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New data breach hits another card processor

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NEW YORK (2/24/09)--Another payment processor has been hit with a data breach that is affecting credit unions and banks. It is the third major breach of a card processor since December and comes on the heels of what may be the largest data breach in history, the Heartland Payment Systems breach. Visa and MasterCard began notifying banks and credit unions Feb. 9 about credit and debit card accounts that were exposed in the most recent breach, involving a payment processor that they did not identify by name ( Feb. 23). The Pennsylvania Credit Union Association and Tuscaloosa (Ala.) VA FCU posted messages on their websites that a breach investigation is under way. Visa informed banks and credit unions that a vulnerability left potentially thousands of credit and debit card numbers exposed between February 2008 through January 2009, according to an alert from Tuscaloosa VA FCU. The report indicated the breach isn't as serious as the breach announced Jan. 20 by Heartland Payment Systems, but said that malicious software was placed on the processor's platform. There is no evidence so far that accounts were viewed or taken by the hackers, said the Tuscaloosa VA FCU. Computerworld (Feb. 23) said the notifications from the card companies indicated that as with the Heartland Payment Systems breach, no unencrypted personal identification numbers (PINs), card verification codes or customer Social Security numbers were exposed. It also didn't involve magnetic stripe data on the back of the cards. Alabama CU, also of Tuscaloosa, said Thursday it had been notified Feb. 17 of a breach at an unknown card processor. "We have been notified by Visa that a lengthy list of Visa ATM/debit card numbers was included as part of a data breach at an unknown vendor's location," said the credit union. The fraudulent transactions are primarily characterized as purchases of prepaid phone cards, prepaid gift cards, and money orders from Wal-Mart, and usually occur in $100 increments, said the credit union. As a result, Alabama CU decided to limit purchases on its cards to $99 per day. Replacement cards have been ordered for every card that is blocked. Cardholders will still be able to conduct PIN-based ATM transactions, up to $500 per day or the limit permitted by the ATMs.

CUs marketing campaign urges unbanking

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NORTH HAVEN, Conn. (2/24/09)--A credit union in Connecticut has developed an "Unbank" marketing campaign aimed at encouraging consumers to consider credit unions as a viable option to banks. The new campaign by Connex CU, a $337.4 million asset credit union based in North Haven, Conn., encourages people to go online and write about what frustrates them about banks ( Feb. 23). The message board, located at has compiled more than 40 posts, many of which criticize banks for issues ranging from subprime lending to fees. The credit union is also trying to take advantage of headlines that large national banks have received during the economic downturn to try to increase its market share. Tansley Stearns, vice president of sales and service at Connex, told the newspaper that the credit union sees it's different from banks, but not a lot of people are aware of the differences. With the campaign, the credit union hopes to underscore its advantages and clear up misconceptions about credit unions. The article outlines the credit union difference.

Gentile New Jersey CUs want corporate in future

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HIGHTSTOWN, N.J. (2/24/09)--A recently held New Jersey Corporate Credit Union Forum made one point: New Jersey credit unions want a corporate credit union network in the future. That message “came through loud and clear” from the more than 30 credit union leaders in attendance, wrote Paul Gentile, president/CEO of the New Jersey Credit Union League (NJCUL), in the league’s newsletter (The Weekly Exchange Feb. 16). The National Credit Union Administration’s (NCUA) Advanced Notice of Proposed Rulemaking on corporate credit unions addresses potential structural changes at corporate credit unions. Some significant structural changes are being considered, Gentile said. “For example, should the payments processing functionality of corporates be stripped out and housed in a national credit union service organization to segregate the investment and payments businesses? NCUA also is looking at the number of corporate credit unions. Does the credit union movement need 28 corporates in a business that benefits from scale?,” Gentile asked. “One idea that is being floated is a regional-based corporate system,” Gentile wrote. “Under this model, there would be much fewer, larger corporates serving defined fields of membership. Some corporates are advocating that competition, while not being completely eliminated, is reduced by calling on credit unions to ‘pay to play,’ so to speak, by choosing a primary corporate, which would require the CU to keep a certain amount of capital at that corporate.” Capital is an issue to be considered with a new corporate network. The system has been undercapitalized for years, but has performed so well it has never been an issue, Gentile added. “Another key area is investment authorities,” Gentle wrote. “Some believe corporates should be limited to what they can invest in, given our current situation. However, credit unions should consider investment authorities very carefully and not just look at our current situation. “If we significantly limit authorities, it will be difficult for our corporate system to deliver a competitive investment offering that will bring value to credit unions,” he added. “Some believe the focus should be more on concentration risk. Many don’t think enough attention was paid to concentration risk, no matter what the investments were rated.”

Program helps homebuyers purchase foreclosed properties

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NEW BEDFORD, Mass. (2/24/09)--Officials in New Bedford, Mass., are offering a mortgage program intended to help home buyers purchase foreclosed properties in the city with assistance from state and local entities and private bank and credit union assistance. Several credit unions are involved. The "Buy New Bedford" mortgage product offers 30-year, fixed-rate mortgages with below-market interest rates, lower down payment requirements, and the possibility of cost savings by skipping private mortgage insurance ( Feb. 21). New Bedford has hundreds of properties that have been foreclosed. Among the credit unions and banks participating in the program are two Fall River-based credit unions: Fall River Municipal Employees CU, with assets of $246.3 million, and St. Anne's of Fall River, which as $746.4 million in assets. Applicants for the loans must meet income limit guidelines set by MassHousing, a part of the Massachusetts Housing Finance Agency, a quasi-public state entity. Maximum income limits are $78,200 for families with one to two people, and $89,999 for families of three or more. They also must meet credit score guidelines. Some of the down payments are as low as 1% to 3%, and interest rates are one-fourth to one-half percentage point below market rates. The program provides education and foreclosure prevention counseling and other programs to support affordable home ownership.

12 Missouri CUs tout benefits at state Capitol

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JEFERSON CITY, Mo. (2/24/09)--Missouri lawmakers learned about the benefits of credit unions at Credit Unions in the Community Day Feb. 18 at the Missouri Capitol Rotunda.
From left, Treina Lind, St. Louis (Mo.) Community CU, talks with State Sen. Robin Wright-Jones (D-5) at Credit Unions in the Community Day Feb. 18 at the Missouri Capitol Rotunda.
Twelve Missouri credit unions displayed table topics that showed how credit unions help their members and their communities (The Missouri difference Feb. 20). “The lawmakers were very interested in payday loan alternatives considering the current financial condition,” said Heather Misuraca, St. Louis-based Gateway Metro FCU branch manager. “They took literature from our table to learn more, and most of them thanked us for coming.” The uniqueness of credit unions was also touted by lawmakers. Columbia-based Tigers CU Business Development Officer Laura Royse was introduced by State Rep. Mary Still (D-25) on the House floor during session. Tigers is one of only four student-run credit unions in the country, Still said.
Mary Still (D-25), left, introduced Laura Royse, Tigers CU, Columbia, on the Missouri House floor to recognize Tigers as one of only four student-run credit unions in the U.S. (Photos provided by the Missouri Credit Union Association)
“Rep. Still noticed the Mizzou sign at my table and wanted to share the concept of a student-run credit union with her fellow lawmakers,” Royse said. “It was exciting to be introduced during session and to spread the word about credit unions.” Credit Unions in the Community Day participants and topics included:
* Anheuser-Busch Employees’ CU, St. Louis--Serving the Underserved; * CommunityAmerica CU, Kansas City--Financial Makeover; * First Community CU, Chesterfield--Savings Programs for Children; * Gateway Metro FCU, St. Louis--Payday Loan Alternatives; * Mazuma CU, Kansas City--Identity Theft; * Mid Missouri CU, Fort Leonard Wood--Helping the Military Community/Homes for Our Troops; * Neighbors CU, St. Louis--Financial Education; * River Region CU, Jefferson City--Partnerships with Schools; * St. Louis (Mo.) Community CU--Volunteer Income Tax Assistance /Get Checking/REAL Solutions; * Tigers CU, Columbia--Student-Run Credit Unions; * United CU, Mexico--Budget and Financial Counseling/ACCEL; and * Vantage CU, Bridgeton--Scholarships;
Additional table topics included Biz Kid$, the Children’s Miracle Network, the Credit Union Difference and National Endowment for Financial Education.

McCormack receives AACUL Farley Leadership Award

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HARRISBURG, Pa. (2/24/09)--Jim McCormack, president/CEO of the Pennsylvania Credit Union Association (PCUA), was honored Saturday with the Eugene H. Farley League Leadership Award, sponsored by the American Association of Credit Union Leagues (AACUL).
Jim McCormack, president/CEO of the Pennsylvania Credit Union Association, is joined by previous Eugene H. Farley Leadership Award winners, from left: Dick Ensweiler, 2006; Carroll Beach, 2002; Gary Wolter, 2003; McCormack; Mike Mercer, the first award recipient, 2001; and Eugene Farley (Photo provided by the Pennsylvania Credit Union Association).
The award was presented during an AACUL reception in Washington, D.C., prior to the CUNA Governmental Affairs Conference (Life is a Highway Feb. 22). McCormack was joined by all nine members of the PCUA board of directors, and staff who were in Washington, D.C., for pre-GAC meetings. “I’m surprised and honored to receive this award,” said McCormack, “But this award goes to all of the credit unions in Pennsylvania, association board members past and present, and the wonderful staff of our association.” The award recognizes the efforts of credit union leagues or associations that demonstrate the characteristics of Eugene H. Farley, who retired in December 1999 after 40 years of service to the Virginia Credit Union League.

NJCUL Corporate CU forum reveals survey results

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HIGHTSTOWN, N.J. (2/24/09)--The New Jersey Credit Union League (NJCUL) highlighted results from an online survey of its membership on corporates at its Corporate Credit Union Forum Feb. 19.
New Jersey Credit Union League (NJCUL) Chairman Shawn Gilfedder addresses attendees at NJCUL’s Corporate CU Forum. (Photo provided by the New Jersey Credit Union League)
The survey focused on National Credit Union Administration’s (NCUA) Corporate Stabilization Plan and NCUA’s Advanced Notice of Proposed Rulemaking (ANPR), which focuses on the restructuring of the corporate credit union network (The Weekly Exchange Feb. 16). The session was attended by 30 credit union leaders. NJCUL Chairman and McGraw Hill Employees FCU President/CEO Shawn Gilfedder led the session, explaining the survey results and presenting some structural changes to the corporate network for leaders to consider. Some of the survey findings regarding the stabilization plan:
* Roughly 38% of respondents said NCUA’s plan would be more acceptable to them if they knew it would result in corporate restructuring and new safeguards to prevent a repeat occurrence of the system’s losses; * The most popular alternatives to NCUA’s plan were: Passing legislation that would allow Central Liquidity Facility funding to go directly to corporates, assessing the National Credit Union Shared Insurance Fund premium in stages, and expanding the Credit Union System Investment Program to make it more attractive to credit unions; * The philosophical question of whether to accept government funds showed a strong divide with 27.5% strongly in favor of the credit union movement accepting Troubled Assets Relief Program funds, while 23.5% were strongly against it; * Nearly 40% felt strongly that taking federal funds would put the credit union tax exemption in jeopardy; * About 71.2% of respondents were in favor of allowing NCUA to bypass Generally Accepted Accounting Principles and pull capital directly from undivided earnings or regular reserves so this event doesn’t impact current performance; and * Some 58.8% said there wasn’t enough capital in the natural person credit union system to absorb corporate losses and fund future premium assessments.
The second part of the survey addressed the restructuring of the corporate system, which is the focus of NCUA’s proposed rulemaking notice. Some of the key findings:
* Nearly 77% of respondents said they still have confidence in their corporates; * Respondents were split nearly 50/50 on the potential of a corporate system broken into two charters: one for corporates that handle payment processing and one for those that handle investments; * 58.8% favored limiting corporates’ fields of membership to defined geographic regions; * 58.3% did not believe corporates’ primary role going forward should be payments processing; * 60% said they still will look to corporates for investments after this or any other NCUA plan is complete; * On the question of whether corporates should consolidate, response was 55.1% in favor and 44.9% against it; * 58.7% said there is a future role for U.S. Central; * 72.3% of respondents said they did not want to see corporates fall under the regulatory purview of Treasury; * 87.8% of credit unions surveyed said they plan to pursue investment options outside of the corporate network; and * 85.7% said they did not plan to pursue payment processing options outside of the corporate network.
NJCUL will continue to update its membership on the latest developments with the corporate system. NJCUL will focus on key aspects of NCUA’s Advanced Notice of Proposed Rulemaking and take a position on those areas. The league will then distribute that to its membership for comments. The ultimate goal is to provide an effective ANPR comment letter to NCUA that summarizes the consensus of New Jersey credit union leaders, NJCUL said.

Ralph Nader CUs an island of calm in casino capitalism

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WASHINGTON (2/24/09)--Consumer advocate and three-time presidential contender Ralph Nader and Credit Union National Association (CUNA) senior economist Mike Schenk explain how credit unions have avoided the financial crisis caused by banks in an article in Counterpunch (Feb. 23), a political newsletter. The article, written by Nader, begins: "While the reckless giant banks are shattering like an over-heated glacier day by day, the nation's credit unions are a relative island of calm largely apart from the vortex of casino capitalism." Credit unions didn't invest in speculative derivatives or offer people "teaser rates to sign on for a home mortgage they could not afford," Nader said, adding that credit unions are well-capitalized because they do not have an incentive to go for high-risk, highly leveraged speculation to increase stock values. He quotes CUNA's Schenk, who explained credit unions are portfolio lenders, which means they hold on to the portfolios most of the loans they originate. Although the deepening recession means has affected their surplus and deteriorated their asset quality a bit, most credit unions can live with those conditions without suffering dire consequences, Schenk said.. Nader also discusses the difference between natural person credit unions and corporate credit unions and notes that the credit union model can provide "contemporary lessons" such as "being responsive to consumer loan needs and down to earth with their portfolios." He noted little is being written about how credit unions' regulation, philosophy and behavior have largely escaped the current economic catastrophe. To view the article, use the link.

CU System briefs (02/23/2009)

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* LANSING, Mich. (2/24/09)--The Center for Financial Health moved its operations to the new Lansing headquarters of the Michigan Credit Union League (Michigan Monitor Feb. 23). The center continues to operate as a separate entity. It works with credit unions, other non-profits, banks, and governmental and legislative entities to provide homebuyer education, financial management classes and foreclosure prevention counseling. It has one full-time housing counselor and one part-time employee. Beth Troost, the league's financial education coordinate, will use part of her time to oversee the center as executive director. The league said it hopes to extend the center's services to more credit union members … * JACKSONVILLE, N.C. (2/24/09)--Seventeen-year-old Jacquelyn Lockard found quite a surprise in her account at Marine FCU--an extra $2.2 million dollars. She informed her father, and they called the Jacksonville, N.C.-based credit union to report the mistake. A credit union employee manually entered the wrong number of the huge deposit from the Internal Revenue Service, sending the funds into the teen's account instead. The credit union will give Lockard two days' of dividends--which will total about $125--on the funds as a reward for reporting the mistake (News 14 via Associated Content Feb. 20) … * SALEM, Mass. (2/24/09)--A veteran of the Iraq War was sentenced to three to six years in prison, plus two years of probation Friday after pleading guilty to robbing St. Jean's CU four times during seven weeks in 2008 to finance his drug addition. Derek M. Christiansen, 35, of Lynn, Mass., was charged in robbing the Lynn-based $114.5 million asset credit union on Feb. 7, March 5, March 18 and March 24. He was arrested March 24 after a police officer recognized his hat from a surveillance camera at the credit union (The Daily Item Feb. 20) … * BEAUFORT, S.C. (2/24/09)--Another new scam involving bogus checks from credit unions has surfaced. In the newest scam, a secret shopper service is mass mailing to individuals cashier's checks purporting to be from MCAS Beaufort FCU, a $75.7 million asset credit union in Beaufort, S.C. The checks, written for $2,940, are to pay the recipient for being a secret shopper. The checks are not from MCAS Beaufort, the credit union told the South Carolina Credit Union League …