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CU System Briefs (02/15/2013)

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  • PAMPA, Texas (2/15/13)--A former employee of Pampa (Texas) Teachers FCU was indicted Wednesday by a Lubbock federal grand jury on charges of falsifying entries at the $11.7 million asset credit union (amarillo.com Feb. 13). Erin Dawn Trevathan is charged with fraud related to federal credit union entries. Trevathan  allegedly funded loans to credit union members,  taking money from other members' accounts and purportedly falsifying credit union records to swindle the credit union, according  to the indictment. The thefts covered a two-year period between 2008 and 2010 …
  • TULSA, Okla. (2/15/13)--A Texas man was sentenced Tuesday to one year and one day in prison by a Tulsa, Okla., federal court for identity theft related to vehicle-loan fraud (Tulsa World Feb. 13).  In addition to the prison time, U.S. District Judge Claire Eagan ordered Don Eugene Osby Jr., 38, to pay more than $100,000 in restitution and to be placed under court supervision for five years after his release from prison. Osby was accused of providing a false Social Security number to obtain approval for six vehicle loans from $616 million asset Tulsa (Okla.) FCU and $1.2 billion asset Tulsa Teachers FCU in 2010 and 2011 ...
  • JACKSON, Mich. (2/15/13)--Sentencing has been delayed for Renee Mainstone, a former branch manager at Jackson, Mich.-based EECU, on charges related to the embezzlement of more than $194,445 from the credit union. Mainstone, 45, of Battle Creek, was to be sentenced Wednesday but the hearing was delayed for one week (mlive.com Feb. 13). In a plea bargain, Mainstone pleaded guilty in December to a charge of taking $50,000-$100,000 and agreed to pay full restitution to the credit union.  She faces up to 15 years in prison and a large fine …
  • HARRISBURG, Pa. (2/15/13)--Carl William "Bill"Anderson, a longtime manager of the former Federal Employees CU in Warren, Pa., died Monday in Warren, according to the Pennsylvania Credit Union Association (Life is a Highway Feb. 14). He was 85. Anderson was employed with the Warren Post Office as an accountant, window clerk and floor worker. He retired as manager of the credit union after 37 years.  Services will be Saturday at Trinity Memorial Episcopal Church. He is survived by his wife, four children, two sisters, nine grandchildren and three great-grandchildren (The Times Observer Feb. 13) …

NCUA: CUs Can Educate During America Saves, Military Saves Week

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ALEXANDRIA, Va. (2/15/13)--Credit unions can educate members and their families about the importance of saving during this year's annual America Saves and Military Saves Week, Feb. 25-March 2, said National Credit Union Administration (NCUA) Chairman Debbie Matz Thursday.

"Having a savings account is the first step towards financial stability, but a recent study indicated a little more than 29% of America's households do not have a savings account," Matz said.

"People need to learn more about how to save and have a place to save," she said. "This year's campaign is a perfect opportunity for credit unions to educate and empower their members and their families so they can balance their budgets, buy a home, or put money aside for their children's educations."

America Saves Week and Military Saves Week are national campaigns that unite government, nonprofit and corporate groups to encourage individuals and families to save and build personal wealth. American Saves Week is coordinated by America Saves and the American Savings Education Council. Military Saves is part of the Defense Department's Financial Readiness Campaign and has been a partner with the department since 2003.

Both programs, which encourage saving, debt reduction and wealth building, are managed by the Consumer Federation of America. Credit unions can partner with local campaigns to offer motivational workshops and obtain posters, brochures and other resources, said NCUA.

During last year's America Saves Week, the 2012 Annual National Survey Assessing Household Savings revealed that a savings plan with specific goals can have beneficial financial effects, even for lower-income families, said the Pennsylvania Credit Union Association (Life is a Highway Feb. 5).

That survey found:

  • 66% of Americans spend less than their income and save the difference;
  • 66% have enough emergency savings to pay for unexpected expenses such as car repairs or a doctor's visit;
  • 42% have a savings plan with specific goals; and
  • 52% of non-retired Americans think they are saving enough for a retirement with a desirable standard of living.
For additional information, use the resource links.

Rep Braley, Coach Highlight Iowa Leg/Reg Conference

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DES MOINES, Iowa (2/15/13)--The Iowa Credit Union League 's annual Legislative and Regulatory Issues Conference will take place Tuesday and Wednesday in Des Moines, with more than 100 Iowa credit union representatives expected to attend.

Those attending will learn more about the legislative and regulatory issues affecting the credit union industry.

U.S. Rep. Bruce Braley (D-Iowa) will speak to attendees on Tuesday at 4 p.m. about issues taking place in Washington, D.C.  Keynoter Paul Rhoads, head football coach at Iowa State University, will present at 1 p.m. Tuesday on Building Pride in Your Team and Organization.

Other speaker highlights include:

  • Bill Hampel, Credit Union National Association  chief economist, who will discuss the economic outlook for 2013;
  • Ed Wallace, deputy director of Workforce Development; and
  • Amy Hudson, director of Business Development for CoOportunity Health.

CUMIS: HELOC Wire Transfers 'Red Flag' For Fraud

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HIGHTSTOWN, N.J. (2/15/13)--Fraud targeted at credit unions--including wire/home equity line of credit (HELOC) fraud, online banking fraud and data breaches--continues to increase, according to CUMIS Insurance Society Inc., the property and casualty company of CUNA Mutual Group.

Credit unions at the New Jersey Credit Union League headquarters, shown here, and at two remote areas discuss--via videoconferencing--emerging areas of fraud with Carlos Molina, risk management consultant at CUMIS Insurance Society Inc.  (Photo provided by the New Jersey Credit Union League)
Any wires funded by HELOCS should be a big red flag, said Carlos Molina, risk management consultant in Credit Union Protection's Risk Management Division at CUMIS. Molina spoke before a group of New Jersey credit unions Tuesday at a special roundtable on emerging fraud issues. The meeting was held at the New Jersey Credit Union League's headquarters in Hightstown, with some participants at two remote locations (The Daily Exchange Feb. 14).

Credit unions, as member-focused service providers, are considered easier prey because they often sacrifice security to provide service, he told the group.

Most credit unions' wire policies usually contain step-by-step instructions on how to perform the wire transfer but don't include verification procedures.  Molina suggested increasing standard verifications since it is easier to access personal information online. The standard name, account number and last four digits of a Social Security number are not enough to positively identify a member over the phone, he said.  Credit unions should take extra caution with fax requests and call backs.  It is too easy for fraudsters to forward phones and fool financial institutions further, he added.

Molina also cautioned credit unions about the type of transactions members can perform using audio response functions.

In reviewing online banking fraud, he cited examples of scams, including phishing, man-in-the-browser attacks and more, and offered recommendations for minimizing the risk.  In discussing data breaches, Molina said a breach can result in more than loss of data; it can also damage the credit union's reputation, and cause financial, compliance and legal risks.  He advocated having more business controls in place and training staff and members on personal safety.

Monday Holiday: CUNA Open, No News Now

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WASHINGTON and MADISON, Wis. (2/15/13)--Monday is a federal holiday (Presidents' Day) and many financial institutions will be closed. However, the Washington, D.C. and Madison, Wis., offices of the Credit Union National Association will be open. 

CUNA's News Now will not publish a Monday edition. News Now will resume regular publication on Tuesday.

Eight States Seek To Join Lawsuit Challenging Key Provisions Of Dodd-Frank

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WASHINGTON (2/15/13)--Eight states filed a motion asking a federal district court to allow them to join a lawsuit that challenges the constitutionality of the Dodd-Frank Wall Street Reform Act, particularly the formation of the Consumer Financial Protection Bureau  (CFPB) and Financial Stability Oversight Council (FSOC) and the establishment of their Orderly Liquidation Authority, which allows the government to liquidate the largest banks if they failed.

The addition will bring the total of states involved in the lawsuit to 11.  If the court approves the motion, joining the original states--Michigan, Oklahoma and South Carolina--will be: Alabama, Georgia, Kansas, Montana, Nebraska, Ohio, Texas and West Virginia.  Also suing are three private entities: the State National Bank of Big Spring, Texas; the 60 Plus Association Inc., a seniors advocacy group in Alexandria, Va.; and the Competitive Enterprise Institute, a public interest organization in Washington, D.C.

The states are challenging only the government's liquidation authority part of the lawsuit.

The proposed amended complaint for declaratory and injunctive relief, which was filed Wednesday in the U.S. District Court for the District of Columbia,  claims the formation of CFPB, the appointment of CFPB Director Richard Cordray, and the formation of the FSOC violate the U.S. Constitution, specifically its provisions for separation of power. 

"Title X of the Dodd-Frank Act delegates effectively unbounded power to the CFPB, and couples that power with provisions insulating the CFPB against meaningful checks by the Legislative, Executive and Judicial Branches," the complaint said.

The FSOC, it added, violates the separation of powers with "sweeping and unprecedented discretion to choose which nonbank financial companies to designate as 'systemically important' (or, 'too big to fail'). That designation signals that the selected companies have the implicit backing of the federal government--and, accordingly, an unfair advantage over competitors in attracting scarce, fungible investment capital."

The act's provision "empowers the Treasury Secretary to order the liquidation of a financial company with little or no advance warning, under cover of mandatory secrecy, and without either useful statutory guidance or meaningful legislative, executive or judicial oversight."

The suit claims the liquidation authority also violates the Fifth Amendment's due process clause and a requirement that bankruptcy laws throughout the U.S. be "uniform."

The states maintain that they have pension funds with investments in institutions that would qualify as falling under the liquidation authority.

The suit names as defendants a number of federal agencies, including the National Credit Union Administration.

Expert: CUs Should Take Holistic Approach To Online Fraud

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FARMERS BRANCH, Texas (2/15/13)--Credit unions should take a holistic approach to preventing online fraud, an information technology (IT) expert advised the Texas Credit Union League.

That strategy should include training, a robust patch management program, testing and security devices on network perimeters, said Idrees Rafiq, assistant vice president of IT Consulting for Financial & Technology Resources, who was interviewed by the league for the Feb. 14 edition of its LoneStar Leaguer newsletter.

Fraud will increase in 2013, in tandem with the continued surge in consumer online transactions, said Rafiq. Fraud is evolving at the same rate as technology, he said.

A holistic approach to fraud prevention includes:

  • Training--Train members, employees, volunteers, and even custodians one topics such as online and e-mail safety, social engineering and the credit union's overall information security policy and program. A breach will most likely target the weakest link in the training, Rafiq said.
  • Patch Management--The program should patch critical vulnerabilities in operating systems (Windows), firmware (routers) and software (Adobe Flash).
  • Security Devices--An antivirus is not sufficient and often will not detect more complex viruses, Rafiq said. Firewalls and intrusion prevention systems that can detect anomalies in traffic are more effective. The National Credit Union Administration requires credit unions to implement encryption technologies for member information both in storage and in transit, he said.
  • Testing--The credit union can best identify vulnerabilities by reviewing and testing security procedures. A third-party review of the processes can help a credit union increase its overall security posture, he added.

'Financially Fit Day' Set For April 3

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MADISON (2/15/13)--The National Credit Union Foundation (NCUF) is inviting credit union organizations to hold a "Financially Fit Day" on April 3 to kick off National Financial Literacy Month. The fundraising day is part of the campaign "Credit Unions Support Financial Education: Leading the Way to Financial Freedom."

Credit unions can hold fundraising days with members or staff on April 3 or throughout April, NCUF said. Donations will be split between NCUF and the state credit union foundation.

Fundraising ideas are included in a toolkit on the campaign website. It also includes other campaign resources such as optional pledge forms, sample newsletter articles, sign-up sheets, stickers, a flyer, a statement stuffer, wall pin-up templates, a YouTube video and Web buttons. Use the link.

Credit unions are also encouraged to leverage the campaign as part of a broader appeal to staff and members around financial education, said NCUF.

Donations will be split between NCUF and the credit union's state credit union foundation. Funds will support NCUF financial education programs such as Biz Kid$ and REAL Solutions and state credit union foundation financial education programs.

April is also National Credit Union Month. National Credit Union Youth Week, sponsored by the Credit Union National Association, will be April 21-27. This year's theme, "Savings Sleuth: Solve the Mystery," will draw in youth (and adults) with the fun of mystery and mustaches. CUNA offers a "Collect the Clues" kit of clue posters and activity sheets credit unions can pair up with prizes. Use the link.

CUNA also sponsors the National Youth Saving Challenge the entire month of April. The challenge rewards 10 savers each with $100 cash prizes.

Mergers Announced By CUs Across the Country

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MADISON, Wis. (2/15/13)--Several credit unions nationwide have recently announced mergers or intentions to merge.

They include:

  • Houston-based El Paso Corp. FCU (EPCFCU), with $121 million in assets, announced plans to merge into First Service CU in Houston, with $331 million in assets, First Service said in a press release Wednesday. The merger is tentatively scheduled to be completed this spring, pending regulatory approval and a passing vote by EPCFCU members. The combined organizations will continue as First Service CU and will have roughly $450 million in assets.
  • The boards of Mendo Lake CU (MLCU) in Ukiah, Calif., with $123.4 million in assets, and Fort Bragg (Calif.) Community FCU (FBCFCU), with $30.6 million in assets, have signed a memorandum of understanding for FBCFCU to merge into MLCU, pending a vote by FBCFCU members (lakeconews.com Feb. 8). MLCU will be the continuing credit union.
  • The $209 million asset National 1st CU in Santa Clara, Calif., requested approval last month from the California Department of Financial Institutions (DFI) to merge with San Jose (Calif.) CU, with $141 million in assets, according to the DFI's January Monthly Bulletin.
  • Milestone CU in Birmingham, Ala., with $20.2 million in assets, has merged into Tuscaloosa, Ala.-based Alabama CU, with $517 million in assets, effective Feb. 1 (The Birmingham News Feb. 10).
  • The $39.1 million asset Premier Source CU in East Longmeadow, Mass., has applied for permission to acquire Wemelco in Springfield, Mass., with $31 million in assets, according to the Massachusetts Division of Banks January Activity Report.
  • Preferred FCU in Greenville, Mich., with $51 million in assets, is proposing a merger with $88 million asset Grand Valley Co-op CU in Grand Rapids, Mich., according to Preferred FCU's website. The continuing entity would be Preferred CU. The merger is contingent upon membership and regulatory approval.