videos, Twitter, MySpace and Facebook, and other communications channels popular with the iPod set. According to Jason Dias, president of Eloquent Online and vice president of marketing at Chetco, this is what reaches the younger set. "They don't have a lot of attention span, and you're not reaching them with a spoken presentation or a Power Point presentation. They're too busy listening to their iPods and texting. So we went with where the target goes--to the music." Several credit unions are following the research. Americhoice FCU in Mechanicsburg, Pa., used a live concert sponsored by its high school branch that attracted 900 Gen Yers. Kids are the ambassadors at the events. The events are on YouTube, and they tweet and use Facebook to spread the word. "A 15 or 16-year old wearing an I-pod won't see a television commercial or read a newspaper or hear a radio ad," Dias told News Now. The Association of Vermont Credit Unions just got a grant to improve financial literacy among Vermont's high school student population using Concerts for Financial Literacy from Eloquent Online (News Now Oct. 5). The CUSO uses no print media. It reaches the young set solely with social media and music. At the concerts, which are often sponsored by the school's student-run credit union, "the kids become the ambassadors for financial literacy. "Gen Y is an ownership generation. They like to own things. You can approach them with the message, 'Hey, you can own your credit union,'" Dias said. The demographic is also thrifty. "You can reach them with the message that they spent on average $1,100 on songs they downloaded in 2008--think of the money they could have saved. That's how you reach them." Think of marketing to this demographic in terms of a large graph, Dias said. "At one end is the word 'lame' and the other end 'standing ovation.' Then you have to pick where your credit union is on that graph. Are you lame? Or are you a standing ovation? Most credit unions are on the lame side. They have a dichotomy of generations, and many have older, outdated boards," Dias said. He noted that Chetco's first Concert for Financial Literacy took place in May 2008 at a high school. "Over 500 young people heard a financial literacy message delivered not from a binder, but from a thumping, rocking concert. In the course of 80 minutes, the crowd grew as students texted and called their parents to come see what was happening at their school. This was not youth marketing. It was youth immersion. The teachers and parents overwhelmed the credit union with calls of thanks and sent letters to the editor of local newspapers," Dias said. For more information, use the resource links.

Vantage CU uses Twitter for account transfers

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BRIDGETON, Mo. (10/7/09)--Vantage CU, Bridgeton, Mo., launched a new banking solution, tweetMyMoney, which allows members to conduct financial transactions within their credit union accounts through social networking site Twitter. Released Sept. 28, tweetMyMoney is free to Vantage members. It allows them to monitor their account balances, deposits, withdrawals, holds and cleared checks. Members also can transfer funds within their accounts. The program can be accessed from a computer or mobile phone. About 70 members have enrolled. They access the program by enrolling in Vantage’s online banking program and setting up a Twitter account. Members also must sign up to “follow” Vantage on Twitter. tweetMyMoney works through Twitter’s Direct Message function--which allows users to send messages to each other privately. In this case, members send messages to Vantage. The program “utilizes a set of codes that you send via direct message to the credit union and get information back,” Eric Acree, executive vice president of operations, told News Now. The codes, originated by Vantage, appear at the end of each e-mail or text return to let members know the messages are legitimate. Members can change the codes at any time to make them more recognizable. They also can change them if there’s a concern the account has been compromised. The codes were implemented to combat phishing. “It’s one of many things we did to address security concerns,” Acree said. “If they get a message that doesn’t have the right code, they know it’s fake.” And, if a code accidentally goes public, “nobody knows what it means,” Acree said. As a security measure, Vantage cross-references individuals following the credit union on Twitter with those who have signed up with the program. One account number is allowed per Twitter username. The new program was controversial from the start, with some members of the technology community responding to tweetMyMoney negatively within hours of its launch. “They thought we were insane because of the unsecured nature of Twitter,” Acree said. “They were tearing us apart on the Internet. They jumped to conclusions, went to our website, and then voted their thoughts.” Vantage has an online poll so users can rate tweetMyMoney. After its launch, the program’s rating was low. However, when Vantage tracked the votes, it realized that negative votes were from non-members who were not using the program. “The primary hurdle is getting people to understand what little risk exists because of the type of information we’re providing and the type of transactions,” Acree said. He recognized that Twitter has been hacked, but said the credit union has thought through every worst-case scenario. The information provided in the Direct Messaging function presents a minimal to nonexistent risk, he said. The credit union hasn’t marketed the program, except for information on its website about enrollment. The viral component of Twitter has been very powerful. “It far exceeded our expectations,” Acree said, referring to the number of members that have signed up for the service so far through word of mouth. Feedback from members on tweetMyMoney has been positive. One member commented on Vantage’s site that the solution “sure beats the pants off of giving up your information to a company like [account aggregator] Mint--[members] of this credit union can now keep it closer to home.” Though the credit union has no hard data yet because the program was so recently launched, Acree expects that tweetMyMoney users are younger. He plans to analyze user data more deeply in about a month. Vantage developed tweetMyMoney in about four months. The staff also discussed text messaging and iPhone applications--which the credit union will provide next year--but kept coming back to Twitter. Vantage contacted several industry technology firms to discuss ideas, and then wrote the program. Testing took about two months, Acree said. Many financial institutions worldwide have contacted Vantage about the program and asked how it keeps the environment secure--which Vantage doesn’t detail for security reasons. Credit unions seeking to provide similar services should work with third parties--such as industry experts or technology firms--to get involved. “The big reason why we could do it more easily is because we wrote our own online banking program,” he said. For many credit unions, writing a banking program could be challenging. “Many credit unions may be at the mercy of the online banking companies they use,” Acree said. tweetMyMoney isn’t a mass-market item--it’s a niche product. Vantage knows that all of its members won’t sign up for it. But if Vantage can make 500 or 1,000 members happy, then it has “strengthened the bond with those members,” Acree said. Vantage plans to offer more solutions in the future, through text messaging, Facebook, and the iPhone. Convenience is a driver for these programs, but security is a primary concern. “We put a lot of thought into security [for tweetMyMoney],” Acree said. “If we can prove that we did our due diligence, it will be well-received. And if we think there’s a real security risk, we’ll terminate it immediately.”

Consumers pull back on credit cards debit rising

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WASHINGTON and YONKERS, N.Y. (10/8/09)--The recession has been hard on the credit card industry, but debit cards are another story, with debt-strapped consumers turning more and more to the debit card for purchases, according to The Washington Post Oct. 7). In July, revolving credit--primarily credit cards--dropped by $6.1 billion, or 8.1% on an annualized basis, according to the Federal Reserve. However, debit card use, which has steadily grown over the years, has surged during the recession. For the first six months of 2009, MasterCard saw U.S. debit card-purchase volume increase 4.1%--to $160 billion--while spending via credit cards dropped 14.8% to $233 billion. Visa reported similar trends. Last spring, it announced that Visa debit card spending in the U.S. surpassed credit spending for the first time in the company's history. Debit payment volume last year was $206 billion, while credit volume totaled $203 billion. Analysts told the newspaper that the drive toward debit card use comes from:
* Cost-conscious consumers shifting their behavior to fit their current economic situation so they can save more and limit their discretionary spending. In July, the personal savings rate rose to 4.2% of after-tax income, from 1% early last year; * Consumers who don't want to carry cash or write checks that present more opportunities for theft than online spending; and * A backlash from consumers angered by recent credit card industry practices, including raising rates and fees, cutting credit lines, and forcing borrowers to go elsewhere.
TowerGroup, a Needham, Mass.-based financial services industry research firm, has predicted debit card use will increase through 2015. It found that in less than 15 years, debit card transactions in the U.S. grew to more than 50% of non-cash transactions, up from 1%.

CU CEOs confidence rises in back-to-back surveys

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PLANO, Texas (10/8/09)--Credit union CEOs’ confidence rose in the last two quarters, according to two back-to-back surveys conducted by Southwest Corporate. The corporate’s Credit Union CEO Confidence Survey indicated that the Confidence Index for the third quarter increased to 29.09, up 4.5 points from the previous quarter to 29.09. The index represents a 21-point improvement over the survey’s all-time low of 7.9, which was recorded during the first quarter of 2009 (eFacts Oct. 6). Credit union CEOs have an overall positive outlook for their own institutions, the corporate said. Assessments of credit unions’ financial condition now and six months from now climbed by nine points and two points, respectively. Confidence in their members’ financial condition now and in six months rose by four and five points, respectively. “Recent news that the economy appears to be stabilizing a bit may be a source of encouragement to credit union CEOs, especially those still shell-shocked by narrowing interest margins, rising insurance assessments and stabilization expenses,” said Brian Turner, Southwest Corporate director of advisory services. “Having most of that behind us not only provides a sense of relief, but also helps us to focus on the future again.” The quarterly survey, mailed to 1,328 credit union CEOs, had a response rate of 24.10%.

Tech Council paper discusses server virtualization

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MADISON, Wis. (10/8/09)--Virtualization, the ability to partition a physical computer server into multiple functioning machines, has gained recognition and acceptance in recent years and is now considered viable in terms of start-up costs for many credit unions, according to a new white paper, “Server Virtualization,” from the CUNA Technology Council. About 70% of credit unions with assets greater than $200 million were surveyed for CUNA’s 2008-2009 Technology and Spending Report. It indicates plans toward putting virtual server technology in place within the next three years--a signal that the credit union movement is traveling at a rapid pace toward the next generation of system processing and storage. According to the paper, server virtualization has many advantages for credit unions and their data centers, including:
* Massive reductions in the number of servers needed overall--a process known among information technology (IT) professionals as “rack consolidation”; * Reductions in space and energy needed to run and cool the IT infrastructure, which generates a smaller carbon footprint and lower energy costs; * Vast reductions in the time needed to bring new servers and applications online; * The ability to easily switch virtual machines with functions or applications heavily in demand over the one virtual machine host to another to avoid overloading, slowdowns, or a system crash; and * Significant decrease in time needed to switch servers for disaster recovery. For example: Heritage CU, Madison, Wis., with $153 million in assets, downsized to two virtual server host machines from 16 physical box servers. Conversely, Mid-Atlantic Corporate FCU, Middletown, Pa., with $3.5 billion in assets, dropped to eight virtual server host machines from 100 physical box servers.
The paper also explores different models of server virtualization, including the virtual machine model, which currently dominates the market. Four in-depth case studies of credit unions also are presented with expert advice on topics such as storage area networks and desktop virtualization. For more information, use the links.

IConsumer ReportsI notes value of CU credit cards

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YONKERS, N.Y. (10/8/09)--Consumers angry about some of the tactics of credit card issuers lately should take control of their cards and fight back with strategies such as switching to a card from a credit union, says Consumer Reports in its just-released November issue. "If you regularly carry a balance, you can beat the card issuers at their game by keeping your debt as low as possible and perhaps switching to a card from a credit union or a regional or community bank, which tend to charge lower interest rates and have more pro-consumer policies," said the report. Consumer Reports repeats that advice for two of the three kinds of credit card users. Fifty-four percent pay off their balance in full each month, 33% carry balances up to $10,000 (with a median balance of $2,554) and 13% carry balances over $10,000 (with a median of $17,366). For the low-balance cardholder, the first strategy listed is: "Roll over balances to cards issued by credit unions or regional or community banks. Credit cards from federal credit unions are capped at 18% APR (annual percentage rate), so even if you do fall behind on payments, you'll avoid the 30% default rates some major cards charge." It also notes that credit unions have the option to take funds from any deposit account to cover credit card defaults. For the card users with more than $10,000 on their balances, among the advice is--again--"roll over balances to small bank or credit union cards. " In a sidebar, the article looks at credit union cards from Pentagon FCU, Addison Avenue FCU, the Digital FCU. The survey of 1,211 Americans in July found that:
* Of those surveyed, 21% said they were treated unfairly by card companies; * Roughly 41% were highly satisfied with their card issuer, making credit cards "one of the lowest-rated services we cover," said Consumer Reports; * Four-to-one respondents said they were charging less on their cards than they did last year; and * Roughly 32% said they had paid off and closed a card since January 2008.

PaCUSC board holds prices steady

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HARRISBURG, Pa. (10/8/09)--The Pennsylvania Credit Union Service Centers Inc. (PaCUSC) board of directors reviewed its pricing structure and chose to not make any changes, despite tough economic times.
Pennsylvania Credit Union Service Centers Inc. board members who met recently in Harrisburg, Pa., are, front row, from left: Norb Kaczmarek, secretary/treasurer; Ralph Canterbury, chairman; and Jim Kanaley, vice chairman. Back row, from left: Directors Karl Larson, Brian Hahn, Tom Smith and Linda Brown. (Photo provided by the Pennsylvania Credit Union Association)
The board met Tuesday in Harrisburg to follow up on its Strategic Planning Session held in June (Life is a Highway Oct. 7). Also, the PaCUSC Board approved entering into a relationship with CO-OP Shared Branching to promote CO-OP Financial Service’s Mobile Banking product. The CO-OP Mobile Banking program allows credit unions using the Next Generation Network to offer mobile banking to their members at a reasonable cost. The board discussed new shared-branching technology, Fast Branch Kiosks, which provide ATM technology and offer access so members can complete shared branching transactions. Erie (Pa.) FCU is one of two credit unions that have deployed Fast Branch Kiosk machines in Pennsylvania. Three machines deployed in the Erie area act as the credit union’s ATMs, providing branch access in locations previously inaccessible. “Although PaCUSC had a slow start in the early 1990s, PaCUSC has been growing with more than 100 shared-branching locations in Pennsylvania,” PaCUSC Chairman Ralph Canterbury told the board. “By the end of 2009, PaCUSC is on target to have a record 111 locations in Pennsylvania and six locations in Delaware.”

Coverage prompts Minn. Senate hearing on FIs

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ST. PAUL, Minn. (10/8/09)--The Minnesota Senate Commerce and Consumer Protection Committee held a hearing Tuesday to examine the lending practices and oversight of financial institutions in Minnesota, including credit unions. The hearing has been in the works for more than two months, following a series of articles published in the Minneapolis/St. Paul Star Tribune in late July. The article, entitled “Lenders Gone Wild,” placed blame on banks, credit unions and the Department of Commerce for taking too much risk and playing a role in the recent economic collapse. The hearing was called by State Sen. Linda Scheid (DFL-Brooklyn Park), who chairs the committee, which has jurisdiction over all bills relating to banking in the state of Minnesota. Scheid said she was eager to learn more about the regulation and examination of financial institutions. “Minnesota has a large number of community banks and national banks with a large presence here, and we certainly have strong credit unions as well,” she said. “It’s important that consumers know that their money is safe in our state’s financial institutions.”
Click to view larger image Minnesota Commerce Commissioner Glen Wilson (left) and Deputy Commissioner Kevin Murphy testified at a Minnesota Senate hearing Tuesday in St. Paul to examine the lending practices and oversight of financial institutions, including credit unions, in Minnesota. (Photos provided by the Minnesota Credit Union Network)
The safety and soundness of credit unions and banks was reiterated throughout the afternoon. The hearing’s list of testifiers--10 in total--represented credit unions, banks and regulators. The Minnesota Department of Commerce began the meeting with Commissioner Glen Wilson and Deputy Commissioner Kevin Murphy providing an overview of banks and credit unions, key objectives of regulation and examinations, reports and rating systems, watch lists, and statistical data about market share and bank failure rates over the past 30 years. Subsequent testifiers also discussed deposit insurance, lending in the current economy, and the overall health and strength of credit unions. “It was noted several times that credit unions are safe and sound financial institutions, and I think that message was heard loud and clear,” said Mark D. Cummins, president/CEO of the Minnesota Credit Union Network. “The line up of testifiers was quite impressive,” Cummins added. “The various organizations provided facts and information from their own perspectives, but all the testimony carried the same underlying theme--that additional regulation would likely be burdensome and unnecessary.” Cummins spoke at the hearing, along with National Credit Union Administration (NCUA) Region IV Director Keith Morton, US FCU President/CEO Bill Raker, and representatives from the Federal Deposit Insurance Corp. (FDIC), the Minnesota Bankers’ Association, the Minnesota Independent Community Bankers and two bank presidents. Morton educated the committee about credit unions’ structure, discussed their strict underwriting standards, and provided factual context to credit unions’ role in the financial downturn. “As a general rule, credit unions are conservatively run,” Morton said. “While there are credit unions that pursue aggressive strategies, as a whole, Minnesota credit unions have not been significantly affected by the loans and investment products that have been the subject of market and media attention during this economic crisis.” Several testifiers cited the healthy working relationship between not only state and federal regulators, but between the regulators and the financial institutions they oversee. “The state plays an important role, along with the NCUA, to ensure that both state- and federally chartered credit unions are properly examined and well-regulated,” Raker said. “While the public’s trust and confidence in many financial institutions have suffered some erosion, credit unions are still held in high regard by their member-owners.” Deputy Commissioner Murphy agreed. “In this economic climate, there are not a lot of sure things in this world,” he said. “But a deposit at a bank or a credit union is a sure thing. Consumers can take comfort in that.” He pointed to financial illiteracy as a significant cause of today’s economic woes and encouraged legislators and financial institutions to devote greater resources to financial education efforts. Ultimately, Scheid said that she does not foresee Minnesota imposing additional regulation on financial institutions. “I’m pleased that Sen. Scheid used this forum to learn more about the regulation of credit unions and banks, using our organizations as the industry experts, as opposed to media reports and second-hand information,” Cummins said. “Through this hearing the credit union industry had an opportunity to speak directly with legislators and set the record straight about generalizations that have been imposed upon the general public.”

Rockford CUs join Treasurers Bank on program

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NAPERVILLE, Ill. (10/8/09)--Three Rockford area credit unions joined Illinois State Treasurer Alexi Giannoulias at an Oct. 1 press conference to officially kick off the “Bank on Illinois” program in Rockford, Ill.
Illinois State Treasurer Alexi Giannoulias looks on as Karen Jurasek, CEO of Generations CU, Rockford, Ill., speaks at a press conference for “Bank on Rockford”--a program that aims to offer unbanked residents from underserved and minority communities free or low-cost accounts with mainstream financial institutions, including credit unions. (Photo provided by the Illinois Credit Union League)
“Bank on Rockford” is a program that aims to offer unbanked residents from underserved and minority communities near Rockford free and/or low-cost accounts with mainstream financial institutions. Credit unions are part of this effort. Partner organizations, which include local not-for-profit agencies and financial institutions including credit unions, hope to sign up 1,000 individuals in the Rockford area in the next year. The three area participating credit unions in the program were represented at the press conference: First Northern CU, Chicago; Generations CU, Rockford; and MembersAlliance CU, Rockford. To participate, financial institutions must offer free or low-cost checking and savings accounts, “second chance” accounts for people with negative credit histories, and accept tax identification numbers, Matricula Consular and other foreign IDs in place of Social Security numbers. To qualify for an account, residents must have a history free of identity theft and fraud. They will be encouraged to enroll in financial literacy training courses. So far, two states--California and Illinois--are offering the program. Rockford is the first Illinois city to participate. Aurora will be the second city with an informational meeting to be held today. Rockford is home to roughly 4,600 unbanked households, according to the Pew Charitable Trusts/Safe Banking Project. The households rely on check cashers, payday lenders and pawn shops--instead of a bank or credit union--to cash checks, pay bills and borrow or wire money. The average unbanked household in Illinois pays $574 a year just to cash payroll checks, leaving $22,376 in remaining income. “Too many Rockford residents are ripped off by check cashers and payday lenders and become trapped in an endless spiral of debt,” Giannoulias said. “Having access to traditional checking and savings accounts will translate into financial independence and empowerment.” “Many of the non-profit partners provide essential elements such as housing and job training, but their clients lack the skills necessary to manage their housing expense and their paycheck,” Karen Jurasek, CEO of Generations, said at the press conference. “This is the point of referral to our credit unions and banks--that can provide the services and educational tools needed for financial security.” “By participating in Bank on Rockford, community groups and non-profit organizations will refer people to our credit union who truly need our help,” said Ed Berg, Illinois Credit Union League director and CEO of First Northern CU. “Without partner referrals, we may never be able to reach many of these people.” Nationally, 65% of unbanked residents are employed full-time and another 24% work part-time, Pew reports. However, more than half of unbanked households say they’ve never had a checking account because of misperception about and distrust of banks.

Hannaford judge seeks Maine Supreme Court input

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PORTLAND, Maine (10/8/09)--A federal judge who ruled against compensating consumers in a potential class-action lawsuit against Hannaford Bros. has reconsidered and is seeking input on the data breach case from the Maine Supreme Judicial Court. In a decision filed Monday, U.S. District Judge D. Brock Hornby agreed to seek input from the state's highest court on a question that has no precedent in Maine ( and Portland Press Herald Oct. 6) . The question is: Do Hannaford shoppers who had to be reimbursed by their banks and went through other hassles associated with stolen account numbers have the right to seek damages for their effort and lost time? Plaintiffs filed a motion this summer asking Hornby to reconsider his original May 12 ruling in which he said consumers cannot seek compensation for the breaches. In that ruling, he dismissed all civil claims against the Scarborough, Maine-based Hannaford. "Those are the ordinary frustrations and inconveniences that everyone confronts in daily life with or without fraud or negligence," Hornby wrote in his May ruling. "Maine law requires that there be a way to attach a monetary value to a claimed loss. These fail that requirement." The plaintiffs in the original case filed a motion last summer asking the judge to reconsider. If the court confirms the original May decision against the consumers, the case will likely end, said the Portland Press Herald. However, if the court finds that consumers have the right to sue for lost time and effort, the case will be revived and plaintiffs will seek class-action status. The grocer experienced one of the largest data breaches in history in late 2007 and early 2008, resulting in millions of compromised card numbers. By the time it made the breach public in mid-March, 2008, cyberthieves had used the stolen data for 1,800 frauduent charges. Hannaford's attorneys argued that the system of contracts between merchants, banks and credit unions, and consumers, as well as a federal law requiring financial institutions to reverse fraudulent charges, work to protect consumers. An extra layer of liability would serve no public good, they said.

New York Desjardins Award winners announced

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ALBANY, N.Y. (10/8/09)--The New York Credit Union Foundation awarded Desjardins Youth Financial Education Awards to three New York credit unions. The Desjardins Award recognizes credit unions that demonstrate a significant commitment to youth financial education. Recipients include:
* Clarence Community & Schools FCU, under $35 million in assets; * Buffalo Metropolitan FCU, $35 million to $75 million in assets; and * Teachers FCU, Farmingville, more than $250 million in assets.
Accepting the awards were: Sandra May, assistant manager, Buffalo Metropolitan FCU; Marsha Brauer, manager, Clarence Community & Schools FCU; Frederick Schaefer, board chair, Teachers FCU, and board member Mario Shortino, Teachers FCU. “Now more than ever, it’s essential that our children and youth understand the importance of improving their financial literacy so they are better equipped to work toward a sound financial future,” said Diane LaVigna-Wixted, foundation executive director.
The New York Credit Union Foundation presented Desjardins Youth Financial Education Awards to credit unions for their commitment to youth education. Accepting the awards for their credit unions were (left) Sandra May, assistant manager, Buffalo Metropolitan FCU, and Marsha Brauer, manager, Clarence Community and Schools FCU.
Board member Mario Shortino (left) and board chairman Frederick Schaefer accepted the Desjardins Youth Financial Education Award on behalf of their credit union, Teachers FCU. (Photos provided by the New York Credit Union Foundation