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Court dismisses Heartlands acquiring banks from breach suit

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HOUSTON, Texas (4/17/11)--A U.S. District Court in Houston, Texas, has dismissed two acquiring banks as defendants in a lawsuit brought by four credit unions and a bank related to the 2008-2009 Heartland Payment Systems' data breach. However, the court suggested that the complaint against one bank be transferred. U.S. District Judge Lee H. Rosenthal of the Southern District of Texas rendered the decision on March 31. Heartland's two acquiring banks--Heartland Bank and KeyBank N.A.--process payments for the merchants who make credit-card sales. They hired Heartland as their processor. In a credit card transaction, acquiring banks contact the card-issuer banks to clear the transaction if there is enough credit in the consumer's account. The four "issuer banks" who brought the suit are Lone Star National Bank, N.A.; PBC CU, based in West Palm Beach, Fla.; O Bee CU, based in Tumwater, Wash.; Seaboard FCU, Bucksport, Maine; and Pennsylvania State Employees CU, Harrisburg, Pa. They sued the banks for breach of contract, breach of fiduciary duty, and negligence based principally on the banks' alleged failure to monitor the security of the card processing system's database and ensure the card processor complied with the Payment Card Industry Data Security Standards. Heartland Bank, based in Clayton, Mo., and KeyBank, based in Ohio, both moved to dismiss the case for failure to state a claim on which relief can be granted. Heartland Bank also moved to dismiss for lack of personal jurisdiction in the state of Texas. The court granted Heartland's motion to dismiss on the first point, but concluded "that transfer [of the case from Texas to another court jurisdiction], not dismissal, is the appropriate remedy." Ohio-based KeyBank's motion was also granted, "with prejudice as to the negligence claim and without prejudice as to the remaining claims." The breach, which was announced by New Jersey-based Heartland Payment Systems in January 2009, is the largest data breach on record, with more than 130 million credit and debit cards compromised. As a result, many financial institutions, including credit unions, had to reissue their member/customers cards to prevent fraudulent charges. Many saw fraudulent charges on cards. Multiple lawsuits prompted by the hacking were consolidated into two tracks: one for consumers whose card numbers were accessed, and one for financial institutions that issued the cards that were compromised in the hacking. The financial institution track lawsuit involves two complaints: one against Heartland Payment Systems, and one against the two acquiring banks. A status conference on the case was scheduled for April 18.

Federal shutdown CUs stand ready to assist members

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MADISON, Wis. (4/8/11)--Credit unions nationwide are preparing to serve members with urgent financial needs in the event of a federal government shutdown at midnight ET today. Federal agencies cannot operate without spending authority provided by Congress, and that authority expires tonight for most agencies. The shutdown could keep as many as 800,000 federal employees from working--and from receiving paychecks at least temporarily. The National Credit Union Administration (NCUA) Thursday issued a letter urging credit unions to remain ready and flexible to address the financial needs of federal workers and other individuals affected by any impasse on federal spending. For more details, please use the link. Credit unions reported to the Credit Union National Association (CUNA) Thursday that they are well-prepared to meet members’ needs. “We continue to receive reports of credit unions readying skip-a-payment options, temporary 0% financing and other special programs to help the federal employees in their membership cope if there is a government shutdown,” said CUNA President/CEO Bill Cheney. “Credit unions are owned by the members they serve. This is a great example of credit union philosophy in action--stepping up to help their members when their members need them most.” Labor Dept. FCU, Washington, D.C., is offering members 12-month loans up to $3,000, with the first 60 days interest free in the event of a government shutdown. “We call it a payroll disruption loan,” CEO Joan Moran told News Now. “If payroll does get stopped, members can keep their day-to-day living expenses going. Once payroll gets started, they can pay us back. Hopefully, without interest.” Moran said members have contacted the credit union, mainly to inquire about access to service if the government shuts down. The credit union’s Web home page features a red banner with bold white lettering, “In case of a government shutdown, we’ve got you covered.” One click away is a list of access options that includes e-mail, courtesy pay, online banking and shared branching. The Department of Labor has given credit union employees permission to access the Frances Perkins Building if there is a shutdown so the credit union can provide members with essential services. As the CEO of a credit union that serves government employees, Moran said her credit union is prepared for a shutdown. “We’ve been watching this for months,” she said. “I think we first started talking about it in January. We’ve been building up liquidity so we can provide funding however it’s needed.” At HEW FCU, Washington, D.C., any loan payments made by government payroll will be skipped for the next payroll period if there’s a shutdown, according to CEO Kathy Geary, who said the credit union would re-evaluate the policy before the next payroll. Members with direct payroll deposits can also obtain interest-free loans and pay them back when they resume their jobs. If they wish to carry the loans longer, the terms are 3% for three months or 4% for six months. Members were relieved when they learned the credit union was providing some financial relief, Geary said. “A lot of them said, ‘A bank wouldn’t do this for us,’” she added. Geary said HEW FCU was much better-prepared because the credit union went through another government shutdown in 1995-96. “We pretty much took out the boxes from 15 years ago, dusted them off and looked at what we could apply to members today,” Geary said. Cabrillo CU of San Diego is offering 0% loans to members on direct deposit from the federal government. Loans not paid when the furlough is lifted convert to 12-month loans with 7% annual percentage rate (APR). Cabrillo CEO Robin Lentz said her credit union had not received many inquiries as of Thursday morning, but she expected that to change as the deadline approaches. Like HEW FCU, Cabrillo CU went through a government shutdown in 1995-96. Lentz is most concerned about the impact the shutdown will have on her staff, which could be inundated with urgent requests from stressed out government employees. “We have more automation now, which helps, but last time we were overwhelmed,” Lentz said. Frederick. Md.-based COMSTAR FCU’s contingency plans for the federal government shutdown/furlough include: loan payment modifications, such as temporarily reduced payments, skipped payments or interest-only payments; a low-rate shutdown/furlough loan to tide workers and their families over until paychecks resume; and additional staffing at branches that will remain open during a shutdown/furlough. The credit union also is offering a furlough information line staffed with trained personnel to assist workers with specific questions and problems. Jennifer Stillrich, marketing and training manager at COMSTAR FCU, said it’s helpful that some of the credit union’s branches are located outside of federal buildings, so they can stay open in a shutdown. “We know from experience that when the federal buildings are closed, it’s a lot harder for everyone,” she said. Other efforts from credit unions serving federal government employees include:
* NASA FCU, Upper Marlboro, Md., is offering federal government members, including contractors, a 0% interest paycheck and furlough relief loan to cover delayed paychecks or furloughs. * Interior FCU, Washington, D.C., is running a $25 membership promotion and will offer a 0% line of credit for 15 days. * At Transportation FCU, Washington, D.C., furloughed employees can skip up to two monthly payments per loan on consumer loans and credit cards. The credit union also offers a “FurDough” loan of up to two weeks of net pay, up to $3,000 at a 4.5% APR for up to 18 months with a minimum payment of $25; * At Associated CU, Norcross, Ga., government employees using direct deposit can apply for 0% interest loans in the amount of their last direct deposited paychecks. If the balance cannot be paid within the 30 days after government payrolls begin, loans will be converted to 12 months at 5.5% APR.

W.Va. newspaper editorial Interchange needs more study

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HUNTINGTON, W.Va. (4/8/11)--A prominent Huntington, W.Va., newspaper has sided with credit unions regarding debit card interchange fees, saying the matter needs more study before any change to the fee structure is made. “The proposal is to cut the fees to the retailer from an average of 44 cents per transaction now to about 12 cents,” said The Herald-Dispatch (April 4). “But there is a growing concern that the Fed did not look at the ‘big picture’ when it developed the lower limits. Some argue that the legislation, which was proposed as a benefit to consumers, may have just the opposite effect. Consumers could end up paying more for their debit-card use or seeing restrictions on that use. The higher consumer fees could have a big impact on lower-income families. “That is certainly the way the plan is viewed by representatives of many smaller banks and credit unions, which typically have a higher per transaction cost than big banks,” the editorial added. U.S. Rep. Shelley Moore Capito (R-W.Va.), who is leading the effort for a bipartisan bill that would delay the proposal’s implementation for a year, said the matter deserves another look, the editorial noted. Availability issues, credit issues and lower-income people having more charges on checking accounts and therefore lower use of their debit card are ramifications that weren’t considered in the original rule, or the amendment. Therfore, Congress should postpone any ruling to obtain a more accurate study, Capito said last week, reported the newspaper. The newspaper agreed. “That [Capito’s viewpoint] makes a lot of sense. One thing we have learned from the country’s recent financial problems is that what is best for the largest businesses is not always best for everybody. This plan needs another review,”’ the editorial concluded. And, in another prominent West Virginia newspaper, The Charleston Gazette, Kenneth R. Watts, president of the West Virginia Credit Union League, wrote a letter in March that also agreed with Capito’s position on interchange. “Congresswoman Capito and her colleagues have it right by slowing this process down and proceeding cautiously,” Watts wrote. “Credit union members, and bank customers who rely on their debit cards to make essential purchases without writing checks, should not have to pay higher fees especially since debit cards help increase sales and provide convenience to merchants who voluntarily accept them. Also, these financial institutions assume all of the risk of fraud and provide immediate payment to merchants. “Now is not the time to raise unnecessary fees on consumers. It is time to thank lawmakers like Congresswoman Capito who want to proceed carefully on this matter,” he concluded. The Credit Union National Association (CUNA) opposes the cap on interchange fees and has told federal lawmakers that such action would limit consumer options, competition and technological innovation. Interchange fees allow business costs, including the risk of consumer nonpayment, to be shared by the payments participants, CUNA says. To read the editorial and letter, use the links.

CUNA Small CU Committee posts resources video on website

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MADISON, Wis. (4/8/11)--The Credit Union National Association’s (CUNA) Small Credit Union Committee has posted some new resources and additions to its website. The committee held it first-ever Small Credit Union Roundtable on Feb. 27--the first day of CUNA’s annual Governmental Affairs Conference in Washington, D.C. The purpose of the committee and roundtable is to address issues of concern to small credit unions, such as collaboration, regulatory compliance and how to lower costs to serve their members better (News Now Feb. 28). Mike Schenk, CUNA vice president of economics and statistics and CUNA’s liaison to the committee, has announced these website additions and updates:
* A 15-minute video update (go to website link below to download video) that discusses recent committee activities--including details of a February meeting with National Credit Union Administration Chair Deborah Matz--and points small credit unions to helpful resources and material available to them; * Audio clips of the proceedings at the Feb. 27 Small Credit Union Roundtable, made possible with support by CUNA Mutual Group; * A quarterly financial wrap-up for small credit unions, consisting of a Small Credit Union Profile report that summarizes key ratios and trends using recently released call report data; and * A continuous posting of minutes from committee meetings, including an archive of past meetings.
To access the website, use the link.

Connecticut league meeting attracts 200 attendees

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MERIDEN, Conn. (4/8/11)--The 2011 Annual Meeting of the Credit Union League of Connecticut Tuesday provided interactive activities for nearly 200 credit union attendees in Plantsville, Conn.
Click to view larger image Kelly Fuhlbrigge (left), Credit Union League of Connecticut vice president, Government Relations; and Tony Emerson, (right), league president/CEO; flank Connecticut Attorney General George Jepson following his address at the league’s annual meeting.
Click to view larger image Tony Emerson, (left), president/CEO of The Credit Union League of Connecticut, presents the 2011 Connecticut Credit Union Professional of the Year Award to Robert L. Aresti, president/CEO of 360 FCU, Windsor Locks, Conn. (Photos provided by The Credit Union League of Connecticut)
Credit union officials, staff, volunteers and guests participated in education sessions on compliance issues and the corporate system, a chapter officials organizational meeting, and interchange update and discussion, and heard guest speakers. They also visited with more than 40 exhibitors and industry service providers. Featured speakers included Connecticut Attorney General George Jepson, who spoke on the function of his office; Lt. Colonel John T. Wiltse of the Connecticut National Guard, who discussed current guard activity; Jay Friedland, compliance expert, president/CEO of M&M Consulting, and a league strategic partner, who reviewed current hot compliance issues; and Jay Murray, president of Mid-Atlantic Corporate CU, who provided an overview of the corporate credit union system. During the business meeting, the board of director’s governance committee presented results of the recent statewide affiliated credit union voting approving realignment of the league’s board from 12 directors and six alternates to six chapter directors and three at-large directors to streamline and enhance board effectiveness. Also, the 2011 Connecticut Credit Union Professional of the Year Award was presented to Robert L. Aresti, president/CEO of 360 FCU, Windsor Locks, in recognition of his contributions to his credit union, its membership, the community it serves, and the credit union movement in Connecticut as a whole.

CU System brief (04/07/2011)

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* WASHINGTON (4/8/11)--The 2011 Credit Union House Board recently elected officers at its annual meeting, held in conjunction with the Credit Union National Association's Governmental Affairs Conference (Highlights from the Hill first quarter). They are, from left: Vice Chair Dick Ensweiler, president of the Texas Credit Union League; Director Bill Mellin, president of the Credit Union Association of New York; Treasurer Brett Thompson, president of the Wisconsin Credit Union League; Chairman Charles Elliott, president of the Mississippi Credit Union Association; Secretary Patrick La Pine, president of the League of Southeastern Credit Unions; and President Bill Cheney, president/CEO of the Credit Union National Association. (Photo provided by CUNA) …

National CU Youth Week gets its own song

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MADISON, Wis. (4/8/11)--A new song called "Save!"--which encourages thrift and savings among young credit union members--could become a soundtrack for youth week activities for the National Credit Union Youth Week, which is observed April 17-23.
"Save!," a new song by Madison, Wis., thrift rock band, The Disclosures, encourages thrift and savings among young members. From left are band members Christopher Morris, director of communications at the National Credit Union Foundation, and Chris Helminak, Web and member development strategist at the Wisconsin Credit Union League. (Photo provided by The Disclosures)
A Madison, Wis.-based credit union music duo--The Disclosures--released the new song in celebration of the week, which is sponsored by the Credit Union National Association. The song and lyrics can be found on The Disclosures' website (use the link) and is free for credit unions to distribute and share with members. 'When we heard that the theme for this year's youth week was 'Money Rocks at My Credit Union,' it seemed like a natural fit for us to do something special," said band member Christopher Morris, whose day job is as director of communications with the National Credit Union Foundation. The message behind "Save!" is intended for a younger audience and takes a different approach from other tracks found on the band's recently released thrift rock album, "(Hey, We're) The Disclosures," which focuses on themes such as credit union history and philosophy. "We wanted to have some fun with the lyrics, especially the tongue-in-cheek chorus," said Disclosure member Chad Helminak, Web and member development strategist for the Wisconsin Credit Union League. "The fun part about savings isn't putting your money away, but rather envisioning what you're saving for and then reaching your goals." Morris and Helminak were featured in a recent issue of Madison's popular weekly, Isthmus, discussing "thrift rock" and the benefits of credit unions.