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Consumers write CUNA Nearing point of bank revolt

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MADISON, Wis. (12/16/09)--Consumers are writing the Credit Union National Association (CUNA) to vent against banks' actions and policies, and some are mentioning the word "revolt." In a meeting Monday, several large banks were taken to task by President Barack Obama about their reluctance to make loans and help the economy and their opposition to regulatory reforms. That prompted several letters Tuesday to News Now. "I wonder if you have made any discoveries of people revolting against any of these banks that pay these huge salaries and/or bonus packages?" asked Mel Eaglin of San Diego, in an e-mail to CUNA. "If for no other reason, I would automatically move my money from any of these banks. I've encouraged others to do the same," Eaglin told News Now. "If enough depositors move their accounts (savings and checking) elsewhere, then banks could quickly be undercapitalized. Just an idea," Eaglin concluded. In another e-mail, a member of Arizona FCU, Phoenix asks "What is the credit union movement's response to Obama's call to the banking industry?" The member said he has "used credit unions exclusively for my personal financial needs since 2002. I believe the credit union movement, and its member-ownership business model, is the only alternative to the profit-driven and very non-consumer center commercial banking industry. He noted the president in the meeting "issued a call to the banking industry to remember the aid given to that industry by the American people by way of the TARP (Troubled Asset Relief Program) program, and give assistance to the 'Main Street' consumer by increasing lending activity; by doing so, the banking industry would be of great help in the economic recovery," the Arizona FCU member wrote. "No mention was made of the role that credit unions play in America's consumer financial network [at the president's meeting]. No mention was made in news reports I saw about the credit union movement being represented in this meeting by either executives or member-owners. I find that disappointing and troubling," the member said. "What is the response of CUNA to the president's call for greater response and accountability from the commercial banking sector? How have America's credit unions been impacted by the economic difficulties of the past couple of years, and how are America's credit unions helping in the economic recovery? Why are credit unions still a better value for the consumer than commercial banks, and how is the credit union movement spreading that message?" he asked. CUNA has pointed out to Obama that credit unions are in fact lending to business and could be doing much more. CUNA President Dan Mica noted that credit unions could pump more than $10 billion into the economy and create more than 108,000 jobs if Congress would agree to expand their capacity to make business loans. However, he said Monday, "The very people who met with the president today are the same people who oppose allowing credit unions to help." He noted the "absolute unconscionable" actions of bankers who "would block credit unions from helping the nation, while simultaneously being rebuked by the president for not doing enough to help. "Were we in the room, the president could have easily pointed to us and said, 'These guys want to help--why can you be more like them?" Mica said (News Now Dec. 15). The words brought another writer's comments: "Hooray for speaking out re: (the) omission from Obama bank meeting. How blind can they be?" said Mary A. Sommerville, a contractor and Army G-4 publications manager. Sommerville told News Now in a separate e-mail. "I am a long-timer user and believer in credit unions, which have probably done more for the economy and private citizens than banks. I hope the omission by the president was not intentional but lack of good advice."

Mass. Supreme Court dismisses CUs breach case

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BOSTON and MADISON, Wis. (12/16/09)--The Massachusetts Supreme Court has dismissed a multi-million dollar lawsuit by CUMIS Insurance Society, filed on behalf of credit unions whose members' credit cards were compromised in a data breach of BJ's Wholesale Club in 2004-2005. The suit, filed in April of 2005, had sought recovery of millions of dollars lost by CUNA Mutual and 163 CUMIS Bond policy holders. In 2005, CUNA Mutual had estimated the costs suffered by credit unions would likely exceed $5 million and that at least 300 credit unions suffered losses due to the breach (News Now Jan. 27, 2005, and April 6, 2005). "It's disappointing the Massachusetts Supreme Court concluded that the card associations' compliance process provided an adequate remedy for credit unions that suffered huge losses in the BJ's Wholesale Club breach," said Chuck Cashman, Plastic Card product executive with CUNA Mutual. "This is an unfortunate ruling and one which we, and likely our credit union partners in this litigation, do not agree with," he said in an e-mail to News Now. "Data breaches will continue to be a front-burner issue for all parties involved-- merchants, card issuers and consumers. But because of our action, we've created awareness to empower others to stand up and say, 'Enough is enough' on data breach losses," Cashman said. BJ's Wholesale's breach was the one of the first huge breaches that hit a widespread area and involved millions of cardholders. It brought to light that a large number of merchants use point-of-sale software systems that capture and store full magnetic stripe information off plastic cards--a violation of the card association operating rules and regulations. CUMIS' complaint alleged a breach of a third-party contract, based on BJ's agreement with Fifth Third Bank not to store customers' magnetic stripe data (Courthouse News Service Dec. 15). The credit unions sought compensation for having to reissue millions of new credit cards to replace ones compromised in the breach. The Massachusetts State Court in Boston, the trial court sided with BJ's and the state high court affirmed, saying the contract was exclusively between BJ's and Fifth Third. The court also dismissed fraud and negligence claims against BJ's and the bank, saying they never misled the credit unions and CUMIS about their compliance with Visa and Mastercard regulations. "By pursuing this litigation, CUNA Mutual helped expose the limitations of existing law in providing recourse which, in turn, helped spur the passage of legislation in some states," Cashman said. "We're hopeful our efforts provided some motivation to the card associations to increase their efforts to require compliance with their rules, thereby helping reduce the chances for these types of occurrences in the future," he added.

U.S. CU Profile for third quarter 2009 now online

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MADISON, Wis. (12/16/09)--With a hopeful sign in the economy's third-quarter rebound, credit unions' savings growth increased to 10.2%, according to a third quarter 2009 summary of credit union results compiled by the Credit Union National Association. The U.S. Credit Union Profile for the quarter is now available online.
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Loan growth for the quarter eased to 2.7% from 6.7% in 2008--which is typical for an economic downturn, said the profile, which is prepared by CUNA Economics and Statistics. Delinquencies and net chargeoffs increased but both remained substantially lower than bank norms, said the profile. Earnings pressures remain obvious, with the return on average assets (ROA) at 26%, compared with -0.2% in 2008 and 64% in 2007. The aggregate loan-to-savings ratio at credit unions decreased to 78.1% from 83.2% in 2008. That means there is more liquidity, but ROA pressure remains as credit unions' low-yielding investments grow. Interest-rate-risk exposure declined to 34.6% from 2008's 35.2% . Increased mortgage loan sales are a major factor in the decline, said CUNA. Third quarter net worth ratios declined to 10.1 % from 10.6% in 2008 due to the combination of fast asset growth and low earnings, CUNA said. The liquid asset ratio increased to 16.3% as of June, from 14.7% last year. Stable low-cost deposits held steady at 36.2% but are substantially lower than in 2005. Nearly all credit unions remain well-capitalized, with 95.8% maintaining a net worth greater than 7%, the report said. Asset yields decreased 62 basis points (bp) from 2008, but interest costs declined by 64 bp. Credit union margins were nearly equal to expense ratios, largely to fast asset growth and stabilization accounting. Membership growth inched up, with the 12-month member growth now double the rate of population growth. Net interest margins increased marginally to 316 bp. Noninterest income rose to 178 bp from 128 in 2008. Credit union borrower-bankruptcy rates rose to 3.7 per 1,000 credit union members from 2.6 last year. The profile includes overviews of mortgage lending, consumer lending, share/deposits, and more. In September, 7,773 credit unions averaged $114 million in assets with the median assets at $16.1 million. The movement had total assets of nearly $885.9 billion. Total loans were $585.1 billion and total savings were more than $748.8 billion. Members totaled 91.3 million. Total surplus funds in the movement was nearly $268.2 billion. Use the resource link to access the full report.

CEFCU issues 7 million dividend to members

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SAN JOSE, Calif. (12/16/09)--Citizens Equity First CU (CEFCU) will be issuing a $7 million dividend to members, including members of Valley CU, which CEFCU acquired after Valley was placed into conservatorship last year. Valley CU is now a division of CEFCU. Peoria, Ill.-based CEFCU told The San Jose Business Journal Tuesday that savings and loan activity in 2009 was strong enough to give the dividend to its 268,000 members. Loan volume at Valley’s three branches in November increased about 3,000% to $3.4 million, up from $109,000 in November 2008. CEFCU has $4.17 billion in assets. When Valley CU, San Jose, Calif., was acquired by CEFCU, it had $257 million in assets and 30,000 members.

Member Business Solutions reaches 1 billion in loans

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DULUTH, Ga. (12/16/09)--Member Business Solutions LLC (MBS), a credit union service organization (CUSO) jointly owned by Georgia Central CU, Duluth, Ga., and Southeast Corporate CU, Tallahassee, Fla., recently passed the $1 billion mark in underwritten loans. This comes less than a year after surpassing the $500 million milestone. “One of the keys to our steady growth has been referrals from existing clients and industry insiders,” said Jim Gallagher, MBS president. “We focus on giving our lenders a thorough underwriting package in one to three business days, which allows them to effectively compete in the small business market.” Credit unions entering the market today will find plenty of opportunity, Gallagher said. While banks still deal with large volumes of bad loans, loans underwritten by MBS have an aggregate reportable delinquency rate of 0.64% versus 3.35% reported by the National Credit Union Administration for credit unions nationally. During the same period, the commercial bank delinquency rate exceeded 5%, which has provided more opportunities for MBS partners because high delinquencies have tightened credit in the general marketplace. “Our credit union business lenders are not encountering a lot of competition because the bankers are contracting and trying to manage problem loan portfolios,” Gallagher said. MBS is unique in its focus on encouraging its partners to fill their portfolios with amortizing secured-term loans with a concentration on owner-occupied real estate, Gallagher said. Also, MBS’ emphasis in underwriting loans has been on global cash flow. As a result of the CUSO’s attention to the two criteria, the portfolios of MBS partner credit unions have performed above average, he added. Another byproduct of the current economic landscape is the lack of traditional income sources at financial institutions. “Credit unions are being squeezed with a lack of consumer loan demand and falling investment rates, leading them to explore business loans,” Gallagher said. MBS has 60 partner credit unions, 11 of which joined in the last year.

Wescom CU to close 12 branches

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PASADENA, Calif. (12/16/09)--Wescom CU, Pasadena, Calif., announced it will close 12 branches on Jan. 29 to improve its long-term financial strategy. The branches closing include all six locations in San Diego County and Santa Barbara County, and in Temecula, Fontana, Monrovia, Anaheim Hills, Santa Monica and San Pedro. After the closings, Wescom will have 29 branch locations in five counties. Wescom has thousands of members in San Diego County and in Santa Barbara County. The credit union said it planned to fully develop its presence in those areas, but the economy hampered its ability to allocate resources. “We concluded it would continue to be a challenge to provide adequate resources to our growing markets,” said Wescom CEO Darren Williams. “We also considered our branch network as a whole and concluded we could make adjustments in our primary markets as well.” However, “we believe we can continue to serve our members well with our 29 remaining branches and through our remote and automated channels,” he added. Wescom will make positions available to every employee in the impacted branches. Many positions will be comparable and in commutable location; however, some management level staff will be offered noncomparable positions and the geography of the branch network will make it less feasible for some staff to commute to a new location. The credit union also said it is working to improve its online banking and ATM capabilities to serve members. Wescom has $3 billion in assets.

Calif. league CEO urges lifting MBL cap in article

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ONTARIO, Calif. (12/16/09)--Bill Cheney, president/CEO of the California Credit Union League, recently told a California newspaper credit unions’ member business lending caps should be lifted so they can help small businesses. Credit unions cannot lend more than 12.25% of their assets. The California league participated in a congressional lobbying effort urging lawmakers to approve proposed legislation that would raise the caps (The Inland Valley Daily Bulletin Dec. 10). The effort was part of the Credit Union National Association’s national Hike the Hill visits by credit unions to their congressional delegates. By lifting the cap, “we conservatively estimate that this can create 108,000 jobs nationally (the first year) without any cost to the taxpayer,” Cheney told the newspaper. He added: “We’re getting a lot of positive response from lawmakers.” Many banks are not lending to small businesses, which Cheney said he isn’t criticizing. However, he pointed out that there should be other alternatives to help businesses. Arrowhead CU, San Bernardino, Calif., has run up against its business loan cap. Raising the caps could increase the credit union’s business lending from $100 million to $200 million, said Jon Parks, Arrowhead CU vice president of business development.

IOpEd NewsI Stick it to the banks. Join a CU

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PHILADELPHIA (12/16/09)--Consumers who are fed up with high bank fees, poor service and stingy lending should “stick” it to banks where it hurts--by joining a credit union, said the author of an opinion piece in Tuesday’s Dave Lindorff, a Philadelphia-area journalist, wrote that he joined a credit union after going through several tribulations at his local bank--including having his credit line frozen, being turned down when asking that a check from a regular employer be immediately cleared to help him pay bills, and waiting a month for a refund of funds improperly taken from his account. He chose the $394 million asset, Warminster, Pa.-based Freedom CU, where he said he had no trouble obtaining a credit line. “President Obama recently had to call bankers to the White House to plead with them to start lending (unsuccessfully, it appears), but here's my credit union begging me to finish filling out my loan application, and this for a loan that will be at a rate more than 1% lower than what my bank was offering,” Lindorff wrote. “No wonder 90 million Americans are already using credit unions,” he added. “At a time when the interest rate on a 30-year mortgage at a typical bank is 5.58%, it's 5.44% at credit unions.” He also noted that bank interest on savings accounts is averaging 0.44%, while it’s 0.68% at credit unions. Bank [certificates of deposit] are paying an average of 0.62%, and credit unions are paying 1.22%, or almost double, he said. Used-car loans at a bank cost 7.5%, while credit unions charged 5.72%, he said. These days, there should be a lot more credit union members, Lindorff wrote, “but I guess it’s hard for credit unions to compete with the advertising budgets of the banks.” His advice: “Stop grumbling about your bank, and about all those obscene fees, charges and the bad service you get, and just do a little research and switch to a local credit union. "It’s not just that you'll save money, be happier … but in a small way, you'll be doing your part to stick it to the banks,” he concluded. To read the opinion piece, use the link.

CU System briefs (12/15/2009)

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* HARRISBURG, Pa. (12/16/09)--The Pennsylvania Credit Union Association Tuesday said it was experiencing disruptions in its phone service, with sporadic calls interrupted by disconnections. Verizon was working on the matter and hoped to have the problem corrected by Tuesday afternoon. Callers were advised that if their call was disconnected to call back or e-mail PCUA (Life is a Highway Dec. 15) … * LOS ANGELES (12/16/09)--The downtown Los Angeles branch of Los Alamitos, Calif.-based Southland CU was robbed Monday by a man who rode a bicycle for his getaway vehicle. The holdup occurred at about 10:30 a.m. when the man handed the teller a note and escaped with an undetermined amount of cash, said the Los Angeles Police Department (LAPD). No injuries were reported. The branch is located about a block from LAPD's new headquarters building ( Dec. 14) … * LATHAM, N.Y. (12/16/09)--The Credit Union Association of New York and Sunmark FCU
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presented $2,000 to the Children's Hospital at Albany Medical Center. The donation represents proceeds from the association's statewide "Credit Unions Care for Kids" 2009 campaign. Pictured are from left: association President/CEO William J. Mellin; Rich Meddaugh, public relations specialist from Sunmark FCU; and Brenna Griswold, certified child life specialist for the hospital. Griswold also was presented with a large wagon stuffed with stuffed animals for patients. (Photo provided by the Credit Union Association of New York) … * RALEIGH, N.C. (12/16/09)--State Employees' CU, based in Raleigh, N.C.,
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celebrated its gift of 54 laptop computers for North Carolina's Tarheel Challenge Academy with a ribbon cutting ceremony officially opening of the school's computer lab. The credit union provided the computers through a partnership with Visa Inc. The academy, located in Salemburg, N.C., is a quasi-military program for at-risk youth sponsored by the state's National Guard. It has graduated more than 2,7000 youth graduate since 1994. The laptops will be used to enhance instruction, and will feature links to financial literacy programs--including SECU's teen website, the National Endowment for Financial Education's website and Visa's Practical Money Skills for Life. Cutting the ribbon are, from left, Shirley Bell, immediate past chair of SECU's board; two Tarheel ChalleNGe Academy cadets; and North Carolina Adjutant General William E. Ingram Jr. (Photo provided by State Employees' CU) …

CDFI Fund First American CU among new native CDFIs

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WASHINGTON (12/16/09)--A credit union in Arizona is among six new community development financial institutions (CDFI) geared toward serving Native Americans, the Treasury Department’s CDFI Fund announced Tuesday. First American CU (FACU), Casa Grande, Ariz., is chartered by Arizona and is one of the nation’s first Native American credit unions. It was organized to serve tribal members and employees of the Navajo nation. FACU has three branches. Its 18,000 members include members of eight Native American tribes and residents of primarily rural communities near their reservations. FACU has $65 million in assets. FACU offers credit union products and services, and is one of the few lenders who will make loans to Native Americans living on their reservation, the CDFI Fund said. Other newly certified institutions include:
* Karuk Community Loan Fund Inc., Happy Camp, Calif.; * Keweenaw Bay Ojibwa Housing and Community Development Corp., Baraga, Mich.; * Lower Brule Community Development Enterprise LLC, Lower Brule, S.D.; * Native Community Finance, Laguna, N.M.; and * Northern Shores Loan Fund Inc., Harbor Springs, Mich.
The six CDFIs were certified between August through November.