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NEW From ACUC: Indirect Lending--Yea Or Nay?

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NEW YORK  (7/2/13 UPDATED: 10:22 a.m. ET)--Do credit unions do a disservice to members via indirect lending? Or is this practice a powerful tool that allows members to obtain loans when and where they want?
That was the "great debate" Monday afternoon at the America's Credit Union Conference between two credit union lenders: Dawn Wade-Brummett, vice president of retail lending and operations for ORNL FCU, Oakridge, Tenn., and Jim Holt, CEO of MidAmerican CU, Wichita, Kan.
David Polet, CUNA Mutual Group's director, voice of customer, moderated the discussion. He polled the audience on its views of indirect lending: 58% of those polled believe it's a member-focused service, while roughly 30% disagreed somewhat with that statement.
"We must get past the stereotype of the shady dealer," said Wade-Brummett, an indirect lending proponent. She says reputable dealers often get lumped in with those that are irresponsible--similar to how credit unions sometimes are unfairly equated with banks.
"Indirect lending is about empowering members to get loans when and where they need them," Wade-Brummett said. "Credit unions should do due diligence with dealers like they do with all vendors--and they should never give control of underwriting."
Holt, meanwhile, applauded the 30% of session attendees who "had not gone over to the dark side" by working with auto dealers. "It's not good to send members into a high-pressure situation where they will be sold high-priced products.
"And do we want the people the dealers send us?" he continued. "Less than 20% of these people even qualify for other services."
Wade-Brummett offered a firm "yes" to that question. "We want these members, and every credit union should. These people live in your community. They may not fit your model, but credit unions need to extend services to those who need them. Let's introduce ourselves to them."
That's fine, Holt said, "but I don't want the first contact a member has with us to be a sales guy at a dealership. I want that to be with my employees, who've been properly trained and coached. We have trained loan officers who can fit them into the right deal--and maybe change their mind from buying a Cadillac to a Taurus."
The conference, presented by the Credit Union National Association, ends Wednesday. Be sure to visit News Now and Credit Union Magazine frequently this week to keep up with all the ACUC action in New York City. You can also follow ACUC on Twitter and LinkedIn by using the links below.

CU System Briefs (07/02/2013)

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  • LIVONIA, Mich. (7/2/13)--The merger of CUcorp into CU Solutions Group became official Monday, said the Michigan Credit Union League. The boards of the three entities announced in May that they had approved the merger (News Now May 8). CUcorp, a wholly owned subsidiary of the league, focused on serving Michigan credit unions with card solutions, lending products and consulting and partner relations. CU Solutions Group is a combination of CU Village, HRN, CUTS and Koker Goodwin that offers solutions in marketing, technology, membership enhancements and performance management. League President David Adams will continue as CEO of the league and CU Solutions Group. Drew Egan, previously president and chief operations officer at CUcorp, will stay on as executive vice president and COO of CU Solutions Group ...
  • DOVER, Del. (7/2/13)--Dover, Del.-based Del-One FCU has wrapped a 40-foot long DART Inter County Coach bus with pro-credit union messages. The bus stops include Wilmington, the Christiana Mall area, Odessa, Middletown, Smyrna and Dover, as well as breach routes during the summer months, said the Delaware Credit Union League (Together June 30). One side of the bus says "Del-One Federal Credit Union Experience the Credit Union Difference." The other side says "The One Way to a Better Life." "This is yet another way that Del-One plans to increase awareness of the credit union difference throughout Delaware," said CEO Dion Williams.  (Photo provided by the Delaware Credit Union League) ...
  • READING, Pa. (7/2/13)--CTCE FCU CEO Glenn Potteiger and Chief Financial Officer (CFO) Jerry Winchester retired on Sunday, announced Dieter Czerny, chair of the board. Both Potteiger and Winchester have given 24 years of service to the Reading, Pa.-based credit union. Cordy Kemmerer has been promoted to CEO, Patricia Shermot is now chief operations officer, and Kevin Wigoda is CFO. Collectively the new leaders total 57 years of experience with the $78 million asset credit union ...

CU Loans, Savings Up In May

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MADISON, Wis. (7/2/13)--Savings growth outpaced loan growth at credit unions in May, leading the credit union movement's aggregate loan-to-savings ratio to fall to 67.7% from 68% in April, according to the Credit Union National Association's Monthly Credit Union Estimates.
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Credit union loans grew by 0.5% in May--a 6% annualized rate.  Savings growth outpaced loan growth by a wide margin--though the disparity arose because May ended on a pay day and automatic payroll deposits caused share draft balances to increase dramatically. Savings balances increased by 9% in the month. 
"The combination of a slowly improving economy, significant pent-up demand, and seasonally strong borrowing should result in relatively strong loan growth in the coming months," said Mike Schenk, vice president of CUNA's economics and statistics department. "All else equal this should have a positive influence on credit union bottom-line results as short-term, liquid investments yielding close to zero are replaced with higher-yielding assets."
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May's asset quality improved marginally, with dollar delinquencies ending at 1.14%, which compares to 1.17% at the end of April.  The movement's aggregate delinquency rate has remained in the 1.20% to 1.14% range for the past year, though it is substantially improved compared to the year-end 2011 reading of 1.6% and the 1.85% cyclical high recorded in January  2010.  The movement's long-run average aggregate delinquency rate is about 1%.
CUNA economists continue to stress the likelihood of slow improvement in economic conditions, with a continuation of slow labor market improvement, marginal income gains and more loan growth.  "This suggests that the improving asset quality trends we've seen will continue in the coming months," Schenk told News Now.  "More important, the improvements are likely to push the aggregate delinquency rate back down near the 1% long-run norm in 2013."
Total memberships expanded rapidly--by 0.5% (an annualized 5.5% rate)--during May. "That rate of growth will obviously not be sustained throughout the year, but the data do show credit union memberships are up by 2.5%, compared to year-ago levels and are up 1.5% on a year-to-date basis," Schenk said. "By way of comparison, the U.S. population grows at an annual rate of slightly less than 1%--a clear indication that more consumers continue to recognize the credit union difference and understand that credit unions are the best choice for consumer financial services."
From an economic perspective, the U.S. economy continues its slow, unsteady recovery, said CUNA economists.  Further improvement has lately been constrained by big declines in government spending and investment, Federal Reserve policymakers that seem to be sending mixed signals on the potential for quantitative easing (QE3) "calibration" and more cracks evident in overseas economies--particularly in China.
Nevertheless, consumers are engaged.  Personal consumption activity has been fueling economic growth and (by extension) labor market improvement.  With the federal funds interest rate expected to remain low through 2014, a robust housing market recovery (with big upside potential) and consumer confidence at its highest level since January 2008 more improvement-- both in the economy and in credit union operating results is expected in the coming months, CUNA economists said.
"Looking forward, these macro-developments should translate to marginally faster loan growth, further improvement in asset quality and higher capital cushions at U.S. credit unions in the coming months."
CUNA economists said they expect:
  • Credit union savings balances to grow 6% in 2013 and 5% in 2014. Saving growth will remain below the average growth rate over the last 20 years of 6.7% as the economic recovery encourages more households to spend rather than save.  Fast membership growth of approximately 2% (twice as fast as the 1% growth in population) will help buoy savings growth.
  • Credit union loan balances to rise 5.5% in 2013 and 6.5% in 2014. "We expect households to release some pent-up demand for autos, furniture and appliances over the next two years.  New auto loans, credit card loans and purchase mortgage loans will be strong growth areas," said Schenk.
  • Credit quality will improve in 2013 and 2014. The overall loan delinquency rate will fall below 1% in 2013, the lowest level since July 2008, as job growth continues.  Provisions for loan losses as a percent of assets will fall to 0.30 percent in 2013, below the 0.43% recorded in 2007.
  • Credit union return on assets will fall to 0.75% in 2013 and 2014.  A 10 basis point (bp) decline in net interest margins will be only partially offset by a five bps decline in provisions for loan losses.  Fee and other income will decline as the mortgage refinance boom comes to an end in 2013.
  • Capital-to-asset ratios will rise to 10.9% in 2014. Capital growth will outpace asset growth over the next two years, increasing the capital-to-asset ratio.  Credit union capital ratios will approach the record level of 11.5% set in 2006, the year before the beginning of the great recession.

NEW: Use Social Media To Reach Goals, CUNA Chair Wesenberg Tells ACUC

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NEW YORK (7/3/13--UPDATED 12:25 p.m. ET)--Social media can be the catalyst in activating and rallying millions of Americans to help credit unions achieve their goals, Pat Wesenberg, board chair for the Credit  Union National Association and president/CEO of Central City CU in  Marshfield, Wis., told attendees at the 2013 America's Credit Union Conference (ACUC) this morning.
CUNA's  ACUC  in New York City  runs through Wednesday.
"Frankly, with our emphasis on people power--which is growing every day, as our recent membership growth shows--the use of social media is right in our wheelhouse," Wesenberg said.
Kristen Christian's Bank Transfer Day efforts, spawned through social media, helped add more than two million members since mid-year 2011 through the end of last year, she added.
Facebook still remains the social media behemoth--with more than 1.1 billion users worldwide, Wesenberg explained. Nearly 50% of Facebook users 18-to-34 years-old check their Facebook page when they wake up in the morning. And 28% of these young Facebook users check their Facebook page before they even get out of bed, she added.
"The point, I think, is clear: Social media is engrained around the world and here at home as the communications medium of choice for millions and millions," said Wesenberg.
Social media can perform a strong role in CUNA's Unite for Good program and Don't Tax My Credit Union Initiative, Wesenberg noted.
"We also know, the vast majority of our members--especially our most loyal members, more than 40 million who consider a credit union their 'primary financial institution'--will stand with us," Wesenberg said. "All we need to do is activate them. Because, if we use social media the right way today, it can become for us the most effective way for rallying our members."
Be sure to visit News Now and Credit Union Magazine frequently this week to keep up with all the ACUC action in New York City. You can also follow ACUC on Twitter and LinkedIn by using the links below.

ACUC: Payments Space Is Changing, CUs Need Good Timing

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NEW YORK (7/2/13)--The payments market is rapidly changing, so credit unions need to monitor the market, evaluate payment platforms and channels, and determine where to enter and exit on the product life-cycle curve, said a CUNA  Mutual Group speaker at the 2013 America's Credit Union Conference.
The conference, presented by the Credit Union National Association, runs through Wednesday in New York City.

Seventy-five percent of credit union fee income is related to the payments space because products and services related to payments generate revenue, Theran Colwell, CUNA Mutual director, strategy and business development, said in a Discovery Breakout Session sponsored by CUNA Mutual Group.
Seventy-five percent of credit union fee income is related to the payments space because products and services related to payments generate revenue, Theran Colwell, CUNA Mutual Group director, strategy & business development, said in a Discovery Breakout Session sponsored by CUNA Mutual at the 2013 America's Credit Union Conference in New York City Monday. (CUNA photo)
"That's what makes this a hot topic," he explained.
Payments are the key to being the consumer's preferred financial institution, Colwell said. With payments, there are seven platforms and two channels.
The platforms are:
  • Cash;
  • Checking system;
  • Credit card system;
  • Debit card system;
  • Automated clearing house (ACH);
  • Wire transfer system; and
  • Closed-loop systems and virtual currencies (i.e., airline rewards, Starbucks Card).
There are two channels: Electronic (Web, mobile, clearing house ATM) and physical (cash, checks). Payments move in all directions among the platforms and channels, Colwell explained. 
One trend in roughly the past 10 years is that check transactions and processing are significantly down, while the number of debit-card transactions, credit-card volume and ACH transactions are up, he added.
Notable entrants into the payments market include Starbucks (Starbucks Card), Square (Square Register and Square Wallet), Google (Google Wallet) and Target (RedCard Debit, RedCard Credit), Colwell said.   
Starbucks is known as the most successful entrant into the new payments world, with its Starbucks Card processing $2.7 billion per year, with more than 500 million transactions annually.  
The future of payments for credit unions is dependent on what members want, technology, regulation, economics and timing, Colwell said. "Timing is critical in payments," he added.
Be sure to visit News Now and Credit Union Magazine frequently this week to keep up with all the ACUC action in New York City. You can also follow ACUC on Twitter and LinkedIn by using the links below.

ACUC: Step Up Your Social Media Game

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NEW YORK (7/2/13)--During the "Step Up Your Social Media Game" session Monday afternoon at America's Credit Union Conference (ACUC) in New York City, two experts shared information on why social media is so powerful, how credit unions are currently using social media and what improvements to make to become more successful.

The message of Jason Milesko, chief impact officer at Filene Research Institute,  and Patrick Rooney, CEO of QUEsocial, was simple. The public isn't responding to basic marketing and advertising campaigns anymore. Instead the public wants to hear--through word of mouth--that the product or company is good, reliable and effective.

The Madison, Wis.-based Filene Research Institute recently conducted a survey on how credit unions are using social media. The conclusion: Credit unions have social media because they understand it is important but aren't utilizing it effectively.
To have a successful social media campaign Milesko and Rooney suggested credit unions:
  • Treat social media like any other business tool;
  • Set clear objectives, strategies and metrics;
  • Define your story and stick to it. What is your credit union story and why are you so unique;
  • Understand the landscape: who is talking, where, and how;
  • Include the three F's--Fun, Fame, Fortune. Entertain your audience, recognize and highlight your followers and give them an incentive;
  • Target and research your audience. Define who you are targeting and research what they are interested in hearing about;
  • Activate employees. Ask them to become your social media ambassadors. It will increase their pride in the organization and allow the credit union to expand its reach through its social media connections.
  • Measure, assess and adjust: Assess what you are doing and if it is working. Social media is constantly changing and requires constant modifications to your strategic plan.
  • Be consistent. Social media is only successful if you cultivate relationships, which is built on being a constant reliable source of information.
"We are only bound by the limits of our creativity. There is so much we can do. The sky is the limit," said Rooney.
Throughout the presentation, Rooney and  Milesko presented multiple examples of successful social media campaigns companies have created showing that social media is an inexpensive yet powerful tool in which to invest.

The conference, presented by the Credit Union National Association, ends Wednesday. Be sure to visit News Now and Credit Union Magazine frequently this week to keep up with all the ACUC action in New York City. You can also follow ACUC on Twitter and LinkedIn by using the links below.

ACUC: Act To Secure Future, Cheney Urges CUs

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NEW YORK (7/2/13)--The time has come for credit unions and their members nationwide to take action to protect credit unions, reduce regulatory burdens and prepare for the future, Bill Cheney, president/CEO of the Credit Union National Association, told attendees in his opening remarks Monday morning at the 2013 America's Credit Union Conference (ACUC).

Click for slide show Bill Cheney, president/CEO of the Credit Union National Association, outlined three key initiatives during his opening remarks on Monday at the America's Credit Union Conference: Unite for Good, Don't Tax My Credit Union, and Plan to Win. (CUNA Photo)

The ACUC started Sunday and runs through Wednesday in New York City.
"Credit unions have done a tremendous job responding to and recovering from the financial crisis," Cheney said. More than 700,000 net new members have joined U.S. credit unions in the first three months of this year, he noted.
Three key initiatives are underway to help credit unions thrive in the future: Unite for Good, Don't Tax My Credit Union, and Plan To Win, Cheney said.
The "Don't Tax My Credit Union" national campaign has taken credit unions from defending the tax exemption to advocating for it, Cheney noted. The threat level has increased because Congress is taking a "blank sheet of paper approach" to tax exemptions. "We need to get back on that blank sheet of paper," he added. 
Unite for Good seeks to have the whole credit union industry speak with one unified voice to remove barriers, increase awareness and foster service excellence for credit unions in reaching the strategic vision in which "Americans choose credit unions as their best financial partner." "This is a long-term project," Cheney explained.
Plan to Win is "a 535-seat strategy" to reach every member of Congress by developing a communication strategy, Cheney said. The plan focuses on local and national media relations, shaping the views of opinion leaders, and using social media to its full capacity in support of advocacy efforts.
Plan to Win also continues to work on increasing credit union political activity in terms of political action committee contributions, as well as individual contributions, he said.
The three CUNA initiatives are "synergistic," working together to create enhanced effects, Cheney said. 
"With your help, we can convince millions and millions of Americans to support credit unions, and millions and millions of Americans to flock to credit unions and make them successful in the future," Cheney concluded.
Be sure to visit News Now and Credit Union Magazine frequently this week to keep up with all the ACUC action in New York City. You can also follow ACUC on Twitter and LinkedIn by using the links below.

ACUC Speaker Gladwell: Bigger Isn't Always Better

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NEW YORK (7/2/13)--Being an underdog isn't such a bad thing after all.  In fact, much of what people consider to be weaknesses turn out to be strengths, best-selling author Malcolm Gladwell told America's Credit Union Conference Monday morning in New York City.

The conference, presented by the Credit Union National Association and attended by more than 1,200, ends Wednesday.
"A lot of our intuition about what an advantage is and what a disadvantage is, is wrong," Gladwell said. "Bigger isn't always better and being powerful in a marketplace doesn't ensure future success."
That's because large leading companies often innovate less, they're less nimble, and they're further from their customers, he said.
Conversely, underdogs often resort to unconventional methods, hard work, and sheer determination to compete with their larger rivals.
That's good news for credit unions, which are decided underdogs compared to their banking rivals in terms of resources.
Gladwell cited legendary college basketball coach Rick Pitino as a prime example. Pitino is one of the few coaches to use a full-press approach to the game, whereby players contest every inbound pass.
Despite his success, including an unlikely Final Four appearance with Providence College, few coaches mirror his approach. Why?
"They don't do this because it's hard," Gladwell said. "Playing conventionally is easy. What's different, rare and scarce is effort, not resources.
"When looking at innovators who make lasting contributions," he continued, "you see the same traits again and again: they're creative, conscientious, and disagreeable because they feel that they're right."
Admitting he's the only member of his family to not be a credit union member, Gladwell urged credit unions to spread the word about how they differ from other financial institutions and the benefits those differences provide.

CUs, State Regulator Meet On 'Reasonable Director Compensation'

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FEDERAL WAY, Wash. (7/2/13)--Washington state credit union movement leaders and consultants met June 20 with the Washington Department of Financial Institutions (DFI) to begin discussions on how "reasonable" credit union director compensation will be defined.
It was the first such meeting since the state legislature passed an updated Credit Union Act, which allowed for credit unions to pay board members, said the Northwest Credit Union Association (Anthem Recap June 25). Gov. Jay Inslee signed the measure into law on April 22.
The DFI  intends to have board compensation rulemaking completed by the end of the year, with an effective date of Jan. 1, said DFI Director Linda Jekel. She indicated that credit unions could begin compensating board members by July 28, the date the updated law becomes effective, but urged them to wait until DFI issues its proposed rule, CR102.
Jekel asked NWCUA to help identify and lead a work group to review Washington's model bylaws, which were last updated in 2001. Washington credit unions interested in helping to review the bylaws can contact John Trull, NWCUA's director of regulatory advocacy.
"The right balance between guidance and rulemaking was a significant topic of discussion at the meeting," said Hal Scoggins, principal attorney at Farleigh Wadda Witt. He noted that most participants were "seeming to be in favor of guidance."
"Some of the things that guidance may cover are the board nominating process, fair and open elections, verifying election results, and board qualifications," Scoggins reported.
NWCUA encouraged credit unions considering board compensation to review guidelines issued by the Internal Revenue Service on what tax-exempt organizations should consider in setting executive compensation.

Louisiana League Equips CUs With Fin Counseling Know-how

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HARAHAN, La., and MADISON, Wis. (7/2/13)--Credit unions in Louisiana have embarked on a new program that promises to give members another benefit through credit union membership through access to certified financial counselors.
Click to view larger image Louisiana credit unions participate in a new blended training program that offers staff affordable training as certified financial counselors. The Louisiana Credit Union League teamed with the National Credit Union Foundation's REAL Solutions Program and the Credit Union National Association's Center for Professional Development for the program. (Photo provided by the National Credit Union Foundation)
Working with the National Credit Union Foundation's REAL Solutions Program and the Credit Union National Association's Center for Professional Development, the Louisiana Credit Union League has continued its affordable training program that kicked off for credit union staff in January with 57 individuals from 22 credit unions and the league participating.
The program combines the lower cost and convenience of CUNA's self-study Credit Union Financial Counseling Certification Program (FiCEP) with webinars and local in-person training and networking. Once participants successfully complete the FiCEP training and pass eight proctored exams, they earn the Credit Union Certified Financial Counselor (CCUFC) designation.
In June, more than 30 individuals earned their CCUFC designations, and more than 30 are expected to earn the designation in July. Certificates will be presented to individuals during chapter meetings around the state in August and September. The league also plans to offer the program again in January.
"We are so encouraged by the tremendous response we've seen to this program from our credit unions, and the students have been so enthusiastic and eager to learn," said Jennifer Green, league vice president. "We believe it will help credit unions make an incredible difference in their members' lives."
She noted that "credit unions are in a unique position to provide both education and counseling to members to help them improve their financial future."

Anti-BofA Sidewalk Chalk Protester Found Not Guilty

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SAN DIEGO (7/2/13)--A jury Monday found a 40-year-old man not guilty of vandalism charges brought for writing protest messages in sidewalk chalk in front of three Bank of America branches in San Diego.
Jeff Olson had been charged with 13 counts of vandalism by City Attorney Jan Goldsmith for writing statements including "No thanks big banks" and "Shame on Bank of America" on the sidewalk outside a BofA location between February and August 2012 (Fox 5 San Diego).
Olson, a Bank Transfer Day proponent and a member of California Coast CU in San Diego, faced 13 years in jail and a $13,000 fine if convicted of the charges.
Olson's attorney Tom Tosdal said vandalism law requires that jurors find something was "maliciously defaced," but Olson's purpose was to inform, Tosdal said.
Several news reports indicate that BofA officials pressured local authorities for months to arrest Olson. They reported several e-mails from one BofA official asking for progress on the case. That official had allegedly confronted Olson and another man in front of a BofA branch, accusing them of running a business outside the bank (News Now June 27).
Olson told media he carried a homemade sign promoting Bank Transfer Day outside one branch but decided his time would be better spent at the banks, trying to convince people to ditch their banks for local credit unions. He noted that was the best way to hold executives and corporations accountable for the financial crisis.

ACUC: Cybersecurity Session Outlines Trends

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NEW YORK (7/2/13)--With data breach trends exponentially growing and becoming more frequent, cyber security is a topic that every credit union is being forced to address and take seriously.
During Monday's Cybersecurity session at the America's Credit Union Conference, John Mullen Sr. of Nelson Levine de Luca and Hamilton, and Mark Greisiger, president of NetDilligence, reported data breaches jumping from 1,100 in 2004 to 2,600 in 2012.
They outlined the main threats from data breaches in two categories, non-malicious and malicious.
Non-malicious threats include staff mistakes such as losing a laptop, marketing mishaps, innocent customer data leaks and networking operations. Malicious threats include stealth hackers, rogue contractors or a breach from a planned hack on a system.  Non-malicious are the most common, they said.
Common issues with data breaches are decentralized information technology (IT) operations, hacking (SQL injections), the common loss of a laptop with client data, loss of backup tape,, staff mistakes and breaches of vendor and business partners.
"I hear all the time from credit unions that they believe they are too small for someone to want to hack into their systems," Mullen said. "What they don't realize is they aren't dealing with Bill Gates sitting in his garage planning and plotting his attack. Hackers use programs which provide information about which systems they will be able to attack successfully."
He went on to stress that although protecting the credit union from data breaches and cybersecurity attacks can be very expensive, it is a precaution that is necessary. With the average cost of a breach claim totaling $1 million, it is worth investing in educating the credit union's IT personnel on how to handle and prevent these attacks as well as allowing a third party to double check that the credit union's preventative measures are successful, he concluded.