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CU System

Pacific Service CU cuts rates for 80 of credit cardholders

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WALNUT CREEK Calif. (12/15/09)--While many banks are raising rates, lowering available credit limits and increasing fees, Pacific Service CU has lowered its credit card rates for 80% of its cardholders. As a result of a new program design, rates at the credit union are between 8.9% and 13.9% annual percentage rate (APR), based on credit qualifications. "While most financial institutions are raising costs to consumers through higher interest rates and fees, Pacific Service is lowering costs to consumers by restructuring products and services to create market-leading value," said Steve Punch, president of the Walnut Creek, Calif.-based credit union. "Earlier this year we launched four new checking programs that lowered costs for thousands of consumers. Those programs were very well-received, and we expect a similar response for our redesigned Visa credit card program," Punch said. The program is unique in the current marketplace, said the credit union. It assesses no fees for cash advances, balance transfers, carrying a zero balance or paying the balance in full each month. It has low variable rates, a 25-day grace period on purchases, and the same interest rate for purchases and cash advances. It also has no annual fee for basic Visa Platinum cardholders. Visa Rewards Platinum cardholders can avoid a $25 annual fee with a qualifying credit union checking account. Also, Rewards points earned do not expire. "Most credit card programs are fee-driven as a way for the financial institution to earn additional revenue and post a better bottom line," said Kristin Dove, vice president of marketing at Pacific Service. "But, excessive fees and astronomically high interest rates are unfair to consumers who manage their finances responsibly." For its fair and ethical practices, Pacific Service CU's credit card program recently received the Credit Card Connection's highest five stars rating. Pacific Service CU has more than $1 billion in assets.

WOCCU foundation exec dir. profiled in newspaper

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MADISON, Wis. (12/15/09)--The executive director of Worldwide Foundation for the World Council of Credit Unions was featured Sunday in the front page of the business section of the Wisconsin State Journal. In the article, "Bringing financing to those in need," Valerie Breunig describes her job raising money from U.S. credit unions for WOCCU's work in microfinance aide and other programs to alleviate poverty in developing countries, such as Kenya, Rwanda, Afghanistan, Sri Lanka, Bolivia and Colombia. She travels to program sites two or three times a year to monitor progress of the foundation's programs and noted that "Everybody loves to tell you about their credit union, when it formed, how it started, who the original founder was." Most of her job involves fundraising. Last year, she and an assistant raised $1.4 million, mostly from U.S. credit unions, to support WOCCU programs. Larger program grants are raised by staff in Washington, D.C., through donations from corporations, foundations and government agencies, the article said. Breunig noted that program sites are chosen in areas where WOCCU can get funding. Asked about the economic downturn's effect on giving by credit unions, Breunig said gifts are down this year because some credit unions have been hit hard by the downturn. In response, the organization cut some regional training in Latin America. However, she said, "I'm feeling like we're through the worst (period)."

UBIT case oral arguments end briefs due Feb. 1

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DENVER (12/15/09)--Closing arguments in Bellco CU's challenge of the government's unrelated business income tax (UBIT) ended at 12:15 p.m. (MT) Friday in a U.S. District Court in Denver, with the judge requesting post-trial briefs from both sides by Feb. 1. U.S. District Judge Christine M. Arguello began hearing testimony Dec. 7 from 15 witnesses, including 11 called on behalf of the Greenwood Village, Colo.-based credit union and four called by the government, according to Eric Richard, Credit Union National Association (CUNA) general counsel, who attended the trial. "The judge asked both sides for additional briefs, due Feb. 1. She will need time to read them and make her decision, so we are not expecting an immediate outcome," Richard told News Now, adding that Judge Arguello indicated that some of the issues involved in the case are difficult. At the conclusion of the case presented on behalf of Bellco by Mike Conway of the Foley & Lardner law firm, the government moved for a summary judgment as a matter of law, saying Bellco hadn't met its burden of proof. However, Judge Arguello said Bellco had submitted plausible evidence and denied the government's motion. Bellco argued why income derived from credit life and disability insurance, as well as royalties from accidental death and dismemberment (AD&D) insurance, should not be subject to UBIT. Among Bellco's arguments were that:
* Credit insurance is substantially related to the credit union's purposes of promoting thrift and making credit available at fair and reasonable rates. All sides in the case agree that a substantially related product is tax exempt, said Richard. "The Colorado credit union statute indicates credit unions must promote thrift among their members and help make credit available at fair and reasonable rates. The products protect credit union members from loss and protect the credit union from the effects on its capital from defaults on the loans," Richard told News Now. * Credit unions have been offering and integrating the insurance in the work of credit unions at least since 1934, when CUNA and CUNA Mutual were established. * Bellco offered the best rates in Colorado on credit insurance products, and these products were valued by the Bellco members who elected them.
The government argued that credit union insurance products are a poor value for members and do not promote thrift. The government's case relied heavily on what it characterized as the low loss ratios experienced by the insurance company that worked with Bellco on some of the insurance products offered through Bellco. Also at issue is whether AD&D insurance provides royalty income, which is exempt from UBIT. "To earn royalty income, the credit union must play a passive role in marketing and administering the AD&D program. The outside parties who contract with the credit union, such as marketing and insurance companies, must do most of the work," Richard said. "We believe Bellco met this test. But the court will consider whether Bellco's time and actions spent with the product reflect more than passive involvement." Richard noted that Bellco CU President/CEO Doug Ferraro "has shown incredible dedication" on a key issue important to credit unions. "He and his key employees participated in all the preparations for this trial, including the discovery process. He testified as the first witness last week, and spent every day with counsel at the counsel table in court the entire week." Bellco filed the lawsuit in May with support of the UBIT Steering Committee, which includes CUNA, CUNA Mutual, the American Association of Credit Union Leagues and the National Association of State Credit Union Supervisors (News Now Dec. 7).

Connecticut league visits offer thanks dues notices

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MERIDEN, Conn. (12/15/09)--The Credit Union League of Connecticut’s management and staff are personally visiting all member credit unions to thank them for their membership, loyalty and participation in 2009, offer holiday greetings and hand deliver dues notices for 2010. The league said it made the same type of visits in 2008. "Even in these financially challenging times, credit unions are poised to deliver crucial service to members,” said league President/CEO Tony Emerson. “Providing uncommon, superior member service during a tough economy often means simple, good business, setting an organization apart from its competition. “The league wants to exemplify this model,” he added. “We also want to deliver a high caliber of service to our member credit unions. Like them, we are first and foremost a service organization.” The league said it served member credit unions in 2009 by listening to their needs and fulfilling their requests with low- or no-cost alternatives and events such as a regulatory compliance workshop and a Real Estate Settlement Procedures Act conference. For 2010, the league has established a six-month, 12-session compliance school--at no cost to small credit unions--to keep affiliated credit unions up-to-date on the increasingly complicated regulatory compliance landscape. “No one is describing credit union operations as turnkey these days,” Emerson said. “By forming programs that provide hands-on, essential instruction and the latest updates, and surrounding them with personal connection and individual attention, the league is fulfilling its promise to serve with the same commitment that member credit unions render service to their own members. It’s the way we like to do business in Connecticut.”

NCUA denies lump-sum payment to employee of defunct CU

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WASHINGTON (12/15/09)--The National Credit Union Administration (NCUA) has denied a lump sum payment of more than $265,000 to a person who had a deferred compensation agreement with the failed New London (Conn.) Security FCU. The decision issued Nov. 19 was made available last week on NCUA’s website (theday.com Dec. 12). The unnamed resident, a former credit union employee, also will not receive her expected retirement benefits, NCUA said. The type of deferred compensation agreement, known as a “Rabbi Trust,” placed the employee’s benefits at risk, NCUA said in a decision that appealed a ruling in its Asset Management and Assistance Center, the publication said. “The reason parties entered into Rabbi Trusts organized this way is to inject sufficient uncertainty in the possibility of payment to the beneficiary that the Internal Revenue Service will not treat the benefits under the trust as recognized, and thus taxable, at the time the trust is first funded,” NCUA said on its website. “The beneficiary of a Rabbi Trust obtains a tax benefit in exchange for the risk that the institution might become insolvent before the promised benefits are all paid off,” NCUA added. “Unfortunately ... this insolvency risk materialized in the case of New London [Security FCU].” NCUA dissolved the credit union in July 2008, stating its late investment broker, Edwin F. Rachleff, had likely been embezzling funds for years, the publication said. Rachleff committed suicide in August 2008. “There appears to have been massive fraud at New London,” the NCUA decision said. “As a result, there are almost no assets available to pay claims and, presently, none available for general creditors.”

Six cyber trends outlined by I.D. theft center

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WASHINGTON (12/15/09)--Identity crime, especially Internet-based crime, continues to plague consumers and the economy, according to the Identity Theft Assistance Center (ITAC) Identity Theft Outlook for 2010. The report is based on developments during the past year and notes what’s ahead in 2010, including trends in criminal activity and law enforcement. The report also outlined six trends ITAC anticipates for 2010:
* More criminals will use malware to steal usernames and passwords, and recruit accomplices as “money mules” to open phony accounts and transfer funds. “It is the responsibility of consumers and businesses alike to demand the best security protection and to implement it into their everyday experiences,” said Michael Stanfield, CEO, Intersections Inc., a CUNA Strategic Service. * More collaboration on cyber security. The Obama administration will continue to break down silos within the government and collaborate more with the industry as it develops and implement cyber security policy, ITAC said. * Expanded use of identity management solutions to address identity theft, data breaches and cybercrime. * Changes resulting from “Red Flag” rules. Red flags are any activity or practice that indicates possible identity theft. Consumers will face questions about address changes and other behavior, including missed payments or changes in spending patterns. Consumers may be annoyed until they adjust to the new levels of scrutiny. * Stiffer sentences for those convicted of identity theft. The law requires a mandatory two-year sentence for aggravated identity theft. Prosecutors also are pursuing added jail time for related felonies, including wire fraud and use of unauthorized access devices. * Possible federal regulation of breaches of consumer data. The Senate is slated to consider two measures that would regulate how public and private organizations protect personal information.
ITAC is a nonprofit coalition of financial-services companies, committing to protect consumers from identity theft. Through its partner Intersections, ITAC offers identity management services.

Debt still troubles consumers CUNA tells IThe StreetI

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WASHINGTON (12/15/09)--Consumers have been paying down debt and saving more than they did during the economic boom, but the average level of household debt is still 120%--leaving consumers wary, a Credit Union National Association (CUNA) senior economist told The Street Monday. “Most people and investors are thinking we’re not going to come roaring out of this; it’s going to be a slow, deliberate and painful recovery,” Mike Schenk, CUNA senior economist, told the news outlet. “They want to feel like things are getting better. And once they feel like things are not only getting better but staying better, we can fix some more of these problems.” Consumers will remain skeptical until debt is reduced and wages grow. Retail sales have been strong, “but the real wild card there is if you see big uptick in inflation, that’s going to get big, long-term investors pretty nervous,” he added. For the full article, use the link.