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McGrath to give up parking lot to make restitution

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NEWARK, N.J. (6/16/09)--Michael McGrath, who pleaded guilty Thursday to swindling credit unions and others out of nearly $140 million while he headed the now bankrupt U.S. Mortgage Corp. and CU National Mortgage, will lose his interest in a Hoboken, N.J. parking lot to help make restitution. McGrath, who will also forfeit several bank and brokerage accounts, said he used some of the money obtained by selling fraudulent loans to credit unions to cover cash flow problems with U.S. Mortgage's operations as well as personal investments, such as the parking lot (The Jersey Journal June 15 and June 11). The restitution totals about $13 million. The rest of the swindled funds is lost in bad investments. McGrath admitted he directed the servicing manager of U.S. Mortgage to generate false reports for credit unions stating that their loans--which he had sold to Fannie Mae--were still in their portfolios, and to modify data in U.S. Mortgage's servicing system. He also admitted he directed the company's chief financial officer (CFO) to pay off or make monthly payments to credit unions for the fraudulent loans, and directed the CFO and a subordinate to falsify documents. In other actions involving the case, the company's surety bond insurer, Zurich American Insurance Co. and one of its units, Fidelity and Deposit Co. of Maryland, filed a motion Friday with the U.S. Bankruptcy Court seeking relief from a stay that prevents the company from withdrawing and canceling its surety bonds on behalf of U.S. Mortgage Corp. U.S. Mortgage filed for a Chapter 11 bankruptcy on Feb. 23. On April 1, its subsidiary, CU National Mortgage filed for Chapter 11. The court granted the bankruptcy applications on April 13. Before the petition date, Zurich issued 13 surety bonds to U.S. Mortgage. Two of the bonds were cancelled before the petition date. According to the motion filed in court, Zurich says that U.S. Mortgage and CU National Mortgage have ceased originating loans and no longer need the surety bonds to support or guarantee its business operations. The motion filed noted that since the surety bonds continue to secure U.S. Mortgage's obligations up to their withdrawal and cancellation, "U.S. Mortgage is in effect continuing to use the surety bonds as post-petition credit without Zurich's consent or agreement." Zurich is seeking adequate protection in case the mortgage company contests the request to withdraw and cancel the bonds. Zurich is also filing "an administrative priority claim" totaling $21,705.54 for premiums for the surety bonds "that provided a benefit to U.S. Mortgage's estate after the bankruptcy filing." McGrath faces 150 to 240 months in prison. He will be sentenced on Oct. 1.

Ex-sponsor closes shop CU glad it diversified

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ODESSA, Texas (6/16/09)--Complex Community FCU is glad it made a decision in 1995 to expand it membership to all of Odessa, Texas, from its previous membership of only employees of Odessa Petrochemical Complex. The complex is closing. Today, the credit union serves 27,000 members and 11 counties, said Jason Berridge, CEO of Complex Community. It will open a new branch in Andrews, Texas, in August (Odessa American June 13). “We were looking ahead,” credit union board member Jack Westerfield told the newspaper. “Even though we didn’t think this would ever happen out here, in other locations, credit unions were having problems [with sponsor closures].” Although the credit union’s branch near the chemical plant normally was packed on paydays, it no longer is used only by employees. However, Berridge is concerned about the loss of the plant, he told the paper. “I hope it doesn’t have a major effect on the credit union,” he added. “But when you lose 500 jobs, it’s going to have an effect. You just don’t know what the end result will be.”

CUNA Mutual considering appeal in credit life case

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MADISON, Wis. (6/16/09)--CUNA Mutual Group says it is considering an appeal of a federal jury's "excessive" $6.2 million award Friday over its denial of a credit life disability claim on a former school teacher's home equity loan. The jury in Rapid City, S. D., awarded $200,000 in compensatory damages and $6 million in punitive damages to the estate of Teri Powell, who died of cancer in 2007. Her personal representative, Sharon McElgunn, and Powell's attorneys continued to pursue the case. Powell purchased disability insurance from the company in 2001 on a home equity loan and stopped working the following year because of deteriorating health. In 2005, she was diagnosed with cancer and applied for benefits as far back as 2002, the year she stopped working. CUNA Mutual denied the claim, saying she had not contacted the company when she first became disabled in 2002. "CUNA Mutual carefully examines each claim and pays benefits due under the policy," said CUNA Mutual in a statement. "In this case, we talked with Ms. Powell about the claim, explained how she could have our decision reconsidered and ultimately paid all of Ms. Powell's benefits after working with her on the claim. "As a closely regulated industry, CUNA Mutual routinely works with regulators to review claims handling practices. We are fully transparent, and the interpretation of the policy that the plaintiff’s lawyer challenged was one that our regulators have reviewed in the past and raised no question. And we are currently working with regulators to discuss how best to handle this situation. We have also had other courts examine this type of claim and [they] agreed that CUNA Mutual properly handled the claim. "As a mutual insurance company, our responsibility is to administer our claims fairly. We consistently meet that responsibility. In 2008, CUNA Mutual paid out $1.6 billion is benefits to policyholders, of which $385.6 million was in claims for credit insurance. While Teri Powell’s situation was tragic, we disagree with the verdict and believe the award to be excessive. As such, we are considering an appeal in this case."

Dover FCU in Delaware to hit 250M assets

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DOVER, Del. (6/16/09)--Dover FCU was recently recognized as the first credit union in Delaware to grow past $250 million in total assets. The recognition is a sign of the credit union’s strength and ability to meet the financial needs of families statewide, said the Dover, Del.-based credit union. “It is rewarding to have over 35,500 members who have chosen Dover Federal as their financial partner for more than 50 years,” said David Clendaniel, president/CEO. “Our members have trusted us to provide smart financial solutions and that confidence has allowed the organization to truly excel even during tough times.” Dover FCU was chartered by a group of Air Force and civilian workers at Dover Air Force Base in 1958. Today, it serves members, encompassing the military, Delaware families and more than 300 different select employer groups and organizations statewide. There are six credit union branches statewide, with the corporate center in Dover.

Members United Corporate closes Minn. branch

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WARRENVILLE, Ill. (6/16/09)--Members United Corporate FCU will cut its work force by 39 employees and close its Eagan, Minn., branch in 2010 to curtail costs and eventually build capital. The separation dates for the employees will be staggered, Victor Vrigian, Members United senior vice president of marketing, told News Now. The cuts are on top of 84 positions eliminated at the corporate in December. David Preter, president of the corporate, was among the staff reductions in December. After a one-time charge in June for severance and other benefits, Members United said the latest reduction in work force and other changes will result in ongoing savings to its operations of $6.5 million per year--$5.9 million of this will be realized in 2010. When fully implemented, and added to the reductions made last December, the reductions will reduce the corporate’s workforce by 38%. The cuts will realize an ongoing operational cost savings of $18.9 million per year. Reductions have occurred at all levels of the organization. Members United will reduce the size of its office space in Auburn, Mass., in 2009, and Indianapolis in 2010. “The actions announced Friday, although difficult, are a necessary response to the ongoing financial crisis,” said Joseph P. Herbst, Members United CEO. “Moreover, these changes are an essential building block toward the rebuilding of Members United as a smaller, leaner corporate credit union.”

Keeping CU control of networks important--survey

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TALLAHASSEE, Fla. (6/16/09)--Credit union executives surveyed say that keeping control of ATM and point of sale (POS) networks is important to the credit union movement. If they lost control, the executives predicted that the movement would see increases in price and decreases in income.
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The survey was conducted by Credit Union 24, a surcharge-free, credit union-owned, ATM and point of sale network. About 153 credit union executives responded. Easy access to a large network of surcharge-free ATMs is important for credit union members, according to 89.2% of credit union executives polled, and 71.3% said a credit union-owned point-of-sale (POS) network is important for the credit union movement. About 67.4% polled said that if credit unions lost control over ATM and POS access, a price increase/income decrease would occur. Currently credit unions have access to the largest fee-free networks in the nation, with more than 50,000 surcharge-free ATMs and hundreds of thousands of POS terminals at merchants. The statistics show the success achieved from credit union networks that address the direct needs of credit unions and their members, said CU 24. It also concluded that credit unions can evolve these services to even better address members' needs--when credit unions have direct control over these member-contact points. "From these results, credit unions can see the overall picture of where their products and services rank among credit unions," said Jim Park, CU 24 president/CEO. "It also allows networks to more accurately gauge where and how we need to focus our efforts to give credit unions the tools they need." About 61% of responding credit unions said that attracting consumers to become new members in the movement is the No. 1 challenge facing credit unions today--more than the 59% who cited the current economic climate as the main challenge. Roughly 67% said that consumer misunderstanding of credit union benefits over banks is the greatest challenge in attracting new members and directly affects credit union growth in a volatile economic climate. "The survey illustrated that credit unions are currently utilizing multiple products and services that ensure the longevity of their credit union, the overall credit union movement, and the individual credit union member in this challenging economic climate," said Mansel Guerry, president/CEO of Mississippi Employees CU, Jackson, Miss., and CU 24 board chairman. CU 24 also asked what challenges credit unions are experiencing and identified how credit unions are addressing those challenges. The results can help credit unions see "where to focus their membership outreach efforts and target consumers with the elements of credit union membership that benefit consumers most," said Guerry. A majority of credit unions surveyed were currently promoting free checking, online banking, surcharge-free ATM access, and lower fees on mortgages and loans to attract new members. Those polled said promoting these elements will help achieve growth. Guerry noted that credit union members benefit from being a part of the member-owned structure and from being a part of participant-owned networks, which "provide credit unions and their members with a direct voice and choice in their financial services decisions." The survey also asked credit union leaders what they look for in choosing a credit union service organization (CUSO). More than half said that credit union-owned CUSOs do a "better job" of serving credit unions. More than 70% look for exceptional customer service from a CUSO, while 40% look for flexible programs that are customizable.

Survey Non-members like online bankingbill pay

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MADISON, Wis. (6/16/09)--When it comes to preferred service delivery channels, non-members report they are using Internet banking and bill pay more frequently now than a few years ago, says a new Credit Union National Association (CUNA) survey.
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About 68% of non-members who use Internet banking and 62% of online bill payment users report an increased use, according to the 2009-2010 Survey of Potential Members: Membership Growth Strategies. Also, 59% of debit/check card users employ the cards to pay for purchases more often now than three years ago. “Many industry analysts believe that online banking and bill pay have reached the point where credit unions must offer them not just to compete for new members, but to retain current members as well,” said Jon Haller, CUNA director of business-to-business publishing. “Credit unions should also consider adding online loan application capabilities, preferably with an automated approval feature, if they have not done so already.” The survey uncovers new issues, opportunities, and strategies for reaching more than 100 million potential members. The survey breaks down this group by:
* Membership growth opportunities, demographics, and eligibility; * Keys to attracting more members; * Loyalty to current primary financial institution, including overall satisfaction and net promoter scores; * Use of financial services such as convenience, savings, and loan services, along with loan usage and outstanding loan amounts; and * Delivery channels, use and frequency of the most common channels for members versus eligible non-members.
Each chapter concludes with strategic considerations and suggestions on how to best identify and leverage a credit union’s competitive advantages to attract eligible non-members from their current providers. Also, the 2009-2010 National Member Survey--CUNA’s companion report to this survey--reveals trends involving members’ use of financial services and attitudes. It also addresses strategies to build loyalty and attract more business. The report provides information and analysis related to members’ demographics, satisfaction, interest in new services, delivery channels and more. For more information, use the link.

CU System briefs (06/15/2009)

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* BOSTON (6/16/09)--During his recent visit with two Boston area credit unions, National Credit Union Administration (NCUA) Vice Chairman Rodney E. Hood learned about Harvard University Employees CU's (HUECU) new Custom Loan Program for Harvard University Graduate Students. The plan provides financial assistance to students at Harvard's 13 graduate schools and is available to domestic and international students. It couples competitive loan terms with flexible repayment options. He also discussed credit union issues with Susan Elliott, president of the Federal Home Loan Bank of Boston, and Eric Rosengren, president/CEO of the Federal Reserve Bank of Boston. Hood also met with Winthrop FCU and CEO Joe Clark to discuss the importance of serving low-income individuals in underserved areas. From left are Gene Fokley, HUECU president/CEO; George White, HUECU board chairman; Hood; and Dan Egan, president, Massachusetts Credit Union League. (Photo provided by the National Credit Union Administration) … * CONCORD, Calif. (6/16/09)--A global positioning system (GPS) device dropped into one of the bags of money helped nab two men suspected of robbing DC FCU, Concord, Calif., Friday. A man wearing a blue bandanna and carrying a duffle bag entered the credit union, collected an undetermined amount, and got into a getaway car. The suspects were detained in Pittsburg, Calif. (Mayor of via June 12) … * BEAVERTON, Ore. (6/16/09)--The Credit Union Association of Oregon (CUAO) has hired Jennifer Wagner as its new director of credit union advocacy. Wagner will oversee CUAO's grassroots advocacy efforts including the CU Advocate program, Credit Union Legislative Action Committee fundraising and other legislative outreach initiatives. Previously Wagner worked as a field representative and legislative assistant for several Oregon congressional members and state representatives including U.S. Reps. Kurt Schrader (D-5) and Darlene Hooley. She also was campaign manager for state Rep. Greg Macpherson. Wagner succeeds Kasey Rockwell, who is now CUAO's director of credit union development … * RANCHO CUCAMONGA, Calif. (6/16/09)--The California and Nevada Youth Involvement Network (CNYIN), in partnership with the Richard Myles Johnson (RMJ) Foundation, awarded its second annual School of the Year Award to Liberty High School in Napa, Calif. It was nominated by Marlene Myers, financial education officer with Travis CU, Vacaville, Calif. Liberty High School, a court community school for students suspended or expelled from a comprehensive campus, received $1,000 as the winning recipient. The award is sponsored by CNYIN, the RMJ Foundation, and contributions from American First CU, Brea, Calif., and Greater Nevada CU, Carson City, Nev. From left are Liberty High School teacher MariJo Dickerson; Travis CU's Myers; and Napa County Superintendent of Schools Barbara Nemko, Ph.D. (Photo provided by the California Credit Union League) …

CU interconnectivity improves Guatemalan service

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CHIQUIMULA, Guatemala (6/16/09)--An interconnectivity device that links Guatemalan small businesses to local credit unions allows members to access their accounts and pay for purchases electronically, boosting business for merchants and credit unions.
Click to view larger image Brian Branch, World Council of Credit Unions executive vice president and chief operating officer (left), visits Guatemalan sporting goods merchant Flavio Sontay to discuss point-of-sale (POS) technology. The POS device can be seen in the foreground. (Photo provided by the World Council of Credit Unions)
Sporting goods merchant Flavio Sontay knows the way to improve his competitive edge is to offer products and services his customers need. In addition to stocking a complete line of soccer balls, athletic shoes and other related merchandise, Sontay is installing a point-of-sale (POS) device that links him to Cooperativa de Ahorro y Crédito Integral San José Obrero R.L (COOSAJO), the credit union that supports his two retail stores. The POS device will enable customers who are credit union members to pay for purchases at the store electronically and withdraw cash from their accounts. “The young people who come here to buy sports equipment are always in a hurry,” said Sontay, whose stores serve Chiquimula, an eastern Guatemalan city of more than 300,000 residents. “They do not want to stop at the credit union to pick up cash and then come to my store to shop, so I will let them do both things here.” In addition to providing convenience, both Sontay and COOSAJO will make a few cents on each transaction. That’s different than the 8% fee the merchant would pay for sales charged on an international MasterCard or Visa, which Sontay now feels less obligated to accept. The POS device is an added advantage that has attracted more businesses to the Central American country's credit unions, according to Brian Branch, executive vice president and chief operating officer for World Council of Credit Unions (WOCCU). “The credit union-issued debit cards work throughout Guatemala's credit union system” Branch said. “Members can access their accounts from any credit union branch, ATM or POS device across the country, paying just a few cents per transaction for the convenience.” Guatemala’s electronic transaction network, similar to those that link credit unions and their members in several Latin American countries, is also part of WOCCU's outreach development plan. Guatemala’s network follows networks already established in Ecuador and Bolivia and is the model for services soon to be offered in Peru. The emphasis on electronic transactions is a new addition to development strategies that in many countries previously focused on marketing efforts and brick-and-mortar facilities, Branch said. “Much of WOCCU's current outreach strategy involves technology applications that expand services into rural areas,” he explained. “We have successfully experimented with service extensions through ATMs, POS devices, personal data assistants and mobile phones.” COOSAJO began its electronic efforts by installing lobby ATMs to reduce teller traffic in late 2008. It took some time for members to warm up to the machines for several reasons, including past negative experiences with electronic transfer technology at other institutions. The credit union addressed such concerns by stationing a receptionist near the ATM who trained members on the equipment. The ATM has since been moved to an enclosure outside the credit union, where transactions have tripled since its initial installation. With the growing acceptance of electronic transaction options, particularly POS devices, merchants like Sontay, have seen increased sales and modest fee income. COOSAJO and other credit unions also benefit from growing acceptance of the technology by members and other area businesses. “The credit unions are gaining trust, along with higher transaction rates, by providing services from gas stations, convenience stores and local restaurant franchises,” Branch said. “They see the greater benefit of being able to serve more members more effectively and more often.”