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UBIT jury hears witnesses on behalf of CU

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GREEN BAY, Wis. (5/13/09)--During the second day in the trial over the Internal Revenue Service's interpretation of the unrelated-business income tax (UBIT) related to insurance products at a Wisconsin credit union, the jury heard testimony and depositions from six witnesses and experts on behalf of the credit union. The trial began Monday in a U.S. District Court in Green Bay, Wis. Community First CU, based in Appleton, Wis., filed suit in January 2008 against the government after the IRS determined that certain guaranteed auto protection (GAP) and insurance products offered to members fall outside the credit union's main mission and are subject to UBIT. The credit union is seeking a refund of $54,000 in taxes paid on credit life and credit disability insurance and GAP products. Community First filed the suit with the support of the Credit Union National Association (CUNA), the American Association of Credit Union Leagues, CUNA Mutual Group and the National Association of State Credit Union Supervisors. According to Eric Richard, CUNA general counsel, six witnesses testified. A judicial order issued by Judge William Griesbach on Monday discourages those in the court room from reporting on the specific content of the testimony, since witnesses who haven't testified yet have been excluded from the courtroom. "The day began with the jury viewing a videotape of CUNA Vice President of Economics and Statistics Mike Schenk, in which he described a study of the value that Community First CU provides to its members," said Richard. Others testifying Tuesday on behalf of Community CU included:
* Kevin Hartz, senior vice president of branch operations at the credit union. Hartz, who has been with the credit union for 24 years, has experience with the products at issue; * Brett Thompson, president/CEO of the Wisconsin Credit Union League; * Kathy Graham of CUNA Mutual Group, which offers credit life and disability insurance; * Richard Fischer, director of product management at CUNA Mutual Group; and * Robin Jorde, a member of the credit union who has experience with the products.
Also, parts of a deposition from Denise Lynch of Allied Solutions, a provider of GAP insurance products, were read by counsel and a member of the credit union's staff. Today, the credit union's attorney, Michael M. Conway of Foley and Lardner law firm, plans to call two more witnesses on behalf of the credit union: Jurri Sauerhammer, a member, and expert witness Glenn Potts, a professor of finance at the University of Wisconsin-River Falls. "Then the government will present its case, with two expert witnesses, and the credit union will present two more rebuttal witnesses, " Richard told News Now. "There is some possibility that the trial could end ahead of schedule, but that still remains to be seen," he said. The credit union's lawsuit maintains that the revenue from the sale of the products is "substantially related" to the purposes and functions of the tax-exempt, state-chartered credit union (News Now April 30). CUNA and the Wisconsin league are following the case closely. Earlier this year, CUNA President/CEO Dan Mica wrote a letter to IRS on the UBIT issues (News Now Feb. 24). Mica's letter reiterated CUNA's concern that the IRS "may not understand that credit unions are an integral part of the credit markets, especially for consumers, and have been playing a vital role in keeping credit flowing to consumers. "Tax policies that undermine credit unions' ability to lend are completely at odds with current efforts to free up the credit markets and can contribute to pro-recessionary credit shortages." Credit unions feel so strongly about the UBIT issue that thousands gave Community First CU President/CEO Cathie Tierney a standing ovation at several conferences, including CUNA's Governmental Affairs Conference in Washington, for filing the lawsuit.

Delfin Thomas highlight CU outreach on CNN

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FAIRFAX, Va. (5/13/09)—National Credit Union Foundation (NCUF) Executive Director Steve Delfin and Fairfax County FCU President/CEO Joe Thomas are appearing daily on CNN Headline News’ Cox “Local Edition.” Delfin focuses on the importance of credit unions reaching emerging markets and their role to better serve low-wealth, modest means households and working families. “This is work that’s very important right now in our environment with what’s happening in the financial services sector,” Delfin said. “And it’s also important for the growth of credit unions--because in emerging markets like the Hispanic market, that’s where credit unions are going to see their growth in the future.” Thomas focuses on how Fairfax County (Va.) FCU is reaching the Hispanic market. Fairfax has $223 million in assets. With a $99,900 NCUF Innovation Grant, Thomas said “we’ve been able to increase our educational output and our products and services to increase savings [in the Hispanic community] and ultimately generate wealth for their local families.” One of the most popular products is Safe Accounts for immigrants who don’t have a Social Security Number. “They’re still required by the Internal Revenue Service(IRS) to have a Taxpayer Identification Number,” Thomas pointed out. “We’ve now become an agent for people to come to us, and we will be able to act on their behalf and get their Taxpayer Identification Number ... We will submit the forms to IRS on their behalf.” CNN Headline News’ interview with Delfin and Thomas began airing May 5 and will continue to air seven times a week through July 5. The cable television broadcast reaches 244,000 households each day throughout Fairfax County, home to diverse communities near Washington, D.C. The video is also posted on the Cox YouTube channel. With additional visibility and outreach made possible by an Innovation Grant, Fairfax County FCU projects that by year-end, Hispanics will account for up to 25% of the credit union’s new members. Delfin concluded that as long as credit unions continue investing in the Community Investment Fund, NCUF will be able to continue funding programs for credit unions and their members.

Branch capture users surveyed about efficiencies

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DALLAS (5/13/09)--Nearly 80% of credit union respondents cited greater efficiency as a primary value of branch capture, according to the results of a recent survey conducted by Southwest Corporate FCU. The efficiencies credit unions cited:
* Scanning checks eliminates hand encoding, enabling staff to pursue other tasks; * Transmitting deposits throughout the day speeds work flow and saves payroll expense; and * Online archival provides more timely access to images and eliminates a separate microfiche or image process.
About 16% of credit unions said reduced costs were the leading benefit of branch capture. Survey results were compiled from 124 credit union respondents, with assets ranging from under $10 million to more than $1 billion. About two-thirds were in the $20 million to $200 million range. Respondents were from more than a dozen states. The survey was conducted last month. Branch Capture is part of the corporate’s suite of Remote Deposit Solutions.

N.J. CUs create cooperative student lending program

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HIGHTSTOWN, N.J. (5/13/09)--Credit unions in New Jersey are collaborating through a new student lending program that aims to help students pay for school and drive credit union membership. Set for launch the first week of June, the program will comprise 17 credit unions and offer about $60 million in financing. Students and their parents will be driven to an online portal platform where they will take a membership test to see which credit unions they are eligible to join for financing if they are not already credit union members. From there, they can apply for a loan, which will be offered with common pricing, according to Paul Gentile, New Jersey Credit Union League president/CEO. “It is the ultimate example of collaboration and cooperation among credit unions,” he said. Aside from offering students financing, the program also strives to drive up membership. “It’s a great [way] for credit unions to get closer to younger members,” Gentile told News Now. Credit unions will be able to nurture relationships with their young members as they make monthly loan payments, he added. The program also is beneficial for small credit unions because the loans are offered cooperatively. No credit union will hold more than 10% of a student loan on its books. Each loan will have an originator, and financing will be spread among nine other credit unions. “There will always be 10 credit unions [total],” Gentile added. “[It helps] small credit unions get a piece of the action.” The league and credit unions are talking to local universities with the goal of being listed as a preferred lender. A high percentage of New Jersey high school students attend colleges in the state or within a three-hour radius of their hometowns, Gentile said. The league estimates that there are at least 200,000 potential college students in the state. Another feature of the program is that it will reward students who maintain good grades. A student who maintains a good grade point average will receive better rates on loans, because students who maintain good grades and are on track to graduate will likely pay their loans back, Gentile said. The key to creating a program such as New Jersey’s lending program is constant collaboration. “It wasn’t just the league telling credit unions, ‘Here’s what we’re going to do.’ We kept relying on credit union feedback,” Gentile said. “It was a fascinating experience.”

Members United Corporate to spin off CUSO

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WARRENVILLE, Ill. (5/13/09)--Nextworks LLC, a credit union service organization (CUSO) initially seeded by Members United Corporate FCU, will spin off from the corporate and is currently seeking funding from credit unions. Since the formation of Members United’s innovation department in 2006, the group now called Nextworks “exists to bring a competitive advantage to credit unions through a refined process and a strategic approach to innovation,” said Charlie White, the corporate’s former chief innovation officer and Nextworks’ president. “The corporate continues to explore cost-cutting measures, and it made sense for our department to morph into a CUSO,” he added. “Innovation is incredibly valuable to credit unions, and we want to focus resources in a manner that will generate value for them.” White’s team has a number of projects in the innovation queue, most notably “Modoh,” a solution to help credit unions attract and retain younger members. It offers an interactive environment to help young members learn about responsible spending, saving, charitable donations and credit. It features an immersive financial simulation game, and a youth card program to reinforce financial concepts and independence. Also, Modoh can help a credit union establish a comprehensive brand that appeals to the younger demographic. Nextworks is releasing Modoh this spring. Nextworks’s process ties strategy to market changes and provides dedicated resources that reduce the risks of product development through a shared funding pool. “This down cycle is the perfect time to leverage a small investment in the future,” White said. Nextworks is seeking ownership funding. The CUSO is capitalized through June 30, and then will rely on capital funding from member credit unions to operate.

Survey CUs win on trust reliability confidence

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NEW YORK (5/13/09)--Credit unions made major gains in trust, reliability and confidence during the first four months of 2009, according to a new Trust Study released Tuesday by TNS, a custom research company.
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Despite large-scale brand marketing initiatives currently underway, the nation's large national banks, insurance companies and brokerages continued to slip further behind credit unions and smaller regional banks in consumer trust ratings. Reflecting the economy, consumer trust decreased across the board during the first four months of 2009, with the largest drop for banks and brokerage/investment firms, public sector/government, and automotive sector from the prior period (October 2008 to January 2009. Although every category saw a drop in confidence levels, credit unions experienced the least decline, with 17% of consumers surveyed saying their trust had declined in the past three months. That compares with 61% whose trust had declined in large national banks, and 24% for small local and regional banks.
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"The exceptional news is the way that credit unions are making such positive progress across multiple trust dimensions, despite continuing economic and financial insecurity," said TNS. In the measures "across nine different trust dimensions, including overall, rational and emotional attitudes, consumers surveyed showed significantly greater trust and confidence in these smaller players who they feel show greater understanding and reliability than the large national banks." "The credit unions alone demonstrated significant bounce-back in consumer trust from January to April 2009," said TNS. It noted there were minor gains for small and regional banks but the "change was not significant."
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"The fact that credit unions have improved their consumer trust and confidence scores implies they are doing a better job of engaging their customers and making them feel safe with their financial choices," said Trish Dorsey, senior vice president, financial services brand and communications TNS. "The larger institutions need to step up and take a leadership role in reassuring customers of their financial stability." "Consumers' continued distrust of large national banks and brokerages is a signal that they are looking to large financial institutions for strength and leadership," Dorsey said. "As a category, it is clear that they have not demonstrated their leadership position effectively and consumers are left feeling inadequately supported and deeply distrustful." The company surveyed 1,000 U.S. consumers in October 2008 and January and April 2009 to chart trust levels across several major industries.

TNB Card Services to sell card portfolio to Elan

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DALLAS and MINNEAPOLIS (5/13/09)--Town North Bank (TNB), parent company of Town North Bank Nevada, announced Tuesday that it has sold its agent-issuing credit card portfolio to Elan Financial Services, but will continue to serve its credit union clients through its card processing operation, TNB Card Services. Elan, a provider of outsourced solutions, will become the new issuing partner to the 168 credit unions representing TNB’s former agent issuing partnerships. TNB sold the portfolio to reduce assets and generate capital in a move to offset losses from the bank’s investment portfolio in 2008, said John C. Reap, TNB president/CEO. “As everyone in the financial industry is painfully aware, 2008 was a challenging year,” Reap said. “The damage done to our own investment portfolio has compelled us to make this strategic decision.” TNB is working closely with Elan and its credit union agent clients to make the transition smooth. Full transition of the agent accounts from TNB Nevada to Elan will be completed in November. TNB will service the accounts as they are transitioned. Elan has partnered with credit unions for about 40 years and has agent-issuing relationships with more than 350 credit unions, TNB said. TNB is based in Dallas. Elan is based in Minneapolis.

Filenes CU Harmony website aims to connect

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MADISON, Wis. (5/13/09)--The Filene Research Institute’s i3 innovation group is piloting CU Harmony, a website that connects credit union people with one another to share information and ideas about credit union-related issues. The website offers listings of credit union topics for others that are seeking information. Visitors can post questions or comment on the ones already posted, or place a “watch” for a particular item of interest. “CU Harmony can help credit unions reduce their operating expenses, mitigate risks, and enhance compliance training and fraud prevention,” said Denise Gabel, Filene chief innovation officer. “We’re looking for help from credit union innovators across the nation to help gauge industry interest in making the CU Harmony program available. The site is a prototype, and Filene is looking for feedback on it through June 15. After that date, the i3 group will meet again to determine the next step. The name of the website also could change. “We’re also asking for specific feedback on the program’s functionality so we can refine it before offering it as a fully tested product,” Gabel said. Filene has already received a strong response. CU Harmony has had 139 hits and seven comments from six different credit unions, Gabel added.

CU System briefs (05/12/2009)

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* BOSTON (5/13/09)--Kelly Curley, 35, a former loan officer at a Boston area credit union, was sentenced to two and a half years in jail Monday for embezzling more than $200,000 from the credit union last year (Nashua Telegraph May 12). Curley pleaded guilty to five counts of embezzlement and one count of identity theft, said Massachusetts Attorney General Martha Coakley. Between June 2006 and February 2008, Curley secured five loans for herself by using co-workers' computers and the names and information of a relative and two friends. She used some of the loans to pay off earlier loans. She was indicted in December and pleaded not guilty at a Jan. 13. However, on Monday she pleaded guilty. Curley is to serve eight months of the sentence with the remainder suspended for three years. She will be on probation for three years and banned from working in the financial services industry, said Coakley … * COLUMBIA, Md. (5/13/09)--Credit unions across Maryland and Washington, D.C., used a turnkey program from the Credit Union Foundation of Maryland and District of Columbia that offered newsletter articles, posters, statement stuffers, Web links and funding to offer $11,000 in scholarships to college-bound members. The program led to more than 200 essay and video applicants in the foundation's 2009 College Scholarship Program (FOCUS Newsletter May 11). The video category was new this year. In it, applicants produced a one-minute video on "How are Banks and Credit Unions Different?" The essay's topic challenged applicants to envision credit unions run by staff and volunteers, all under the age of 30. Scholarships were awarded to the top 10 essay applicants and top video applicant. The winning entries are at the foundation's website … * BURLINGTON, Mass. (5/13/09)--The Credit Unions at Heart program presented $320,000, raised by employees, volunteers and friends of 48 participating credit unions, to Children's Hospital Boston. The
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donation brings the total funds presented by Kids at Heart to more than $3 million. The presentation was made at a party celebrating patient-partners and their Boston Marathon runners, one of credit unions' numerous fundraising events for the hospital. The weekend before the 113th Boston Marathon on April 20, Children's Hospital honored 13-year-old Andy Martin with the Katie Lynch Award, recognizing him for his courage and upbeat attitude in the face of serious adversity. He is the patient-partner of Ray Phillips, a board member of Hanscom FCU, Bedford, Mass. (Photo provided by EasCorp) …

Delaware league elects board presents awards

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NEW CASTLE, Del. (5/13/09)--Two board members were elected to serve on the board of directors of the Delaware Credit Union League at the league’s 52nd annual meeting May 2.
Awards presented at the Delaware Credit Union League’s 52nd annual meeting May 2 were, from left: Outstanding Volunteer--John Lewis, Sussex County FCU, Seaford; Outstanding Volunteer--Anthony Casarino, ICI America FCU, New Castle; and Outstanding Professional--Edwin Grebe, Newark, Del., City Employees FCU. (Photo provided by the Delaware Credit Union League)
Incumbents Sharon Schaeffer of Delaware First FCU, Wilmington, and Kate Toner of Wilmington (Del.) Postal FCU, were re-elected to serve three-year terms. The league also announced its 2009 board officers:
* Chair--Joel Romaine of DPL FCU, Newark; * Vice Chair--Jerry King, DEXSTA FCU, Wilmington; * Secretary—Toner; and * Treasurer--Meredith Jeffries of New Castle County Delaware Employees FCU, New Castle.
The board also includes members: Cheryl Chilcutt, Chestnut Run FCU, Wilmington; Schaeffer; and Allen Riley, Sussex County FCU, Seaford. The annual meeting included the presentation of outstanding credit union professional and volunteer awards for 2008. The 2008 Outstanding Credit Union Volunteer was awarded to: Anthony A. Casarino Sr., who has been a credit union volunteer with the ICI America FCU, New Castle, for 15 years, and John W. Lewis, a volunteer with the Sussex County FCU, Seaford, for 26 years. The 2008 Outstanding Credit Union Professional was Edwin W. Grebe, who has served credit unions for more than 50 years and was an original charter member of the league. He is the manager of the Newark, Del., City Employees FCU.