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CU System Archive

CU System

Judge OKs settlement in suit involving Centrix

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KANSAS CITY (5/27/11)--A federal judge has approved a settlement totaling $2.6 million in a class action suit involving the Centrix Financial LLC, a Centennial, Colo.-based company that financed subprime auto loans for credit unions and went bankrupt in 2008. U.S. District Judge Gary A. Fenner of the U.S. District Court for the Western District of Missouri on May 19 approved the settlement, which had been filed with the court on Feb. 4, for the class action case of Cecil E. Hopkins vs. Kansas City Teachers Community CU and Marathon Rothschild CU, Rothschild, Wis., according to court documents. The suit included 140 class action claimants who obtained vehicle loans from the credit unions in conjunction with a portfolio management program administered by Centrix Financial and whose vehicles were repossessed. The settlement allows a cash payment of about $9,315 per person, totaling $1.3 million, plus write-offs on deficiencies or account balances remaining on their loans totaling $8,968 or $1.25 million so borrowers can improve their credit scores. The settlement dismisses the suit against the credit union without prejudice. After a 40-day waiting period to see if any appeals are filed, the settlement will be distributed. Attorneys in the case were awarded $819,631, which includes litigation expenses and court costs incurred, as well as 30.4% of the gross settlement fund in attorneys fees. Centrix Financial was placed under involuntary Chapter 11 protection on Sept. 15, 2008. Several days later the company and its affiliates filed voluntary petitions for Chapter 11 protection (News Now Oct. 20, 2008). Credit unions and other entities claimed millions against the company's assets. More than two-thirds of Centrix's portfolio was owned by about 230 credit unions across the nation. It underwrote more than 250,000 loans totaling $4 billion.

Wisconsin payday loan rule takes effect Wednesday

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MADISON, Wis. (5/27/11)--A rule implementing a Wisconsin law that regulates payday lenders and establishes uniform rules for them will go into effect Wednesday, according to the State of Wisconsin Department of Financial Institutions (DFI). The Wisconsin Legislature created the 2009 Wisconsin Act 405, requiring the DFI's Division of Banking to regulate the sector. The rule aims to establish clear standards and requirements for the payday lenders, including notice of repayment guidelines and other protections for their customers. It also defines database requirements for the secure entry, retention and transmission of customer information, said the DFI. DFI said the rule:
* Defines the type of loans covered and notice as to what practices are prohibited; * Provides the industry with clear, itemized requirements for disclosures, repayment plans and standard calculations for income determination; * Provides for safe and secure transmission of payday lending transactions into a database; and * Addresses permissible fees and default matters.
The statutes and the rule include many consumer protections such as requiring that the loan agreement disclose repayment options, the 24-hour right to rescind the loans, and a limit of one rollover per loan. To view the rule, use the link.

Excellence in lending entries deadline Aug. 5

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MADISON, Wis. (5/27/11)--Entries are being accepted for the 12th annual Excellence in Lending Awards, which recognizes outstanding lending results and practices by credit unions. CUNA Mutual Group and the CUNA Lending Council established the Excellence in Lending Awards in 2000. The Excellence in Lending Awards recognize individual credit unions for their ability to serve members while sustaining sound financial performance. Credit unions demonstrating an ability to meet their members’ needs through innovation are excellent award candidates, said the organization. “This competition offers the opportunity for a credit union to be recognized as one of the industry’s best lenders,” said Dan Murray, vice president for lending services at CUNA Mutual. “This national recognition provides a great opportunity for credit unions to promote their award-winning lending success locally to potential members.” Credit unions may be nominated for the 2011 award in four categories:
* Consumer Lending Excellence--for credit unions with assets less than $250 million, and for more than $250 million; * Mortgage Lending Excellence--for those with assets less than $250 million, and for more than $250 million; * Low/Modest Means Excellence--any asset level; and * Business Lending Excellence--any asset level.
The awards will be presented at the CUNA Lending Council’s annual conference, Nov. 6-9 in New Orleans. Airfare, hotel and conference registration for one representative from each winning credit union is included with the award. For more information, use the link.

CU wins appeal on fidelity bond claim

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LATHRUP VILLAGE, Mich. (5/27/11)--A 2009 jury decision in for Michigan First CU in a case about an insurer's denial of a fidelity bond claim involving hundreds of defaulted indirect auto loans has been affirmed by the U.S. Court of Appeals, Sixth Circuit. The $568 million asset, Lathrup Village, Mich.-based credit union is entitled to $5 million in damages and another $2.7 million in interest from CUMIS Insurance Society Inc., according to the ruling filed Tuesday by the appeals court regarding the jury decision in the U.S. District Court of the Eastern District of Michigan at Detroit (leagle.com May 25). In 2003, the credit union began offering the loans, with a third-party administrator approving low-risk loans and forwarding higher risk loan applications to the credit union for review. A credit union vice president was charged with submitting monthly reports to the board to ensure compliance, but failed to monitor the program, the ruling said. A quarterly internal audit in October 2003 discovered one loan that violated the credit union's indirect lending policy, said the court documents. But in January 2004, it was discovered that "hundreds of loan applications in violation of the lending policy" were made, resulting in "numerous defaulted loans." The credit union claimed that it suffered financial harm as a result of three of its employees' "conscious disregard of its lending" policies and filed a fidelity bond claim with its insurer, which denied the claim. A seven-day jury trial ensued, with the jury awarding $5.05 million in damages. A motion for a new trial was denied, and the court imposed a $2.7 million interest award. CUMIS appealed the judgment and the credit union countered with an appeal on the interest calculation. In Tuesday's ruling, the court said there was sufficient record evidence to support the jury's finding that the credit union "did not acquiesce to the policy violations at issue." CUNA Mutual Group declined to comment on the case.

CUNA closed on Monday no INews NowI

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WASHINGTON and MADISON, Wis. (5/27/11)--The Washington, D.C., and Madison, Wis., offices of the Credit Union National Association will be closed Monday in observance of the Memorial Day holiday. News Now will not publish a Monday issue, but will resume regular publication on Tuesday.

Schlehuber elected to CO-OP board

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RANCHO CUCAMONGA, Calif. (5/27/11)--Lisa Schlehuber, CEO of Eli Lilly FCU of Indianapolis, has been elected to the CO-OP Financial Services board of directors. Two incumbents also were re-elected to new three-year terms on the board at the annual meeting of CO-OP shareholders. They include:
* Tom Dorety, president/CEO, of Suncoast Schools FCU, Tampa, Fla., and * Gary Oakland, president/CEO, of BECU, Tukwila, Wash.
Also, officers of the 11-member board were appointed to remain in their positions for another year. They include:
* Chairman--Doug Allman, President/CEO, of NASA FCU, Upper Marlboro, Md.; * Vice chairman/chairman-elect--Terry Laudick, president/CEO, of New Mexico Educators FCU, Albuquerque, N.M.; * Treasurer--Doug Ferrero, president/CEO, of Bellco CU, Greenwood Village, Colo.; and * Secretary--Patsy Van Ouwerkerk, president/CEO, of Travis CU, Vacaville, Calif.
Based in Rancho Cucamonga, Calif., CO-OP Financial Services connects credit union members to their accounts through network, payment processing, e-commerce, shared branching and call center services.

NACUSO requests clarity on Texas CUSO proposal

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AUSTIN, Texas (5/27/11)--The National Association of Credit Union Service Organizations (NACUSO) joined with the Texas Credit Union League in filing a comment letter Monday opposing proposed state regulation of Texas credit union-owned credit union service organization (CUSOs). NACUSO told the Texas Credit Union Commission that its primary objectives are protecting the ability of CUSOs to bring added member services and non-interest income, lower costs through economies of scale achieved by collaboration, and sharing the cost and risk of innovation among several credit unions. Innovation costs to obtain the expertise to introduce new products and services “can be prohibitively expensive for an individual credit union, and yet affordable when shared with several credit unions through a CUSO,” the letter said. Therefore, NACUSO said it is concerned about the commission’s recent proposal in Subsection (g) stating: “All legal limitations imposed on a credit union by Texas Finance Code, Title 3, Subtitle D and any rules adopted under that Subtitle, apply equally to CUSO activities.” “It is our belief that this would not be good public policy for the State of Texas,” said NACUSO’s letter. “We are uncertain of the full implications of the proposal. Will CUSOs have the same powers and limitations of credit unions? What is meant by the term ‘limitations’? If the intent is to subject CUSOs to the same regulatory restrictions and supervisory authority as those facing credit unions, this is a serious departure from the current powers in every other state that regulates credit unions and the federal authority of the National Credit Union Administration (NCUA). “There is no jurisdiction in the U.S. that restricts CUSOs to those permissible activities only credit unions are permitted to perform,” the letter added. “NCUA does not have regulatory authority over CUSOs but has expressed a desire to petition Congress for that authority. Even NCUA does not seek to have CUSOs confined to permitted credit union activities. What is the value of CUSOs if they become mere shadows of credit unions? There would be little need for CUSOs as the risk, presently being often shared through collaboration via a CUSO, would now be taken back within the credit union seeking to innovate or offer an expanded service. Frankly, it would not be an overstatement to characterize the proposed action in Texas as a radical departure from the norm.” Because the commission already has the ability to inspect a CUSO’s books and records, the commission already can compel a CUSO to take action that is in the best interests of credit unions if the CUSO poses a safe and soundness risk to credit unions, NACUSO said in the letter. That power includes the ability of the commission to issue a cease-and-desist order “to prevent credit unions from using the services of the CUSO and/or requiring the owner credit unions to divest their investment in the CUSO.” NACUSO also said it has concerns about a proposal limiting a credit union’s investment in a CUSO to 15% of net worth, because it could have a “chilling effect on new CUSO investment.” The organization also questions the commission’s proposed 20-day notice required if a CUSO makes a material change in its organizational structure or performs a new activity. NACUSO said more clarity is needed on what the changes would entail. The letter concludes that it would like the commission to revisit the proposal. To read the letter, use the link.

La. CUs promote CU difference at state GAC

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HARAHAN, LA. (5/27/11)--Nearly 70 Louisiana credit union professionals and volunteers representing 24 credit unions statewide attended the 2011 Louisiana Credit Union League Governmental Affairs Conference May 17-18 in Baton Rouge, La., to promote the credit union difference.
Joe Battaglia (left), CEO of Homeland FCU, Metairie, La., meets with Louisiana State Rep. Joseph Lopinto (R-80), vice chairman of the Louisiana Commerce Committee at the 2011 Louisiana Credit Union League Governmental Affairs Conference, May 17-18, in Baton Rouge. (Photo provided by the Louisiana Credit Union league) .
The conference opened with State Rep. Joseph Lopinto (R-80), vice chairman of the Commerce Committee, addressing attendees. Presenter Kelly Parks conducted an afternoon session in which she discussed “Integrating Advocacy into Credit Union Marketing” (eNews May 25). Attendees congregated at the State Capitol to meet one-on-one with lawmakers. The group spoke with one voice in promoting the credit union difference and the value credit unions offer to their members, said the league. Attendees also heard from Lt. Gov. Jay Dardenne, J.D. Fields from the Louisiana Office of Financial Institutions, and Valerie Bogart from National Credit Union Administration. Rob Rieger from law firm Adams and Reese, LLP, presented an overview of the current climate of the state legislature and its impact on credit unions. Jeff Brooks, Adams and Reese LLP, presented an overview of Congress and legislation affecting credit unions on a national level.

Peruvian co-op law becomes reality

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LIMA, Peru (5/27/11)--The government of Peru has passed landmark legislation that recognizes the not-for-profit status of the country’s 160 credit unions and other cooperatives and grants them tax exemption. World Council of Credit Unions’ (WOCCU) member La Federación Nacional de Cooperativas de Ahorro y Crédito del Perú (FENACREP) has worked with a coalition of cooperative advocacy groups on the bill since introduction into the legislature in December 2009. Manuel Rabines Ripalda, first vice chair of WOCCU’s board of directors and president/CEO of FENACREP, said the country’s cooperatives have long struggled to help lawmakers understand that cooperatives’ transactions with members are not designed to produce profit, and therefore should not be taxed. “This is not just about a tax break for cooperatives,” Rabines said. “This law is simply correcting the interpretation of existing cooperative legislation so that tax laws will be properly applied to cooperative acts.” The new law specifies the scope of two articles in Peru’s existing General Law of Cooperatives by recognizing that cooperatives are different from commercial enterprises because their transactions with members are “cooperative acts.” Since these cooperative acts are considered internal--carried out in accordance with the cooperatives’ social objectives--they have no motive for profit. Cooperative acts are not considered a “sale of goods” or “provision of services,” so the sales tax associated with these activities is not applicable, said WOCCU. “Credit unions and other cooperatives have historically had a strong presence in Peru and throughout Latin America,” said Pete Crear, WOCCU president/CEO. “Earning and maintaining the support of government is vital to our global movement, and the enactment of this new law in Peru is a great achievement.”

N.J. ad campaign directs consumers to aSmarterChoice

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HIGHTSTOWN, N.J. (5/27/11)--The New Jersey Credit Union League’s (NJCUL) “Banking You Can Trust” ad campaign now directs consumers to aSmarterChoice.org, the new website created by the Credit Union National Association (CUNA) and the state leagues to help consumers learn more about credit unions and find one they are eligible to join. “Our ‘Banking You Can Trust’ campaign here in New Jersey continues to gain steam,” said NJCUL President/CEO Paul Gentile. “Now that we’re in our third year, the branding is becoming more established in the marketplace. “We have recently adjusted our ads to include aSmarterChoice.org as the destination that the ads direct consumers. aSmarterChoice.org is an effective site to direct consumers because it explains the story of credit unions in simple terms and clearly defines our value proposition as credit unions,” he said. New Jersey’s ad campaign informs consumers about the benefits of using credit unions. aSmarterChoice.org provides consumers with the necessary information to make the switch. The credit union locator tool on aSmarterChoice.org not only shows consumers which credit unions are nearby, but which ones they are eligible to join. The website’s online locator tool is powered by findacreditunion.com and includes all U.S. credit unions in its database. The stimulus for aSmarterChoice.org, which was introduced in March at CUNA’s Governmental Affairs Conference, came from a task force created by the American Association of Credit Union Leagues with the goal of raising awareness and fostering credit union membership growth, especially among young adults. Gentile was chairman of the task force.

CU System briefs (05/26/2011)

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* ALBUQUERQUE, N.M. (5/27/11)--A Bloomfield, N.M., man, Kacey Allen Fisher, 34, was sentenced in a U.S. District Court in Albuquerque, N.M., to more than 12 years in prison after pleading guilty to robbing eight financial institutions, including a credit union, in New Mexico, Arizona and Colorado. He also was sentenced to five years of supervised release after his 151-month prison term and ordered to pay restitution to the banks and the only credit union robbed, Animas CU, Farmington, N.M. The credit union holdup, on April 3, 2008, was the last robbery committed in the spree that began on Feb. 25, 2008. In each case, Fisher entered the bank or credit union and robbed it while another man served as getaway driver. Fisher was arrested in August, 2008. They men robbed the credit union and two banks in New Mexico, three banks in Arizona, and two banks in Colorado (US Fed News May 24) … * PANAMA CITY, Fla. (5/27/11)--Anthony David Stalnaker, 42, of Lynn Haven, Fla., was arrested about eight hours after he allegedly walked into Panama City-based Tyndall FCU, sat down with a member service representative, and said he had a bomb in the case he was holding. When asked if he were serious, he said no but then asked if she had a panic button and indicated he knew she had keys to the vault. He also allegedly asked whether there would be oxygen inside the vault. Stalnaker then collected his credit union statements from the employee and left with the case and without money. Tyndall issued a press release assuring members that proper security procedures were followed and members and staff remained safe. No money was taken and no accounts compromised (The News Herald May 26) … * HANSCOM AFB, Mass. (5/27/11)--Hanscom FCU's 57th Annual Meeting highlighted its fundraising successes of 2010, with the presentation
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of $21,911 to the CU Kids at Heart Program to benefit Children's Hospital Boston. Raised throughout the year by members, staff and volunteers, the funds represent a 30% increase over 2009, said Board Chairman Paul Marotta. The credit union also was lead fundraiser for the Massachusetts Credit Union League's Credit Union Hope Initiative in 2010 and supported the Massachusetts Coalition for the Homeless, veterans' charities, scholarships, and a high school ROTC program. It also collected personal care items for hospitalized veterans and provided a giving tree at Hanscom AFB, and sponsored the Airman Leadership School, the Patriot Honor Guard, the Patriot Enlisted Association and the Patriot Senor NCO Association. It is a major sponsor of Hanscom Heroes Homecoming, which honors troops returning from deployment in Iraq and Afghanistan. Here, Jane Melchionda of the CU Kids at Heart program is presented the check with, from left, David Sprague, Hanscom FCU president/CEO; Andy Martin Jr., the credit uniok's Children's Hospital patient partner; and Ray Phillips, board member and Hanscom FCU's Boston Marathon runner. (Photo provided by Hanscom FCU) … * MADISON, Wis. (5/27/11)--The Disclosures, a Madison, Wis.-based thrift rock band sings about credit unions and has an album of the songs, made its television debut Monday morning on Madisonscw.com. In the band are Christopher Morris, director of marketing at the National Credit Union Foundation, and Chad Helminak, web and member development strategist at the Wisconsin Credit Union League …