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U.S. Mortgage exec pleads guilty to defrauding CUs

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NEWARK, N.J. (6/12/09)--The former president of U.S. Mortgage Corp. and its subsidiary, CU National Corp., pleaded guilty Thursday in a U.S. District Court in New Jersey to defrauding $139. 6 million from 19 credit unions, Fannie Mae and others. Michael McGrath, 46, pleaded guilty to one count of mail and wire fraud and one count of money laundering conspiracy, according to Ralph Marra, acting U.S. attorney for the District of New Jersey (Reuters June 11). Under a plea bargain, McGrath is expected to be sentenced to between 12 1/2 and 20 years in prison and to pay restitution to the victims, said prosecutors. U.S. District Judge Katharine Hayden set an Oct. 1 sentencing date. Until then, McGrath is confined to home under a $1 million bond. He admitted to conspiring with others from January 2004 to January 2009 to fraudulently sell credit union loans and use the proceeds to finance U.S. Mortgage's operations as well as investments for himself and the company. McGrath also admitted to diverting funds that should have been paid to credit unions for mortgage loans that were sold to Fannie Mae to help offset bad investments he made in mortgage-backed securities, prosecutors said. An attorney for McGrath, John Vazquez, said in a statement McGrath "extends his deepest sympathy" to the victims and will continue to work with authorities, Reuters reported. Court records indicated that McGrath posed as an executive for the credit unions, sold the mortgages to Fannie Mae for servicing without the credit unions' authorization, and pocketed the proceeds from the loans (News Now March 2). The mortgage companies, based in Pine Brook, N.J., filed for a Chapter 11 bankruptcy on Feb. 23 in Newark. The filing documents listed more than $200 million in debts to Fannie Mae and 19 credit unions, among others. The largest unsecured claims are 19 credit unions from New Jersey, New York, District of Columbia, Maryland, North Carolina, Florida and California. Nearly 300 creditors were listed in the bankruptcy petition's accompanying papers (News Now March 2). The mortgages are now being served by Midwest Loan Services and Symbionce Financial Solutions LLC.

Banks take cue from CUs try warm and fuzzy ads

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NEW YORK (6/12/09)--Banks may be taking a page out of credit unions' marketing books, using warm and fuzzy advertising to convey more optimism in an attempt to move on from the financial debacle of the past year. Credit unions had success the past year in their marketing and advertising efforts. They drew national media attention for their messages that they aren't part of the problem but are part of the solutions, that they are safe and sound, and that they are still lending when others aren't. Now, some banks, especially community banks, are starting to convey those same messages And those with ties to the cause of the recession are busy rebranding and airing advertisements that provide a more optimistic, brighter future, according to The New York Times (June 9). Some banks are trying to get the consumers to forget who they were. Case in point: GMAC Bank, long tied to the now-bankrupt General Motors, is now billing itself as the consumer's friend--"Ally Bank, a better kind of bank." AIU, "a unique franchise," is owned by American International Group (A.I.G.). Redneck Bank ("where banking's funner") is the name for Bank of the Wichitas online presence. Bank of America has quit using the Countrywide name because it was a lightning rod for the excesses of subprime lending, said the article. And it recently introduced ads such as "Home has a new address" and "Keep Moving Forward," which features doors opening. Citigroup and other industry giants are reviewing their public image and trying to keep a low profile, said the Times. Citi started airing public service ads, called "The Citi View." The ads provide tips on saving money.

FreedomTruMark Financial present charter argument

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PHILADELPHIA, Pa. (6/12/09)--Two Philadelphia-area credit unions--Freedom CU and TruMark Financial CU--presented their argument for community charters during a hearing Wednesday before the Commonwealth Court in Philadelphia. According to the Pennsylvania Credit Union Association (PCUA), the argument focused on the substantive issue of whether five counties in southeastern Pennsylvania constitute a well-defined local community, which is required in charter expansions (Life is a Highway June 11). Counsel for the credit unions reminded the court that substantial evidence is on the record supporting the credit unions' position. It also was clarified that the banks challenging the community charters had notice and an opportunity to be heard during the charter expansion process. "It's been a long, complex case," said Rick Wargo, association executive vice president and general counsel. "We were glad to have an opportunity to present the substantive issue regarding whether the five counties constitute a well-defined local community to the reviewing court." In a previous review of the case, the Pennsylvania Supreme Court, the state's highest court, instructed the Commonwealth Court to take a closer look at the procedures used by the Pennsylvania Department of Banking when it adjudicated challenges from certain banks and their trade groups in 2004. Freedom CU is a $360.4 million asset credit union in Warminster. TruMark Financial CU is a $1.080 billion asset credit union in Trevosa. They each were granted a community charter for five countries from the state banking department in 2004 (News Now May 12 and Sept. 29, 2008).

N.Y. CU association receives communicator awards

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ALBANY, N.Y. (6/12/09)--The Credit Union Association of New York received five awards in the 15th Annual Communicator Awards presented by the International Academy of Visual Arts (IAVA). The association’s five awards included one Award of Excellence in the newsletter category for its weekly electronic newsletter, The Point, and four Awards of Distinction for:
* Solutions, a bi-annual publication produced for the New York Credit Union Foundation, recognized in the Non-Profit category; * Connection, the association’s quarterly full-color magazine, acknowledged in the Association category; * Covera Card Solutions’ “See What We Have in Store for You” credit card promotion, recognized in the Campaign category; and * A comprehensive re-branding effort for CUC Mortgage, honored in the Financial Services category.
The 2009 competition received more than 7,000 entries from advertising agencies, interactive agencies, production firms, in-house creative professionals, graphic designers, design firms and public relations firms.

Ohio Senate passes budget without CU public funds power

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COLUMBUS, Ohio (6/12/09)--The Ohio Senate passed its version of the state budget but did not include language allowing credit unions to accept public funds, despite extensive advocacy efforts by the Ohio Credit Union League and its credit unions. John Kozlowski, league general counsel, testified during a hearing of the Senate Financial and Financial Institutions Committee in favor of credit unions being able to accept public funds (eLumination Newsletter June 10). The league also delivered letters to Senate members, and sent out an action alert to generate legislative support. A conference committee is working to resolve differences between the Ohio Senate and House versions of the budget. The league said it would continue to address the issue. “It is unfortunate that, by excluding credit unions from these state-backed initiatives, Ohio’s consumers and businesses have fewer choices and less access to programs that would benefit them,” Kozlowski said. Permitting credit unions to accept public funds is a “no cost” option that can save for taxpayers money, said the league. “Even if a single dollar does not change hands from an eligible institution to a credit union, the additional competition would draw down the cost for public entities to borrow funds and increase the rate they earn on deposited funds,” Kozlowski added.

S. Carolina league presidentCEO Parks to retire

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COLUMBIA, S.C. (6/12/09)--South Carolina Credit Union League (SCCUL) President/CEO Garry L. Parks will retire from that position, effective Dec. 31. A national search for a successor will begin as soon as possible, announced the league Thursday. At the time of his retirement, Parks, a U.S. Marine Corps lieutenant general who retired from the military after 35 years, will have served SCCUL and its affiliated organizations for more than five years. In that time, he and senior management have worked to:
* Establish a task force to assess and recommend facilities disposition; * Organize a think tank of credit union leaders, known as the Vision 2020 Committee, to provide continual input; and * Transition the League and Affiliates to a new structure that:
* Creates a new League Service Corp. for member services; * Establishes the Palmetto Cooperative Services as a limited liability company (LLC); and * Realigns the league as an advocacy-based organization.
"Each of these strategic actions is now either complete or well underway," wrote league Chairman Scott Woods to affiliated credit unions, noting that "new levels of confidence, integrity and prestige have been instilled in the league and its affiliates." With Palmetto Cooperative Services LLC established as a standalone company, the league will implement a structure to support an advocacy-based model, starting in January. "These past five years of working in an environment where the daily mantra is 'people helping people' has provided me a feeling of profound appreciation for the contributions that each employee delivers to credit unions, and the credit unions in turn deliver to members so enthusiastically," Parks wrote in a letter to employees. "I will always treasure the opportunities provided by this experience."

PCUA CEO letter to editor touts shared branches

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HARRISBURG, Pa. (6/12/09)--A letter to the editor touting credit union shared branches and written by Pennsylvania Credit Union Association President/CEO Jim McCormack was published Thursday in the Harrisburg Patriot-News. McCormack’s letter responds to a letter to the editor published in the June 3 Patriot-News and titled, “Too Many Banks.” The original letter questions the need for continued construction of branches with the availability of ATMs, Internet and direct deposit (Life is a Highway June 11). In his response, McCormack noted that credit unions “achieve greater efficiencies through cooperation. Currently 43 Pennsylvania credit unions offer their members account access through a ‘shared branching’ network. “Those members can obtain teller service at any of the 3,730 ‘shared’ credit union branches nationwide (including 90 in Pennsylvania), just like they would at their own credit union office,” he continued. “Likewise, many Pennsylvania credit unions offer surcharge-free ATM access to members of other credit unions, through CU$, CO-OP, and Allpoint Networks.” McCormack also noted that credit unions provide better rates on savings and loans, and referred readers to to find a credit union to join.

CUs offer tips for tweeting

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MADISON, Wis. (6/12/09)--Credit unions nationwide are embracing social media through Facebook and Twitter, two free websites that allow users to post updates and information about themselves. Credit unions are using the sites to connect with the communities and members they serve. The sites also are employed to reach potential members--especially the younger generations. DATCU, Denton, Texas, has been using Twitter for about two months. "We're trying to get it out to the community," Casey Braswell, DATCU marketing assistant, told News Now. DATCU began using social media to promote three new accounts for members under 24. The credit union also posts community events--with the goal of their Twitter and Facebook pages becoming sites that community members visit when they want to find local happenings. "We care about the community, and we want to be involved," Braswell said. She handles the Facebook and Twitter updates every day unless she is out of the office. It takes her about five minutes per day to post the information. Once a month, she creates a schedule with community events and other items she's researched to post. Every morning, Braswell also checks Twitter and Facebook for any messages or replies people have posted. Twitter has helped DATCU answer a lot of members' technology-related questions. DATCU recently launched Quicken and Microsoft Money, so members have posted questions about them. DATCU responds to posts within 24 hours. Credit unions should respond to posts and make the answers public in case others have the same questions, Braswell said. "It only takes a few seconds to reply," she added. DATCU, which is about 30 miles from Dallas, also hopes to use the sites to reach students at local universities and a junior college. When using Twitter or Facebook, credit unions should avoid making their pages solely about products. "Let it be a communication tool between you and your members," Braswell said. A class of business students at Southern Illinois University (SIU) at Carbondale helped launch SIU CU's Facebook page last October. SIU, which serves the university community, also hired a marketing intern who regularly updates the credit union's MySpace, Facebook and Twitter profiles. "It's another layer to our marketing effort," Chris Sievers, SIU CU director of marketing, told News Now. The social media sites, especially Facebook, have allowed the credit union to reach new students it normally wouldn't be able to because of costs. "A lot of SIU students are from Chicago," Sievers said. "We couldn't afford to put a billboard in downtown Chicago. With Facebook, we've been able to target them [at a much lower cost]." About 60% of SIU CU's Facebook and Twitter followers are members. SIU CU posts news stories about the financial industry and promotions the credit union is offering. SIU CU has two Facebook profiles--a main profile for the credit union, and another page called "Smart Young Investors," which offers products and services to the college-aged. Credit unions looking to start social networking need to be dedicated, according to Sievers. "Social networking takes time," Sievers said. "Don't create a page and then just leave it static." Laura Higgins, director of marketing at Bellco CU, Greenwood Village, Colo., agrees. "The one thing you cannot allow is your content to get stale--nothing's worse than a dusty old site that hasn't been updated in months," Higgins said. "Fortunately, the costs are minimal--all this really takes is staff time." Bellco CU is active on several sites, including Twitter and Facebook. The tools are "ubiquitous," Higgins said. "Any public-facing organization that in 2009 has not yet embraced the full complement of online marketing channels is an organization that is shrinking instead of growing," she said. Members have responded positively to Bellco's social marketing efforts because "we're careful to put a real face on our social media entries," Higgins said. She warned against using "sanitized marketing-speak." "Credibility comes from having real human beings interacting enthusiastically on behalf of their credit union," she said. Bellco continually looks for ways to engage in more social networking. "There are hundreds of these sorts of social media and networking sites out there, with more cropping up every week," Higgins said. A Wednesday USA Today article, "There's an art to writing on Facebook or Twitter--really" addressed the effectiveness of Twitter and Facebook status updates, offering users several tips:
* Give visitors a hook--a tip, a laugh or a link; * Be thought-provoking; * Include interesting detail; * Use complete sentences with the best possible grammar; and * Post optimistic messages.
The newspaper warned Twitterers against sharing too much information, ranting, speaking in code or using slang.

Texas league offering REAL Solutions

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FARMERS BRANCH, Texas (6/12/09)--The Texas Credit Union League (TCUL) is offering REAL Solutions, a payday lending alternative, to empower Texas credit unions help those individuals of modest means and “low wealth.” “REAL” stands for “Relevant, Effective, Asset-building, Loyalty-producing” Solutions. The signature program of the National Credit Union Foundation (NCUF) works through state credit union leagues to help credit unions offer services that have proven successful for people of modest means and “low wealth.” About 20% of credit union members use payday lenders, according to the league (LoneStar Leaguer June 10). REAL Solutions is currently offered through select credit unions statewide at no cost through a grant from the Texas Credit Union Foundation. Credit unions’ enrollment in the program is for a limited time, but includes access to the upcoming REAL Solutions partner meeting at the TCUL offices in Dallas on June 25. At the meeting, participants will study successful payday lending alternative models and vote for the elements they want their Texas payday lending alternative product to have.

Pandemic is official CUs are prepared

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GENEVA, Switzerland (6/12/09)--The World Health Organization (WHO) has declared a swine flu pandemic--the first global flu epidemic in 41 years--and U.S. credit unions are prepared. The move came as a result of WHO officials meeting in Geneva, Switzerland, with flu experts who gathered to deal with a steep uptick in cases in Australia--which reported 1,263 cases Thursday, and a rising number of cases in Britain, Chile, Japan and elsewhere. In a Wednesday report, WHO said 74 countries reported 27,737 cases of the disease, and 141 deaths since the outbreak began in April (The New York Times June 12). WHO said in a statement to member countries that it decided to elevate the pandemic alert to Phase Six from Phase Five, indicating a global pandemic outbreak, the newspaper said. However, WHO officials--in attempts to avoid causing panic--emphasized that the flu has resulted in mostly minor cases and is not more deadly, now that it has been declared a pandemic. Several state credit union leagues and credit unions, as well as their service providers, have been reviewing their pandemic planning operations since the outbreak was reported in April. The California, Ohio, Kansas and Texas leagues all reported working on their operations to News Now (April 28). Money FCU, an $82.3 million-asset credit union, based in Largo, Md., said it successfully performed an entire disaster recovery test in pandemic mode last month, in which it assumed that no one could physically be at the credit union’s regular location or back-up facility. “We were able to help Money One recover all of their critical information technology systems 100% remotely in a matter of a few hours,” said Hugh Smallwood, chief technology officer for Ongoing Operations, a provider of business continuity and disaster recovery solutions to credit union clients nationwide. Money One found the situation to be a learning experience. “We took a fresh look at our plan given recent events,” said Susan Wilhelm, Money One vice president of Information Systems and Technology. “We quickly realized that under this scenario, we have two issues. The first issue is accessing physical media and systems. How can we continue to accomplish critical business functions for our members if we are physically distant? The second issue is do we have enough trained staff to perform the daily functions?” The Credit Union National Association (CUNA) has a long-term business continuity plan (BCP) and has created a BCP Committee, an internal staff committee that addresses the key components of a pandemic or business interruption, Harley Skjervem, CUNA senior vice president of human relations and company pandemic response organizer, told News Now in April. It also has placed resources for credit unions on CUNA’s websites and recently conducted a webinar on the topic. For more information, use the links.

CU System briefs (06/11/2009)

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* SKOWHEGAN, Maine (6/12/09)--A knife-wielding man wearing a hoodie and sunglasses robbed Winslow, Maine-based Tacconet FCU's Skowhegan branch Wednesday morning of an undisclosed amount. He escaped on a motorcycle driven by another man. Police later found a motorcycle abandoned on a road. Witnesses in the area said one man got into a maroon pickup truck and sped away. No one was hurt during the incident (Morning Sentinel June 11) … * BATON ROUGE, La. (6/12/09)--Eight-year-olds Eli Coleman and Andrew Carter of Baton Rouge became millionaires on June 5 as
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winners of E FCU's Millionaire for a Day Contest, in which local students wrote an essay or drew a picture on "What I Would Do With a Million Dollars." They were each presented an oversized check for $1 million by CEO Ken Bordelon. They also received a five-year, $500 share certificate and received a VIP tour of the credit union's Market Street branch. They also can keep the interest earned on a 24-hour deposit of $1 million. The students also shared lunch with real-life millionaire Todd Graves, founder and chairman of Raising Cane's Chicken Fingers, an area restaurant chain. Graves showed them the kitchen, ate lunch with them and presented them with gift buckets. He also shared advice on becoming a millionaire, staying a millionaire, and developing smart financial habits. "We look forward to seeing Eli and Andrew 30 years from now as real millionaire members of E FCU," Bordelon said. From left are: Coleman, Graves, Carter and Bordelon. (Photo provided by E FCU) …

Emotional images drive lowmod-incomers to save

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MADISON, Wis. (6/12/09)--If credit unions want to attract low-to moderate-income (LMI) consumers, they'll need to understand the LMI mindset about their personal finances and financial services, and appeal to their emotional side.
So says the Filene Research Institute's latest report, Does Imagery Matter: Delving into the Mind of low- to Moderate-Income Savers. The National Credit Union Foundation provided financial support for the report by Nick Maynard, Jeff Zinsmeyer and Tim Flacke of the Doorways to Dreams (D2D) Fund Inc. The threat of financial crisis hangs over LMI families and colors their daily financial choices, but adequate savings can build a more promising future for them, says the report. It explores LMI consumers' response to different marketing images. Consumer Researcher Maya Bourdeau and the research team used the Zaltman Metaphor Elicitation Technique (ZMET)--which elicits insights about human decision making through metaphors and storytelling--to understand attitudes of LMI households toward money and saving. The report details their findings and an "emotional involvement" continuum for marketing visuals. Even subtle imagery can strongly influence the consumer experience, said Bourdeau. For example, slow tempo music increases retail sales by as much as 35%, while timing marketing with in-branch communications creates at 10%-40% return on investments. "Consumers encounter hundreds of marketing messages each day, and this study recognizes that consumers use conscious and subconscious feelings to assess the effectiveness of these messages," said George A. Hofheimer, Filene's chief research officer. "ZMET is a useful tool for marketing professionals to tap into consumers' subconscious thoughts with compelling messages and metaphors, which can lead to more members, more savings, and a more emotionally attuned membership base." Researchers found that choosing emotionally provocative images can connect successfully with LMI consumers. They also found that the marketing can be implemented on different scales, from small to substantial, and that ZMET-based imagery may be most effective when targeted at specific segments within the LMI market. "Credit unions should consider the value of community outreach as a complement to marketing images and messages," Hofheimer said. For more information, use the resource link.