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IWalletPopI IL.A. TimesI give CUs thumbs up on low fees

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MADISON, Wis. (4/6/11)--Articles featured Sunday in two prominent media outlets--AOL's WalletPop and the Los Angeles Times--gave a thumbs up to credit unions' low checking fees and referred readers to websites to locate a credit union. Personal finance columnist Liz Weston, in her question-and-answer money column in the Los Angeles Times, published a letter from someone who opened a free checking account at a bank--only to see the bank acquired later by another bank. The new bank is charging a $10 monthly service fee. The teller told the reader the huge bank doesn't have to "justify anything we do." Weston's answer: "Goodwill doesn’t count for much when banks are trying to maximize revenue." She noted "checking account fees are making a big comeback lately" because regulators are restricting one of banks' big sources of incomes: bounce fees. As a result, banks are experimenting with other fees. But, the reader has options, said Weston, who advised, "you might want to consider moving your accounts to another bank or a credit union. Credit unions are member-owned financial institutions, and many still offer free checking or have lower fees for low-balance accounts." She referred the reader to a website to locate a credit union. In AOL's WalletPop, an article, "Fed Up With Checking Fees: Try a Small Bank," notes research that indicates 51% of respondents to an online pool would shop for another bank if their bank added a fee for checking accounts. Consumers have alternatives to large banks including credit unions, the article said. "In addition to small banks, we've also sung the praises of credit unions in the past, since they also tend to have lower and fewer fees than large banks," said WalletPop. "To find a credit union near you, check out the website of the Credit Union National Association. While credit unions are membership organizations, in many cases you only need to work, go to school or worship in a particular region to be eligible for membership," the article added. To view the articles, use the links.

Costs to protect member data are increasing

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MOUNTAIN VIEW, Calif. (4/6/11)--For the fifth consecutive year, the cost of data breaches grew, with the average organizational cost of a data breach increasing to $7.2 million--an average cost of $214 per compromised record, compared to $204 in 2009, according to a new study. The 2010 Annual Study: U.S. Cost of a Data Breach, released by Symantec Corp. and the Ponemon Institute in March, also found that for the second year the need for organizations to respond quickly to breaches helped drive the costs associated with the breaches higher. Credit unions have been hit with the costs of data breaches that have occurred at other organizations. Some have even sued the companies breached to recoup the costs of replacing compromised cards. The findings that costs are rising are no surprise, but remain a reminder of the importance of protecting members' data. The study is based on data breach experiences of 51 U.S. companies from 15 industry sectors, including the finance and retail sectors. The breaches ranged from 4,200 to 105,000 compromised records. Among the key findings:
* Rapid response to data breaches costs companies 54% more per record than at companies who respond more slowly. Forty-three percent of companies notified victims within one month of discovering the breach, up seven points from 2009. In 2010, these quick responders had a per-record cost of $268, up 22% from 2009. Companies that were slower to respond paid $174 per record, down 11%. * Malicious or criminal attacks are the most expensive and are on the rise. In this year’s study, 31% of all cases involved a malicious or criminal act, up seven points from 2009. They averaged $318 per record, up 43% from 2009. * Negligence remains the most common threat. The number of breaches due to negligence edged up one point to 41%t and averaged $196 per record, up 27% from 2009. This steady trend reflects the ongoing challenge of ensuring employee and partner compliance with security policies, said Ponemon and Symantec. * Companies are more vigilant about preventing system failures. System failure dropped nine points to 27% in 2010. This trend indicates organizations may be more conscientious in ensuring their systems can prevent and mitigate breaches through new security technologies and compliance with security policies and regulations. * Data breach costs continued to rise. The average organizational cost of a data breach this year increased to $7.2 million, up 7% from $6.8 million in 2009. Total breach costs have grown every year since 2006. Data breaches in 2010 cost companies an average of $214 per compromised record, up $10 (5%) from last year. * Encryption and other technologies are gaining ground as post-breach remedies. However, training and awareness programs remain the most popular, with 63% of respondents using training and awareness programs after data breaches--down four points from 2009. Encryption is the second-most implemented preventive measure as a result of a data breach, with 61%. Both encryption and data loss prevention solutions have increased 17% since 2008.
According to Idrees Rafiq, assistant vice president of Financial and Technology’s IT Consulting, a department of Credit Unions Resources Inc. in Texas, companies experiencing large security breaches face regulatory, reputation and legal risks. “As we saw with breaches in the past--for example, Homeland--not only were there nationwide newspaper articles and genuinely 'bad' press, numerous lawsuits were filed and regulatory authorities had no choice but to get involved in the matter,” Rafiq told the Texas Credit Union League (LoneStar Leaguer (April 5). The overall trend shows that the criticality of data protection continues to rise along with the cost. Updating security policies, software and hardware to protect data from cyber-attacks is crucial as the threat to businesses and consumers increases and becomes more visible, he said. Rafiq warned credit unions to be diligent through prudent security practices, staff education, consistently updating and changing system software and most importantly, monitoring and protection of member data. He also reminded credit unions that National Credit Union Administration, in its Rule 748, provides guidelines for information security and protection of member data. He ecommended retaining an experienced, professional third-party vendor to perform a thorough security risk assessment of the credit union’s information system and a security evaluation. Symantec recommended organizations implement the following best practices, whether or not they have suffered a data breach:
* Assess risks by identifying and classifying confidential information; * Educate employees on information protection policies and procedures, then hold them accountable; * Deploy data loss prevention technologies that enable policy compliance and enforcement. * Proactively encrypt laptops to minimize consequences of a lost device; and * Integrate information protection practices into business processes.

CUES sues Digital University over URL usage

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MADISON, Wis. (4/6/11)--The Credit Union Executives Society (CUES) has filed suit in a U.S. District Court in Madison, Wis., against Digital University Inc. and an individual, Keith Thygerson, over the university's continued use of CUES' trademarked internet addresses (URLs) after the two companies terminated a contract for online training services in March. Madison, Wis.-based CUES provides conferences, seminars, online learning and executive education to credit unions. It markets under the CUES and CUES Online University trademarks, according to its complaint filed in Friday in U.S. District Court for the Western District of Wisconsin. The society contracted La Jolla, Calif.-based Digital University on Oct. 3, 2008, to provide online content for credit union staff and maintain software programs required to deliver CUES' Online University program. CUES retained the ownership of the trademarks and URLS, including cuesu.org, cuesuplus.org, cuesupro.org, cuesu.net, and cuesuplus.net, the complaint said. When the agreement was terminated March 15, the defendants continued to use the URLs in violation of the agreement and have not transferred the URLs back to CUES, said the complaint. On March 25, Kenneth Thygerson, president of Digital told CUES the university had no control over the cuespro.org and cuesuplus.org, which were registered "in the name of an individual who has no obligation to sell or transfer them to Digital University," said the document. Digital University is identified as the registrant of three of the URLs. Thygerson's son, Keith Thygerson, is identified as the registrant of the cuespro.org and cuesuplus.org URLs, and that registration lists the university's corporate address, said the complaint. CUES said Digital's use of the URLs is a "false designation of origin, false description, and false representation that Digital University's services are provided by, sponsored by, authorized by, or affiliated with CUES," and that the actions "are likely to cause confusion or mistake among purchasers" and amount to trading on CUES' goodwill. It alleges Digital University engaged in trademark infringement, unfair competition, cyber squatting, fraudulent representation, and breach of contract. It is seeking a judgment, injunctions to stop the use of the URLs, their immediate transfer back to CUES, and statutory and punitive damages.

CU System briefs (04/05/2011)

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* RANCHO CUCAMONGA, Calif. (4/6/11)--CO-OP Financial Services announced its patronage pool totals $20.2 million for fiscal year 2010. This year's dividend brings its total patronage distribution to shareholders to $212.1 million since it became a cooperative in 1996. Other milestones include: realizing $64 million in surcharge replacement savings last year through its investment in access to ATMs in retail locations such as 7-Eleven and Costco; saving clients $18.4 million by cutting operational costs, cutting prices, providing clients promotional materials and support, and absorbing infrastructure costs to upgrade the company's telecommunications platform for all CO-OP services; processing more than two billion payment transactions via CO-OP Network, third party ATM, PIN/Signature debit and credit card; and making more than 71 million shared-branching transactions. CO-OP Financial Services is also now processing more than 200,000 transactions per month via CO-Op Mobile and CO-OP My Deposit … * TACOMA, Wash. (4/6/11)--A former office manager and teller at Tacoma-based KBR CU was sentenced to 33 months in prison for embezzling $440,000 from the credit union by a U.S. District judge. Edgar Hugh Kelly, 37, who had worked for nearly 13 years for the credit union, also was sentenced to three years of supervised community service time and ordered to pay restitution. The embezzlement was discovered in 2010 after an internal audit found false records hiding a loss of funds from the credit union's accounts with other banks. He pleaded guilty in November to theft from a lending, credit or insurance institution (thenewstribune.com (April 5) … * LA SALLE, Ill., (4/6/11)--Angela E. Pena, 50, of Peru, Ill., a former branch manager of American Nickeloid Employees CU in LaSalle, pleaded guilty March 31 to using her position to illegally inflate her home loan. She was charged with one count of financial institution fraud and faces four to 15 years in prison. Pena had been approved for a $86,900 loan, but the document later was altered to $250,000. Pena had no loan approval except for unsecured personal loans up to $5,000. The theft allegedly financed a gambling habit (newstrib.com March 31) …

Members are keeping their autos longer

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DULUTH, Ga. (4/6/11)--Credit union members in Georgia are holding on to their cars longer, according to a recent survey conducted by the Georgia Credit Union Affiliates, and nationwide consumer lending data indicates that trend may be affecting credit unions. The Georgia survey indicates 77.1% of respondents reported that they are keeping their vehicles longer to avoid the cost of purchasing a new or used vehicle. The survey included responses from more than 4,000 Georgia credit union members and aggregated data from credit unions statewide. New-auto loan balances at credit unions nationwide have been declining since 2007, according to the Credit Union National Association (CUNA). The balances decreased by 16.5% in 2010. That’s a faster rate of decline than the 7.9% reported in 2009. Used-auto loans rose by 3.4% in 2010, a slightly slower rate than the 3.9% increase in 2009. Auto loans--particularly new-auto loans--also account for a lower overall share of loans than in previous years, according to CUNA data. Overall, autos composed about 29% of credit union loan balances in 2010, down slightly from 30%. But new-automobile loans accounted for 11% of overall loans, down from 13% in 2009. By comparison, in 2006 auto loans represented about 35% of credit unions’ overall loan portfolios, with new autos comprising about 18% of that total.

Filene First meeting of innovators lab held

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WASHINGTON (4/6/11)--The Center for Financial Services Innovation (CFSI) held the first meeting Thursday and Friday in Washington, D.C., of its Financial Capability Innovator Development Lab. The development lab initiative will support a small group of innovators through peer learning opportunities to strengthen their capacity, sophistication and efficiency in delivering solutions that promote the financial capability of underserved consumers. The CFSI’s Financial Capability Innovation Fund is providing $1.5 million in grants to five nonprofit-led projects designed to help low-income, underserved consumers better manage their finances. The Filene Research Institute and Grow Brooklyn/Brooklyn (N.Y.) FCU are two of the five recipients of grants from CFSI. “It was a kickoff week in which the funders were introduced to the five grantees in the program,” Denise Gabel, Filene Research Institute chief innovation officer, told News Now. “The development lab experience will be two years long and have a pretty aggressive research component. There should be a good cross-pollination of ideas.” Gabel attended the meeting with Mark Meyer, Filene CEO. Filene Research Institute will test Lift, a Filene i3 idea, to determine if rewarding consistent timely loan payments with interest rate reductions will leader to better payment behavior. Grow Brooklyn/Brooklyn (N.Y.) Cooperative FCU and online personal financial management software firm Piggymojo will use goal visualization, social dynamics and mobile technology to help low-income savers turn impulse buys into impulse saves. CEO Samira Rajan represented $11 million-asset Brooklyn Cooperative FCU at the meeting. On Friday, all five grantees met with invitees, dignitaries and policymakers at the Russell Senate Building in Washington, D.C. “Everyone there shares an interest in the financial capabilities of Americans and in raising up those capabilities,” Gabel said. Two U.S. legislators stopped by--U.S. Sen. Daniel K. Akaka (D-Hawaii), and U.S. Rep. Sheila Jackson Lee (D-Texas), she added. “A key theme was how to look at financial capabilities differently, because financial education alone is not working. This group is trying to do some things differently, to link the education with the consumer decisions, for instance at the time of a purchase. “No action was taken at the meeting,” Gabel said. “We just got the ball rolling, got the infrastructure set to start to the projects. Filene will begin its project next week, and will put out a call for credit unions to collaborate.” The CSFI lab participants will meet at least twice a year, with the next meeting scheduled for June. Also, participants will informally meet to see each other’s projects down the road, Gabel said. Other grantees and their projects are:
* Consumer Credit Counseling Service of Delaware Valley, which will test whether social commitments and text alerts can help consumers reduce debt; * Co-opportunity Inc., which will leverage technology via a new online platform to enhance the effectiveness and scale of its volunteer budget coaching program; and * Mission Asset Fund, which will franchise its Cestas Populares program, a peer loan coupled with product-specific, peer-led education, to help immigrants build credit and manage credit wisely.
CFSI selected the five projects from among 246 applicants totaling more than $67 million in requests. Organizations from 44 states responded to the request for proposals CFSI released in September.

Future Catalyst Corporate completes 35 town hall meetings

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DULUTH, Ga. (4/6/11)--Management from Georgia Corporate FCU and Southwest Bridge Corporate FCU Friday completed its town hall tour to spread word about their proposal to consolidate into a new corporate, called Catalyst Corporate. During March, the two corporates hosted 35 in-person meetings in eight states--Georgia, Texas, Oregon, Washington, Oklahoma, Louisiana, Arkansas and New Mexico--and two webinars. More than 950 individuals from about 470 credit unions attended. "The attendees had thoughtful questions that demonstrated how much consideration had already gone into their decision about capitalization," said Dianne Addington, CEO of Plano, Texas-based Southwest Bridge Corporate. "By and large, the response was very positive--strengthening our confidence that members will support the plan." According to Greg Moore, CEO of Duluth, Ga.-based Georgia Corporate, "we have kept in close contact with our member credit unions about the evolving plans for months, so members already were well-informed. But the Town Hall meetings were invigorating because we were able to talk to our members about the details and share our excitement about the upcoming consolidation." Moore acknowledged that some credit union leaders are understandably apprehensive about what the consolidation and other changes on the horizon will mean. The meetings provided an opportunity to answer questions "and provide reassurance that the consolidation will have a positive impact on the service and support members have come to expect. I believe that many final reservations were eliminated through these discussions," he said, adding, "the more credit unions know about our strategy, the more likely they are to support it." Addington noted that "this does not mark the end of our robust efforts to ensure credit unions have all the information they need to understand the new business model--we will be reaching out to them at chapter meetings, through correspondence and one-on-one as often as possible." The two corporates announced their intention to consolidate late in 2010. The planned consolidation date is Aug. 1.

Mich league updates CU School Branch Handbook

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LANSING, Mich. (4/6/11)--The Michigan Credit Union League (MCUL) has updated its online “Credit Union School Branch Handbook.” The updated handbook is a how-to guide for establishing a student credit union branch. It was compiled by members for MCUL’s Financial Education Council with experience in setting up and running student credit unions. The handbook was created in 2003. In 2010, the online link was accessed more than 17,000 times, according to the Michigan Monitor (March 28). The handbook contains step-by-step details and advice, including chapters on establishing a partnership for education, setting up and marketing school branches and an appendix with forms and documents, said the league. “Michigan is a leader in school-based credit unions,” said David Adams, MCUL CEO. “In-school credit unions help teach youngsters about the importance of saving and how to be a good financial consumer.” Michigan leads the nation as the state with the most student credit union branches, with 370 operated by 58 credit unions, according to the Credit Union National Association. Michigan has four times the number of in-school credit unions as the state with the next highest total, Wisconsin, with 86. The Credit Union National Association offers an online directory of credit unions with in-school or youth center branches, including a guide for creating youth program. For more information, use the link.

Wash. state savings lottery bill passes House

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OLYMPIA, Wash. (4/6/11)--Washington state’s House of Representatives Friday passed a bill for a prized-linked savings program that will allow credit unions and banks to offer savings accounts linked to prize drawings, as is the case in four other states. Because of a minor amendment to the bill in the house, it is being sent back to the Senate, which approved the bill earlier. It then would go on to the governor to be signed into law. “We held up the bill for a couple of days to vet an additional floor amendment designed to clarify an amendment offered--and approved--in committee that requires savers to keep their funds in the account for a year,” Stacy Augustine, senior vice president and general counsel for the Northwest Credit Union Association, told News Now. “[Wash. State Rep.] Gary Alexander’s (R-20) intention was to keep people from gaming the system. Our floor amendment clarified that savers don’t need to keep their funds in the account for a full year to win the smaller, monthly prizes, just the annual grand prize,” she said. The bill was heartily approved in both the House and the Senate, Augustine added. “There were a couple of no votes in both houses from legislators who traditionally express concerns about bills that might expand gambling,” she said. “We’ve met with most of them to allay their concerns since.” The association is not anticipating any real problems in the bill becoming law, Augustine added. “I think there were two real keys to getting the bill passed,” she said. “Making sure legislators don’t perceive it as an expansion of gambling, and making sure the other financial institutions are included so that they don’t feel like credit unions are just creating another program to ‘steal’ their customers. Honestly, I don’t think that other financial institutions will be terribly interested in offering the program, but it was important to include them so that they didn’t feel excluded from it. “Amending any state law that could be perceived as gambling is always a tricky venture, so the association is very pleased that the bill has been approved by both the Senate and the House,” Augustine added. “We’ll now wait for the Senate to concur with the amendments made in the House, and look forward to having Gov. Christine Gregoire’s signature on the bill soon.” The bill has had the full support of the Washington Asset Building Coalition and the Doorways to Dreams Foundation, Augustine said.

Fin lit survey Consumers ready to spend lack finance skills

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WASHINGTON (4/6/11)--Consumers are ready to begin spending again, reversing a trend of the past few years, according to the results of the National Foundation for Credit Counseling’s (NFCC) fifth annual Financial Literacy Survey released this week. But those same consumers admit they don’t trust their judgment when it comes to managing their finances. About 26% of U.S. adults report they are spending more than they did a year ago. At the same time, more than 40% of Americans grade themselves as C, D or F in their knowledge of personal finance, acknowledging that they lack the know-how to make sound financial decisions, said NFCC. “An admitted lack of personal finance skills coupled with increased spending is a recipe for financial disaster,” said Gail Cunningham, spokesperson for the NFCC. “The good news is that just over three in four, 76%, recognize that they could benefit from the advice of a financial professional. Hopefully, this indicates that Americans will take the steps necessary to improve their financial literacy instead of falling back into the financial sins of the past.” Credit card debt continues to plague consumers. Although more than two-thirds of adults pay for most purchases with cash or debit cards, two in five still carry monthly credit card balances. Consumers’ lack of sound judgment in regard to credit was reflected in recent comments made by the Amy Jo Johnson of the Credit Union Association of the Dakotas, Mid-America to The Bismarck Tribune (April 5). Johnson said her association is seeing more consumers go into debt simply because they don’t know any better. Consumers would make better choices if they were taught financial literacy in school, Johnson added. Credit unions nationwide are participating in financial education activities in recognition of April as Financial Literacy Month. The NFCC is offering the following initiatives:
* New online counseling request form. Recognizing the increased demand for counseling via the Internet, the NFCC retooled its online counseling request mechanism. * Debt Free Pledge campaign. During April, the NFCC is collecting pledges from consumers across the nation to become debt free. Consumers can visit the NFCC website to take the pledge, view the materials and find tips on becoming debt free. * Shred Your Debt Day. A recent Equifax study identified cities nationwide whose populations had the highest debt levels relative to their income. Wilmington, N.C. topped the list. In conjunction with Cintas Document Management and Equifax, the NFCC will host a series of monthly Shred Your Debt events in the cities identified as most in need of financial education, launching with the kick-off event at the Consumer Credit Counseling Service in Wilmington on April 30. * Shred Your Debt Contest. Cintas Document Management, Equifax and the NFCC are hosting an essay contest, with the winner receiving $2,000 to pay down their existing debt, a money coaching session with a personal-finance expert, the Equifax Debt Wise product and ongoing credit counseling with an NFCC Member Agency. Contestants submit an essay explaining their financial situation, and why they should win. * USA Today personal finance Q&A. The NFCC is teaming with USA Today to answer reader personal finance questions during the last week of April. Trained and certified credit counselors from NFCC member agencies will assist consumers with their financial concerns. * National Poster Contest winner announcement. Each year the NFCC hosts the Be MoneyWi$e National Financial Literacy Poster Contest to introduce school-aged children to financial literacy and offer them an opportunity to express their concepts through artwork. This year close to 1,800 students from grades three through 12 submitted posters around the theme of “Be a Superhero! Save Money!” The national winner will be announced and honored at the 2011 Jump$tart Coalition Awards Dinner in Washington, D.C. on April 13.
The Credit Union National Association is sponsoring the National Savings Challenge this month and National Credit Union Youth Week, April 17-23. For more information, use the link.