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Attorney HeartlandMC settlement pennies on the dollar

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HOUSTON, Texas (6/2/10)--Credit unions and other financial institutions that re-issued MasterCard payment cards compromised by the 2008 Heartland Payment Systems data breach--the largest in history--are being urged by three attorneys to "carefully review" the proposed $41.4 million settlement between Heartland and MasterCard. "The proposed MasterCard settlement has many of the same weaknesses as the Visa settlement offered a few months ago," said Richard L. Coffman, The Coffman Law Firm, Beaumont, Texas; Michael A. Caddell, Caddell & Chapman, Houston; and Joseph G. Sauder, Chimicles & Tikellis LLP, Haverford, Pa. The three are Interim Co-lead counsels for a class action lawsuit against Heartland Payment Systems. Among the settlement's weaknesses, they said:
* It is not based on the actual damages incurred by the affected financial institutions and therefore may offer them little compensation; * It gives financial institutions little time to decide whether to participate; and * It requires financial institutions to release all their legal claims against Heartland, its two acquiring banks--KeyBank and Heartland Bank--and other parties that may be liable.
MasterCard said individual settlement proposals were communicated to the financial institutions affected on May 27. Credit unions and banks have until June 25 to accept or reject the settlement. "Financial institutions that accepted the previous Visa settlement were surprised to learn a few weeks later that had they refused the settlement, they would have automatically received about half of their settlement offer without releasing any of their legal claims under the Visa ADCR Program," the attorneys said. "It is certainly something to consider," said Sauder, one of the court-appointed lawyers representing the proposed class of MasterCard issuers against Heartland, KeyBank and Heartland Bank in a pending class action lawsuit in a Houston federal court. The proposed settlement is not as generous as the parties want financial institutions to believe, said Caddell. "There were over 40 million MasterCard payment cards compromised by the data breach. Once a financial institution factors in the costs it incurred to cancel and reissue the payment cards and the unauthorized charges it was forced to absorb, its share of the settlement most likely will be pennies on the dollar." Coffman noted KeyBank and Heartland Bank, which are defendants in a coordinated lawsuit--are also potentially liable for the breach damages and would receive a complete release of liability in the settlement. Most of the settlement funds are provided by Heartland Payment Systems. KeyBank has $95 billion in assets and Heartland Bank has more than $900 million in assets, "which suggest that there are additional sources of money to compensate the issuers for their damages," he said. Sauder advised each financial institution to perform its own cost/benefit analysis to determine whether to accept or reject the settlement. He emphasized the firms will pursue the cases but added "there are no guarantees that our class action lawsuit will be successful. We simply want to ensure that the financial institutions are making this important decision based on all of the pertinent information." In early May, Heartland agreed to pay MasterCard Worldwide $41.4 million to resolve claims from MasterCard and its issuers related to the 2008 breach of Heartland's payment system environment. Five months earlier Heartland reached a $60 million settlement with Visa related to Visa credit and debit cards (News Now Jan. 11). Ten months ago, it entered settlements of $3.6 million with American Express and $2.4 million in a consumer cardholder class action lawsuit (News Now Dec. 21 and Dec. 29). Like the Visa settlement, the MasterCard settlement is contingent upon financial institutions representing 80% of the claimed-on MasterCard accounts accepting the alternative recovery offers.

Wisconsin CUs tell how they handle hits from economy

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MADISON, Wis. (6/2/10)--Credit unions in south central Wisconsin have lower-risk lending and investment practices, but they too are seeing the impact of the recession on their members. In a Wisconsin State Journal (May 30) article about how the recession is affecting financial institutions' ratings by ratings agencies, Wisconsin Credit Union League President/CEO Brett Thompson points out that both banks and credit unions have been impacted by the tough economy. "Credit unions are not immune to that stress, although from a comparative perspective, I think they've come out of it pretty well," Thompson said. First American CU in Beloit noted that it while banks' recent loan losses are generally tied to commercial developments and home mortgages, First American's relate to business loans. Local mom-and-pop stores are hit by factory cuts in the Janesville area. CEO Tracy Blaske said the credit union's net income and reserve fund are improving, and the credit union is hopeful that businesses can turn around. Three small credit unions have increased their ratings. Members Serving Members of Beaver Dam, the Madison Fire Department CU and the Truax CU of Madison have had positive earnings. Steve Wright, president of Madison Fire Department, explained how his credit union had positive earnings: Firefighters have steady jobs and aren't likely to be hit by government cutbacks even during tough times. The credit union also limits services to mainly savings accounts and loans. "We just do a few (services) and try to do them well," he told the paper. Credit unions also benefit with their low-risk practices. Kim Brilowski, chief examiner for the Wisconsin Office of Credit Unions, noted that credit unions don't get involved in the type of investments and commercial lending that banks do. For most of the 236 credit unions in Wisconsin as of Dec. 231, net income and net worth decreased slightly in the past year, Brilowski said, but overall, their capitalization or reserve fund ratios average 10% or more. Mergers can affect ratings, too. Madison-based $1.4 billion asset Summit CU is the second largest credit union in the state. Its merger two years ago with Great Wisconsin CU increased its operating expense ratio temporarily last year, according to Kim Sponem, Summit president/CEO. But even after the merger, Summit's assets have grown more than 10%. Credit unions nationwide are attracting more members who are fleeing banks in a "flight to safety," said Thompson. In Wisconsin credit unions have 11% of the financial services market, the article said.

Southwest Corporate reports more OTTI charges

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DALLAS (6/2/10)--Southwest Corporate FCU released its financials for April, noting a net loss of $23 million for the first four months of 2010. That compares with the Dallas-based corporate's $9.8 million net income for the same period in 2009. The net loss resulted from other-than-temporary impairment charges totaling $31.6 million, said the corporate credit union's financial statements posted on its website. The OTTI charges relate to the further deterioration of certain non-agency residential mortgage-backed securities since Dec. 31. The net loss is partially offset by net operating income totaling $10.1 million for the period, the corporate said. The OTTI charges mean that the $10.3 billion asset Southwest Corporate has a retained deficit at April 30 of more than $23 million. The corporate reported to its members last week that it will be required to deplete about 5.72% of the original members' capital accounts (MCA) to cover the retained deficit. The latest charges would increase the cumulative MCA depletion percentage to 78.40% from 72.68%.

WesCorp is back in the black

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SAN DIMAS, Calif. (6/2/10)--Western Corporate FCU (WesCorp) presented its April 2010 financials Thursday, announcing that it had realized net income of $14 million for the month. For first quarter, WesCorp's net income was $3.6 million. WesCorp's quarterly income reflects income from normal operations of $53 million less the effect of additional other-than-temporary-impaired (OTTI) charges of $49.4 million recognized in March, according to financials posted on its website. Actual realized losses on 50 securities incurred in April totaled $92.3 million, bringing actual realized losses to date to $362 million for 54 securities in the portfolio, on a life-to-date basis. The actual losses experienced in April will have no additional impact on WesCorp's financial statements because they already have been recognized in previous periods through the recognition of OTTI. The corporate credit union was placed into conservatorship on March 20, 2009, by the National Credit Union Administration. WesCorp is operating with a Prior Undivided Earnings Deficit of $4.964 billion guaranteed by the National Credit Union Share Insurance Fund.

United SavingsSelf-Help FCUs merger in effect

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ANTIOCH, Calif. (6/2/10)--United Savings FCU, Antioch, Calif., is now operating as United Savings FCU, a division of Self-Help FCU, effective yesterday. United Savings and Self-Help have received regulatory and member approval to merge their operations. The partnership aims capitalize on the credit unions’ strengths and expand their capacity to provide financial services to working families in California. United Savings has provided services to local steelworkers and their families since its opening in 1935, according to Bill Waters, United Savings board chairman. “When we decided a merger was the right path for the credit union, we were excited to find that Self-Help Federal’s values, goals and operating philosophy were well-aligned with our own,” Waters said. The merger will help preserve a local institution that provides responsible credit to the Antioch community. Over time, it will result in a broader set of products and services for members, said Mark Ryan, CEO of United Savings FCU. “The combination of Self-Help FCU’s size, financial strength, and commitment to local communities with our long and deep history with the Antioch area will enable us to expand our services and to heighten our impact in the community,” Ryan said. Self-Help FCU was chartered to preserve and expand economic opportunities for families and communities of modest means. It now has 10 branches in the Bay Area and Central Valley. The credit union is based in Durham, N.C. “United Savings’ location, strong management, and tradition of service are a great fit with our vision and existing branch network,” said Steve Zuckerman, managing director of Self-Help’s California operations. “The current and very challenging economic environment is making it increasingly difficult for many smaller financial institutions to thrive.” The merger is the fifth in California for Self-Help FCU. Self-Help FCU has full-service credit union branches in Modesto, Riverbank, East Palo Alto, Porterville, Bakersfield and Lamont under its Community Trust FCU division, a branch in Oakland under its People’s FCU brand, and a Micro Branch in East San Jose. United Savings has $23 million in assets. Self-Help has $180 million in assets.

Virginia CUs MBL cap debate addressed in Richmond paper

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RICHMOND, Va. (6/2/10)--Virginia credit unions and their push to raise credit unions’ member business lending cap were addressed in a Richmond, Va., newspaper Tuesday. The Virginia Credit Union League’s projections show 2,500 jobs would be created in Virginia if the cap was raised to 25% of assets from 12.25%, Karin Sherbin, league director of government affairs, told the newspaper (Richmond June 1). Raising the cap is a “win-win” for everyone because doing so would help the economy without costing taxpayers, Sherbin told the newspaper. The newspaper also noted the Credit Union National Association’s (CUNA) statistics indicate that credit unions had lower rates of business loan charge-offs than banks through the first three quarters of 2009. Credit unions charged off 0.44%, while banks charged off 2.28%. Credit unions experienced 11% growth in business loans between September 2008 and September 2009, while community banks reported a 7.3% decrease and the banking industry as a whole reported a 15.1% decline during the same time period, CUNA said.

CUs loan delinquency rates trending downward

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MADISON, Wis. (6/2/10)--For a second consecutive month, credit unions’ loan delinquency rates--delinquent loans divided by total loans--fell, perhaps a sign of a downward trend due to a recovering job market, according to a Credit Union National Association (CUNA) economist’s analysis of CUNA’s monthly review of credit unions for April. The rate dropped to 1.83% in April from 1.88% in February. “If two months of data make a trend, then we can say that credit union's loan delinquency rates are trending down,” Steve Rick, CUNA senior economist, told News Now.
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“The decline in this ratio is even more remarkable given that the denominator--total loans--fell 0.35% during this two-month period, which would increase the ratio,” he continued. “So a 2.8% decline in the dollar amount of delinquent loans--the numerator--was sufficient to drop the ratio. If the Euro-Zone debt crisis doesn't lead to a double dip recession in the U.S., we believe delinquency rates hit their apex in February and should continue to trend down through 2010. “The biggest causal factor leading to this decline is a recovering job market,” Rick added. “During five of the past six months, more jobs were created than were lost. This is setting in motion a self-sustaining economic recovery where job growth begets job growth.” Credit union loans outstanding decreased less than 0.1% during April, compared with a 0.3% decline during March. Credit union loans in April totaled $579 billion, compared with $582.4 billion in April 2009. Adjustable-rate mortgages led loan growth, increasing 1%, followed by used-auto loans and home equity loans, which both rose 0.4%. Credit card loans increased 0.3%, while unsecured personal loans and fixed-rate mortgages both fell 0.5%. New-auto loans dropped 1.6%. “Credit union loan balance growth is still in the doldrums, having declined for each of the last six months as members pay down debt, and credit unions either sell off or charge-off debt,” Rick said. “This is the first time in 50 years, if not all of credit union history, we’ve seen this level of debt reduction. It should be of no surprise, however, given the massive debt accumulation that took place leading up to the great recession. We don’t expect a robust pickup in loan demand anytime soon because households are still trying to fix their personal balance sheets.”
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Credit union savings balances increased 1% in April, down from a 0.7% rise during March. Credit union savings in April totaled $794.8 billion, compared with $746.6 billion in April 2009. Share drafts grew 6.9%, followed by regular shares and money market accounts, which each rose 0.9%. Individual retirement accounts grew less than 0.1% and one-year certificates decreased 0.5%. “Credit union savings balances increased 3.3% during the first four months of 2010, less than half the pace set during the similar period in 2009,” Rick said. “The fear spawned by the 2008-09 recession has ebbed and consumer confidence is on the rise, both of which reduce credit union members’ desire to boost precautionary savings balances.” The loan-to-savings ratio decreased slightly to 73% in April. The liquidity ratio--the ratio of surplus funds maturing in less than one year to borrowings plus other liabilities--remained at 19%. The movement’s overall capital-to-asset ratio remained at 10% in April. The total dollar amount of capital is $90 billion.

Top 10 INews NowI stories for May (06/01/2010)

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MADISON, Wis. (6/2/10)--Stories about interchange fees accounted for four of the top 10 stories in News Now for May. An interchange amendment was included in the Senate version of the regulatory reform package, S. 3217, the Restoring American Financial Stability Act, which the Senate passed earlier last month. The Credit Union National Association (CUNA) is lobbying against the amendment and has written to lawmakers urging them not to support the interchange amendment. The amendment would have adverse affects on credit unions because, according to CUNA, these amendments “are intended to disrupt the card payment system, with the goal of reducing the merchants’ financial responsibility for the benefits received from the card payment system.” CUNA and the leagues are mounting a grassroots campaign this week and next to express their opposition to the amendment. The top 10 News Now stories for May are: 10. CUNA urges CU action against interchange amendments WASHINGTON (5/5/10)--The Credit Union National Association on Tuesday urged credit union advocates to contact their U.S. senators and ask them to oppose amendments to financial regulatory reform legislation that would affect the debit and credit card system. 9. Credit unions prepare full grassroots alert over interchange WASHINGTON (5/24/10)--Credit unions should be prepared this week for a full grassroots action alert to both the entire Senate and House on interchange legislation once a conference committee on the regulatory restructuring legislation is "instructed," the Credit Union National Association advised its members Friday. 8. NCUA sounds alarm on fraudulent email to CU members ALEXANDRIA, Va. (5/26/10)--It's always “phishing” season, and the National Credit Union Administration Tuesday issued an alert about a new scam targeting credit union members. 7. Compliance: Internet gambling rules take effect June 1 WASHINGTON (5/5/10)--The Credit Union National Association has confirmed with Federal Reserve Board staff that the Unlawful Internet Gambling Enforcement Act regulations are on track for mandatory compliance on June 1. 6. Maine league: Auto dealer yanks ad misrepresenting CUs AUGUSTA, Maine (5/11/10)--An auto dealer's unauthorized ad insert that misrepresented some Maine credit unions and ran in several editions of the Portland Press Herald last week will no longer run, according to the dealer's attorney. 5. NCUA to consider splitting share insurance, corp. fees ALEXANDRIA, Va. (5/14/10)--Telling credit unions that the agency is "very mindful of the effect" that assessments have on their balance sheets, National Credit Union Administration (NCUA) Chairman Debbie Matz said that the NCUA would soon consider splitting the fees used to maintain its share insurance and corporate stabilization funds. 4. Cheney’s experience good for CUNA CEO post WASHINGTON (5/6/10)--Bill Cheney--who will succeed Dan Mica, effective July 5, as the president/CEO of the Credit Union National Association (CUNA)--brings to the position more than 25 years’ experience in a variety of roles in the movement, according to CUNA Chairman Kris Mecham. 3. Compliance: Beware five “Untruths” of new TIL rules WASHINGTON (5/4/10)--The Credit Union National Association (CUNA) is alerting credit union management to give appropriate time and attention to assuring timely compliance with new Federal Reserve Board changes that implement the first changes in a quarter of a century to Truth-in-Lending Act rules. 2. Interchange vote forces CUNA opposition to Sen. reform bill WASHINGTON (5/14/10)--Late Thursday the U.S. Senate voted 64-33 in favor of including Sen. Richard Durbin’s (D-Ill.) interchange amendment in S. 3217, the Restoring American Financial Stability Act. 1. Three banned from future CU work ALEXANDRIA, Va. (5/10/10)--Three former credit union employees have been banned from future work at any federally insured financial institution under prohibition orders issued by the National Credit Union Administration.

CU System briefs (06/01/2010)

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* SAN DIMAS, Calif. (6/2/10)--WesCorp FCU announced that Delton Ho, vice president of Pacific Operations, has accepted the responsibility for managing WesCorp's office in Honolulu, Hawaii. Ho's new role replaces the position previously held by Rand Yamasaki. Ho previously served as vice president and controller of Pacific Corporate FCU since 1999, and served as the director of financial accounting for the Hawaii Newspaper Agency (Gannett) for more than nine years. WesCorp President/CEO Philip Perkins noted that Ho is "highly regarded throughout Hawaii and Guam, and his acceptance allows us to maintain continuity of leadership and superior service to our members." ... * MADISON, Wis. (6/2/10)--CUNA Mutual Group announced that Don Davidson, vice president for CU System Relations since 2000, retired
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May 21 after a 37-year career with the credit union insurer. He was the longest-serving officer in CUNA Mutual's 75-year history. He was charged with building stronger partnerships with CUNA Mutual credit union system partners, including leagues, the Credit Union National Association, other national trade associations, corporate credit unions and the CO-OP Financial Network. He managed teams investigating disability claims and negotiated settlements with credit union CEOs and boards; served as the company's first recruiter in human resources and led its negotiation team through four labor contracts; established CUNA Mutual's first call center, rebuilt the company's international sales and marketing teams and served as CUNA Mutual's delegate to the World Council of Credit Unions; served on the board of HRN Management Group, Salt Lake City, and The LoanLink Center in Dallas. At his recent retirement celebration in Madison, Wis., are from left: John Radebaugh, president of the North Carolina Credit Union League; Rosie Holub, president of the Missouri Credit Union Association; Davidson; and Brett Thompson, president of the Wisconsin Credit Union League. (Photo provided by CUNA Mutual Group) ... * MADISON, Wis. (6/2/10)--Charles "Chuck" F. Eikel III, who worked in public relations at CUNA Mutual Group for more than 25 years, died Thursday of complications from ALS (Lou Gehrig's disease). He retired as a staff writer/editor in 2002. He wrote for internal and external publications, including Dimensions magazine and the annual report, and wrote a column in Risk Management, providing advice for credit unions on loss prevention Eikel wrote a credit union history that explained credit unions' fit with the social and economic history of Europe, North America, and then the globe. He graduated as a Credit Union Development Educator (DE) with the first DE class in 1982 and continued DE training after his retirement. He received the Horizon Award, the DE Program's highest award. Eikel's father, the late Charles "Charley" F. Eikel Jr., was a credit union pioneer and a Credit Union National Association (the CUNA & Affiliates) organizer in Louisiana and 14 other states and was president of CUNA Mutual Insurance Society for 17 years until retirement in 1973. Chuck Eikel's wife, Claire Girvan, preceded him in death. He is survived by a daughter, Siobhan (Michael K.) McGuire; and three grandchildren. A memorial gathering will be held at Cress Funeral Home, 3610 Speedway Road, Madison, WI, on Sunday from 10:30 a.m. to noon (CT) ...

Underserved Latino CU conference speakers announced

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PITTSBURGH (6/2/10)--The National Federation of Community Development Credit Unions and the Network of Latino Credit Unions and Professionals (NLCUP) are hosting a group of industry leaders at their June 9-12 conferences in Pittsburgh. At the 36th Annual Conference on Serving the Underserved & 6th Latino Credit Union Conference, attendees can learn from credit
union experts, researchers, policy-makers, and others with decades of experience serving underserved low- and moderate-income markets, the federation said. Confirmed keynote speakers include:
* Deborah Matz, National Credit Union Administration (NCUA) board chairman: * Gigi Hyland, NCUA board member; * Ambassador Carlos García de Alba, executive director, Institute for Mexicans Abroad. de Alba is executive director of the Institute for Mexicans Abroad. He previously served as director general of international affairs at Mexico's Ministry of Public Education. As a career diplomat in Mexico’s Foreign Service, he served as Mexico’s alternate representative to the Organization for Economic Cooperation and Development; as Consul General of Mexico in Dallas, Texas; as trade adviser at Mexico's Embassy in Italy; and as advisor and permanent delegate of Mexico to the Food and Agricultural Organization. He has also served as director general responsible for the Ministry of Foreign Affairs regional offices throughout Mexico, and as director of multilateral affairs in the Pacific Region. * Bill Hampel, senior vice president of research and policy and chief economist, Credit Union National Association (CUNA). He is an expert on the economy and credit union issues, he is regularly interviewed by the media for stories appearing on national news outlets, including: Bloomberg TV and Radio, The Wall Street Journal, MarketWatch, The Associated Press, CNBC, Reuters, CNN, SmartMoney, Dow Jones News Service, Kiplinger’s Personal Finance magazine, and USA Today among others.
For more information, use the link.