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CU System briefs (11/14/2012)

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  • ST. PAUL, Minn. (11/15/12)--Ninety-three percent of candidates supported by Minnesota's credit unions were successfully elected to the Minnesota Legislature, says the Minnesota Credit Union Network (MnCUN).  The winning candidates were supported by MnCUN's Credit Union Volunteer Fund (CUVOL), which ensures that the credit union voice is heard at the state Capitol.  CUVOL contributed to 71 candidates during the 2012 election, with 48% donated to Democrats and 52% to Republicans. Of those, 66 won their elections. Minnesota credit unions also worked in campaign efforts to elect credit union-friendly candidates. MnCUN and credit union supporters participated in literature drops, door knock events, political action committee check presentations and legislative panels. MnCUN Vice President-Governmental Affairs said MnCUN and the state's credit unions are pleased with the results. "With a 93% success rate, our election efforts help to build the foundation for solid credit union support at the state Capitol." …
  • TOPEKA, Kan. (11/15/12)--A former employee of Enterprise (Kan.) CU has pleaded guilty to embezzling $817,167 from the credit union.  Pamela Emig, 36, of Solomon, allegedly admitted to the embezzlements, which occurred from 2005 to 2011 and involved kiting checks among accounts to cover up the thefts and shortages ( Nov. 13).  Sentencing has been set for Feb. 11 …
  • SIOUX FALLS, S.D. (11/15/12)--Sioux Falls (S.D.)  FCU  has awarded Adopt-a-Classroom grants to seven area teachers to help them teach financial literacy to their students. "We feel that it's incredibly important to provide students in our community with the opportunity to learn how to manage money and how to make wise financial decisions," said Sioux Falls FCU President/CEO Fran Sommerfeld.  The grants went to teachers of special education, seventh grade math, two fifth grades, second grade, first grade and kindergarten …

Fake chat boxes part of pop-up scams

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FARMERS BRANCH, Texas (11/15/12)--Fake chat boxes are a part of the pop-up scams in the latest variation of the Citadel banking Trojan scheme designed to part unsuspecting consumers from their personal information and money while  making online banking transactions.

News Now reported Wednesday about browser malicious software (malware) that can inject fake pop-ups on online banking sites. The fake pop-ups trick users into re-entering their bank and credit union account logins and passwords. (See related News Now article: Fake pop-ups injected into online banking transactions).

The Association of Certified Fraud Examiners (ACFE) has more information about a slightly different twist on the pop-up scams--messages posing as chat boxes from the institution's online banking site, according to the Texas Credit Union League (LoneStar Leaguer Nov. 5).

The league explained how the fake chat boxes work. The Internet user is on the credit union or bank's website when a pop-up message flashes. It says, "We are running a security check." The live chat box then pops up with a message that informs the user a representative will be available shortly.  Then the "representative"--the scammer--begins a live online chat session with the unsuspecting victim, who discloses confidential account information.

ACFE says scammers target computers that have had previous malware infections, which victims download unknowingly through fake Web links or attachments.  After the malware downloads, it stays dormant until the victim opens the online banking site.

The same advice works for both the fake pop-ups and the fake chat boxes. ACFE advises using updated software to prevent malware from embedding itself in a computer.  Credit unions can reemphasize that financial institutions never ask for personal identification information because they already have the information.

ACFE said anyone who encounters the scam should turn off the computer and call the financial institution.  Consumers also should run a security check for other viruses or malware.

Texas CU shares hurricane recovery story

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GALVESTON, Texas (11/15/12)--Coastal Community CU in Galveston, Texas, understands what credit unions in the Northeast are going through as they rebuild from the devastation caused by Hurricane Sandy, said President/CEO Carol Gaylord Purdy. The $43.5 million asset credit union was all but destroyed when Hurricane Ike struck Southeast Texas in 2008.

Hurricane Ike was reported to be the third-costliest hurricane ever to make landfall in the U.S., and Hurricane Sandy is expected to be one of the top 10 costliest hurricanes on record in the U.S (LoneStar Leaguer Nov. 14).

Sandy made landfall at 8 p.m. Oct. 29 near Atlantic City, N.J., packing 80-mile-per-hour winds and causing massive flooding along the state's shoreline and in New York City. More than 7.9 million homes and businesses were without power, from North Carolina to Maine.

Hurricane Sandy's impact on the economy may result in $10 billion to $20 billion in total economic damages and $5 billion to $10 billion in insured losses, according to early estimates from catastrophe-risk modeling company Eqecat (News Now Nov. 1). Since then, estimates have gone up to $60 billion.

In Hurricane Ike, Coastal Community's main office took in eight feet of flood water from the Galveston Ship Channel, Purdy told the Texas Credit Union League. The credit union's 69th Street branch received four feet from the Gulf of Mexico. Also, the wind caused extensive roof and air conditioner damage. In total, Purdy says Hurricane Ike caused half a million dollars in damage for the credit union. For six months, the credit union's main office was closed for repairs.

Despite the damage, the credit union was there for its members. Within one week of Hurricane Ike destroying the Coastal Community CU's main branch, Purdy set up shop at the San Luis Hotel.

Galveston residents were not allowed to return to the island for two weeks, Purdy remembered.

"We received police escorts to the island each day to bring tellers and cash to the San Luis each day and served everyone regardless of membership," Purdy said. "Cash was the only tender and we were the only fully operational financial institution on the island."

Purdy said this allowed her to begin the clean-up and get the disaster-recovery unit ready for its grand opening before the residents returned.

"Our disaster-recovery trailer was the first trailer on the island (before the red tape)," Purdy said. She noted the credit union opened 100 new accounts from its disaster recovery trailer within a month and assets grew $10 million within three months.

For those credit unions that were in the path of Hurricane Sandy, Purdy says, "I truly believe that the best in people comes out in the worst of times."

To help breathe life back into their branch, Purdy recommends bringing in lots of plants. She also suggests that credit unions celebrate and reward staff for their hard work during difficult times.

"You have to rebuild lives before you rebuild buildings," says Purdy. "The credit union is not a building; it's a family."

Retail opponents to interchange settlement to appeal

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ALEXANDRIA, Va. (11/15/12)--Retailers who opposed the $7.2 billion interchange antitrust lawsuit settlement  that received a preliminary approval Friday from a U.S. District Court in Brooklyn, N.Y., announced they are filing a notice of appeal against the ruling.

The National Association of Convenience Stores said most of the 19 plaintiffs opposing the settlement with Visa, MasterCard and large banks will ask the U.S. Court of Appeals for the Second Circuit to deny the preliminary approval due to "fatal legal defects" in the settlement proposal.

The lawsuit was over swipe fees in credit card transactions.

Mortgage delinquencies down for third straight quarter

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CHICAGO (11/15/12)--The national mortgage delinquency rate--the rate of borrowers 60 or more days past due on payments--declined slightly for the third consecutive quarter, dropping to 5.41% in the third quarter from 5.49% in the second quarter, according to credit reporting agency TransUnion.

Year-over-year, the mortgage delinquency rate decreased nearly 8% from 5.88% in third quarter 2011.

TransUnion provides ongoing quarterly analyses of credit-active U.S. consumers and how they manage mortgages, credit cards and auto loans.

U.S. credit unions' overall loan delinquency rate at the end of the second quarter (the most recent data available) was 1.2%--down from 1.6% at the end of 2011, according to data compiled by the Credit Union National Association's (CUNA) Economics and Statistics Department.

During that time frame, credit unions' delinquencies declined to 1.61 % from 2.22% for first mortgages; and to 1.23% from 1.43% for second mortgages. Also, net charge-offs as a percentage of average loans fell to 0.76% from 0.91%, CUNA said.

"Continued declines in mortgage delinquency rates are a welcome sign and reflect that relatively more homeowners are able and willing to make their mortgage payments each month," said Tim Martin, group vice president of U.S. Housing in TransUnion's financial services business unit. "However, we still have a long way to go to reach more 'normal' conditions of a delinquency rate in the 1%-2% range for the U.S. average."

Twenty-two states saw improvement in their mortgage delinquency rates from last quarter. Forty-two states improved from last year.

Forty-nine percent of metropolitan areas experienced quarterly improvement in their mortgage delinquency rates in the third quarter. That is a significant departure from the previous two quarters, when 76% in second quarter and 73% in first quarter of the metropolitan statistical areas improved, TransUnion said.

Arizona and California, two of the states most negatively impacted by the mortgage crisis, experienced the greatest improvement in mortgage delinquency rates on a year-over-year basis. Since the third quarter of 2011, Arizona's has dropped nearly 25% to 5.62% from 7.46%. California has dropped nearly 24% in that same time, to 5.56% from 7.29%.

Currently, only two states remain with double-digit delinquencies--Florida at 13.09% and Nevada at 10.93%--and both showed improvement year over year.

The District of Columbia experienced the largest year-over-year increase in mortgage delinquency rate--up over 11%-- to 6.10% from 5.47%. Eight states also experienced year-over-year increases, with New Jersey registering both the highest overall rate of the group at 8.33% and the largest increase, up nearly 10% year over year.

TransUnion said it expects the mortgage delinquency rate to fall again in the fourth quarter, but only slightly.

"It's generally tough to expect improvement in delinquency rates in the fourth quarter of the year given the extra demands on household income that many experience during the holiday season," said Martin. "However, we saw some improvement in the housing market in the third quarter with regard to house prices, home sales and increased refinance activity, and we believe we will start to see these numbers reflected in improved mortgage delinquency next quarter. As such, we forecast the year-end delinquency rate to improve to something in the 5.25% to 5.35% range."

TransUnion's forecast is based on several economic assumptions, such as gross state product, consumer sentiment, unemployment rates, real personal income and real estate values. The forecast would change if there are unanticipated shocks to the economy affecting recovery in the housing market or if home prices fall more than expected.

CUANY NCUA reps meet on post-Sandy strategies

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ALBANY, N.Y. (11/15/12)--Credit Union Association of New York (CUANY) staff met with National Credit Union Administration (NCUA) representatives Friday to discuss the impact of Hurricane Sandy on New York credit unions.

Rebecca Paliwodzinski, associate regional director of operations for NCUA, and Jon Flagg, NCUA supervisory examiner, talked with CUANY about lessons learned, short-term challenges for credit unions and their members, and long-term priorities.

At a meeting Friday to discuss Hurricane Sandy's impact on New York credit unions were, from left, Rebecca Paliwodzinski, associate regional director of operations at the National Credit Union Administration (NCUA); Jon Flagg  NCUA supervisory examiner; and William J. Mellin, president/CEO of the Credit Union Association of New York. (Photo provided by the Credit Union Association of New York) 

NCUA confirmed that all New York credit unions are now operational--although a small number are delivering services from limited or alternate branches.

Paliwodzinski and Flagg shared their pre- and post-hurricane strategies. The NCUA team reached out to roughly 881 credit unions in New York and New Jersey before the hurricane to verify key contact information, said Paliwodzinski. "This was a huge positive for us, as it facilitated rapid-fire contact when the storm hit," she added.

Sandy made landfall at 8 p.m. Oct. 29 near Atlantic City, N.J., packing 80-mile-per-hour winds and causing massive flooding along the state's shoreline and in New York City. More than 7.9 million homes and businesses were without power, from North Carolina to Maine.

Hurricane Sandy's impact on the economy may result in $10 billion to $20 billion in total economic damages and $5 billion to $10 billion in insured losses, according to early estimates from catastrophe-risk modeling company Eqecat (News Now Nov. 1). Since then, estimates have gone up to $60 billion.

Flagg, a Long Island resident, served as supervisory examiner in New Orleans during and after Hurricane Katrina. Referring to his experiences from that time, he noted that New York credit unions are in much better shape overall than the credit unions impacted by Hurricane Katrina in 2005.

Paliwodzinski praised credit unions for their cooperative efforts during Sandy's aftermath, CUANY said.

CUANY President/CEO William J. Mellin asked about NCUA's plans regarding credit union disaster preparedness. Paliwodzinski confirmed that examiners look at credit unions' disaster recovery plans during examinations. However, both Paliwodzinski and Flagg said the agency has no plans to conduct special or early evaluations.

"Confirming that credit unions are operational was our first priority, and we may also need to look at recordkeeping later if issues arise," explained Paliwodzinski.

The group also acknowledged that impacted credit unions may face potential loan servicing issues. "We will be looking to assist credit unions with methods for recording deferrals and extensions, but we would handle that on a case-by-case basis," said Flagg.

As for potential capital challenges, Paliwodzinski emphasized that NCUA's requirement for achievable net worth restoration plans is firm, but assistance and guidance are available to credit unions facing challenges.

"Our examiners are trained to look at the big picture," she said. "As always, we encourage credit unions to communicate with their examiners and share any issues or concerns they may have."

CUANY will continue to dialogue with NCUA about credit unions' post-hurricane recovery.

"Regulatory advocacy is an essential part of the work we do for New York credit unions, and this is just an extension of that advocacy," said Mellin. "Meetings like these allow us to hear the agency's perspective, share the challenges our credit unions are facing and work together toward the fullest recovery possible."

Joining Mellin for the meeting were Michael Lanotte, CUANY senior vice president/general counsel; Ronald McLean, senior vice president of association services; Tracy Conner, CUANY vice president of member services; Michael Carter, CUANY compliance director; and Edward Kovalefsky, chief operating officer of CUC Mortgage Corp.

See today's related stories in News Now: "Regulators issue more guidance for FIs to help Sandy-stricken borrowers" and "N.J. CUs continue struggles from Sandy's aftermath."

N.J. CUs continue struggles from Sandys aftermath

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HIGHTSTOWN, N.J. (11/15/12)--The New Jersey Credit Union League is encouraging its member credit unions impacted by Hurricane Sandy to apply for CUAid Disaster Relief Fund grants. New Jersey's credit unions are still dealing with the aftermath of the Oct. 29-30 superstorm.

CUAid is the credit union movement's national Disaster Relief Fund maintained by the National Credit Union Foundation (NCUF). The movement has now raised more than $178,000 to aid credit union staff, volunteers and members affected by the storm, according to Christopher Morris, NCUF director of communications.

"The devastation in New Jersey has impacted millions of people's lives. We continue to deal with a gasoline shortage, lack of basic necessities for those who have lost their homes, and many are still without power," said league president/CEO Paul Gentile (The Daily Exchange Nov. 14).

Gentile noted he was "touched by the outreach we have received from credit unions and credit union system organizations throughout the country. It is so valuable to have a fund like CUAid available to concentrate fundraising efforts."

Because of issues related to Hurricane Sandy, some credit union attendees at the New Jersey Credit Union League's Lending Roundtable Tuesday--such as  staffers from Atlantic FCU--participated in the roundtable via video conference call. (Photo provided by the New Jersey Credit Union League)
The league also noted that in the wake of the storm, credit unions are stepping up to make unique loans to help members in need. At the league's Lending Roundtable on Tuesday, credit union lending professionals shared some ideas for Sandy relief.

They included:

  • Unsecured loans with deferred payments of 60 or 90 days;
  • Holiday loans at lower interest rates; and
  • Skip-a-payment options. Credit unions often offer skip-a-payments at certain times of a loan term, but some have offered the option also for November and December if the member requests it.
Attendees at the roundtable also learned about CUAID and were provided information about grant fulfillment procedures and applications found on the league's website. The meeting took place at the league's office with two remote locations videoconferencing in to accommodate credit unions affected by Sandy.

Sandy hit the East Coast after being downgraded from a Category 1 hurricane to a tropical storm. However, it combined with a cold front moving from the northwest and a high pressure system moving in from Greenland to land as a superstorm that impacted 881 credit unions, mostly in New Jersey, New York and Connecticut. It was about 800 miles wide, its winds reaching to the Great Lakes.

The storm, which created unprecedented flooding in lower Manhattan and power outages for about six million people, created havoc from North Carolina to the New England states. At least 56 people in the U.S. and 67 in the Caribbean were killed (The Nov. 1).

Early damage estimates ranged as high as $60 billion.  Claims Journal reported Wednesday that the storm damaged or destroyed more than 65,000 recreational boats, resulting in about $650 million in damage, making the storm the single-largest industry loss since the Boat Owner's Association of the U.S. began tracking losses in 1966.