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Network Solutions breach affects nearly 574000 cards

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HERNDON, Va. (7/30/09)--A Web services provider that caters to small and mid-sized online retail businesses announced last week that hackers had broken into its servers and stolen information on 573,928 debit and credit card accounts from 4,343 customers during the past three months. Network Solutions, based in Herndon, Va., discovered in early June that hackers had gone into services that provide e-commerce services such as website hosting and payment processing to about half of its customer base. They left a malicious code, which has been removed. Credit unions could suffer some peripheral losses if members see fraudulent expenditures on credit or debit cards they used to purchase items from the retailers involved or if they have a number of members who need their compromised cards re-issued. "It was determined that the code may have been used to transfer data on certain transactions for approximately 4,343 of our more than 10,000 merchant websites to servers outside the country," Network Solutions said on, a website the company created to deal with questions about the hacking. "The code may have captured transaction data from approximately 573,928 cardholders for certain date periods this spring. Exposure varied by merchant, but in all cases it took place sometime between March 12, 2009 and June 8, 2009. Transactions after June 8, 2009, were not exposed to the unauthorized code," the company said. The company said that so far, it had no reports or any other reason to believe that the stolen information has been misused. It removed the code promptly. All of the e-commerce servers are functioning properly and no servers supporting customers were affected. Network Solutions has begun notifying retailers affected and is offering to notify the retailers' customers as well. It also is offering to pay for 12 months of credit monitoring service through TransUnion for each consumer whose data were compromised.

MDDCCUA testifies for Baltimore fin-lit resolution

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BALTIMORE (7/30/09)--The Maryland and District of Columbia Credit Union Association (MDDCCUA) was among those testifying on behalf of a financial literacy resolution, which passed unanimously, at a Baltimore City Council education subcommittee hearing July 23. The resolution, introduced by Councilwoman Helen Holton and co-sponsored by 11 of the 13 members of the council, requests the new Board of School Commissioners and the CEO of Baltimore City Schools to examine the feasibility of requiring students to pass a course in financial literacy before they can graduate (FOCUS Newsletter July 27). Seven counties in Maryland already have financial literacy requirements. During his testimony, Brian Tate, MDDCCUA's vice president of legislative affairs, encouraged the council to approve it unanimously. Other supporters attending included Dorothea Stierhoff, senior public affairs specialist from MECU; Dr. Alan Cox and Mary Ann Hewitt from the Maryland Coalition of Financial Literacy; and Chris Dipetro of the Mid-Atlantic Financial Services Association. MDDCCUA is a member of the coalition and MDDCCUA CEO Mike Beall is a member of the coalition's Executive Committee. Members of the coalition include several credit union representatives. Among them, Stierhoff; Rob Windsor, CEO of First Financial FCU; Richard Webb, CEO, Atlantic Financial FCU; and Kalimah Mathews, business development manager, Signal Financial FCU. The next step will be to present the resolution before the City Council. MDDCCUA said it will continue monitoring its progress.

CU System briefs (07/29/2009)

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* WASHINGTON (7/30/09)--The District of Columbia office of the Maryland and District of Columbia Credit Union Association (MDDCCUA) has moved to 401 C Street NE, lst Floor, Washington, DC 20002. The new facility is located next to the Credit Union House and provides offices for MDDCCUA staff and meeting space. Vice President of Legislative Affairs Brian Tate and Director of Public Affairs Sarah Turner have offices in the new facility. Their phone numbers have not changed. The association said the new space keeps a strong local presence in the district, is close to Capitol Hill and is more economic (FOCUS Newsletter July 27) … * COLUMBUS, Ohio (7/30/09)--Ohio Credit Union Foundation (OCUF) says it is well on its way to its goal of providing $250,000 in grants this year. During the first six months of 2009, the foundation awarded more than $150,000 in grants to promote financial independence through credit unions. It funded six financial education grants totaling $112,901 for student education and awareness programs, student-run credit unions, production of Biz Kid$, and creation of a money skills board game. It helped 27 credit union leaders attend 10 state and national professional development opportunities. And it provided an outreach grant to secure the services of a professional grant writer to seek funds for establishing a new Latino credit union in South Toledo. OCUF also has contributed to the World Council of Credit Unions' disaster relief fund to assist credit union employees, volunteers and members affected by brushfires in Australia (eLumination Newsletter July 22) … * SEATTLE (7/30/09)--Della Dimond, a former bookkeeper at Alaska Airlines/Horizon Air Employees FCU, Seatac, Wash., was convicted Thursday of embezzling nearly $109,000 in $50 and $100 bills from the credit union between November 2001 and November 2003. U.S. District Judge John Coughenour convicted Dimond of one count of embezzlement of credit union funds and set a sentencing date of Oct. 30. Dimond began work at the credit union in 2001 and was the sole employee responsible for counting cash daily. In November 2003, credit union officials discovered a large amount missing. She quit the credit union. She faces up to 30 years in prison (Seattle Times July 27) … * BRIDGEWATER, N.J. (7/30/09)--Financial Resources FCU Foundation announced it has raised $15,000 at its annual charity event to benefit Ocean of Love, an organization dedicated to helping children with cancer and their families. Sponsoring the event were Diebold Inc. of North Canton, Ohio, and James Toyota Scion of Flemington, N.J. For the past 17 years, the credit union and its foundation have raised more than $375,000 to benefit charities and medical institutions that provide services to needy children, reported the New Jersey Credit Union League (Weekly Exchange July 20) …

Mass. CUs among initial lenders in homebuyer program

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BOSTON (7/30/09)--Massachusetts Gov. Deval Patrick announced the approved lenders that will participate in the MassHousing First-Time Homebuyer Tax Credit Loan Program. The group includes several credit unions. The program will allow first-time homebuyers to borrow up to $8,000 in advance of their federal tax credit for homes purchased with a MassHousing loan before Dec. 1. Credit unions involved with the program include:
* Greater Springfield (Mass.) CU; * Holyoke (Mass.) CU; * Metro CU, Chelsea, Mass.; and * St. Anne’s of Fall River (Mass.) CU.
To qualify, buyers must have a MassHousing mortgage through an approved lender, use the home as a principal residence for a minimum of three years, and purchase a one, two, three or four-family home from a seller unrelated to the buyer by Dec. 1. Buyers will have the principal and interest payments on the tax credit loan deferred from the time of closing until the loan due date of June 1. If they do not repay in full, it will be amortized for 10 years at the same interest rate as their first mortgage loan.

Small-biz-loan demand up Schenk tells CNBC

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NEW YORK (7/30/09)--The demand for credit union small business loans is up, a Credit Union National Association (CUNA) economist told CNBC. Mike Schenk, CUNA senior economist, told the network Tuesday that demand for small business loans at credit unions has increased 6% compared with commercial banks. CNBC also mentioned a small business owner who received a loan from a credit union at 0% interest. CUNA provided the news outlet with information that led to the interview. The loan will save business owner Harley Nobli $22,000 in interest per year. “The credit union was able to loan the money when the community and commercial banks were not,” Nobli said. CUNA has said that an increase in credit unions’ member business lending cap--currently at 12.25%--could help the country's economic recovery by providing small businesses with more of the credit they need.

CU CEOs question puts Bernanke on the record

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KANSAS CITY, Mo. (7/30/09)--Mazuma President/CEO Rob Givens put Federal Reserve Board Chairman Ben Bernanke on the record when Givens questioned Bernanke about the changing landscape of consumer protection during a special edition of “NewsHour with Jim Lehrer” Sunday.
Ben Bernanke was put on the record when a credit union CEO asked him about the changing landscape of consumer protection during a taping of PBS’ “NewsHour” Sunday in Kansas City, Mo. (Photo provided by the Missouri Credit Union Association)
During the television broadcast, Bernanke took questions from an audience in a town hall-style forum. The audience consisted of 190 Kansas City-area residents, including Givens. Givens asked Bernanke about consumer protection, including the increasing powers given to the Federal Reserve, the existing responsibilities of the Federal Deposit Insurance Corp. (FDIC), National Credit Union Administration (NCUA) examiners and the proposed Consumer Financial Protection Agency (CFPA). Bernanke said he wasn’t opposed to the agency but has some reservations. He was concerned about the overlap among the FDIC, NCUA examiners and CFPA. “It’s a tough issue, and I know Congress is going to be wrestling this for some time,” Bernanke said. Givens said he was honored to participate in the town hall and pleased that credit unions were represented (The Missouri difference July 29). “I appreciated [Bernanke’s] expressed reservations about adding yet another federal agency to the regulatory and compliance structures already imposed on credit unions,” Givens said. “Since credit unions were generally not part of the current crisis, the added costs and burdens of oversight do not seem necessary.” The material from the town hall will be included on “NewsHour” broadcasts this week. The entire taping, called “Bernanke on the Record,” is scheduled to run Friday on PBS television. Mazuma CU, Kansas City, has $368 million in assets.

Reg debate sparks WOCCU conference session

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BARCELONA, Spain (7/30/09)--The future of financial regulation will look different thanks to the current global economic crisis, said Karl Cordewener, deputy secretary general of the Basel Committee on Banking Supervision, at the World Council of Credit Unions' (WOCCU) World Credit Union Conference. What that future will look like, however, was the topic of lively debate during the 90-minute closing panel discussion on current regulatory trends and future possibilities for differ types of oversight. Cordewener was one of six international regulators WOCCU brought together for the conference this week in Barcelona, Spain. Also on the panel, which was moderated by Pete Crear, WOCCU president/CEO, were:
* Jan Engström, board member, the International Accounting Standards Board (IASB); * Brandon Khoo, executive general manager, the Australian Regulatory Authority; * Andy Poprawa, president/CEO, the Deposit Insurance Corp. of Ontario, Canada; * George Reynolds, senior deputy commissioner, Georgia Department of Banking and Finance in the U.S.; and * Lesley Titcomb, director, the Small Firms and Contact Division, and sector leader for the Retail Intermediaries and Mortgages for Great Britain's Financial Services Authority.
Click to view larger image Panel participants in the World Credit Union Conference closing session included, from left, Karl Cordewener, Jan Engstrom, Brandon Khoo, Andy Poprawa, George Reynolds, Lesley Titcomb and Pete Crear.
Click to view larger image Credit unions have an advantage because they know their members, said the Basel Committee on Banking Supervision's Karl Cordewener during a panel at the World Credit Union Conference.
Click to view larger image Profit from banks' mistakes and learn to do things right, advised National Association of State Credit Union Supervisors' George Reynolds, during a regulators' panel at the World Credit Union Conference in Barcelona, Spain. (Photos provided by the World Council of Credit Unions)
"One of the lessons we learned from the crisis is that financial institutions should know their customers," Cordewener said. "That's something we all can learn from credit unions because you know your members very well." Several regulators cited advantages credit unions held during the crisis based on their size, the quality of their member deposit-based capital and other familiar credit union features. However, all regulators cautioned that the future of regulations would change based on hard lessons learned from the crisis. "We have received two demands from the [Group of 20] nations," said IASB's Engström. “Reduce the complexity of financial reporting and push for global conversions. The markets are global but we are often under pressure from local regulators to favor local conditions over global systems." Engström also referred to the positive influence several letters from WOCCU, sent to the board earlier this year, had in helping IASB better understand the issues raised by inappropriately regulating small to medium-sized institutions, including credit unions. “IASB just issued regulations for smaller institutions, and that may be our greatest contribution in helping global operations for your businesses," he said. All participants agreed that 2008 had been a tough year for institutions and regulators worldwide. “As regulators, our job is to make sure people don't make mistakes," said Canada's Poprawa. “Sometimes we win and sometimes we lose." Unlike other countries, Canada has about a dozen provincial regulators that focus on credit unions, Poprawa said. Canada has fared better than many other countries in the face of the crisis, but the country's smaller credit unions still face sustainability issues and the threat of mergers. The situation in the U.S. is not nearly as positive, said Georgia regulator Reynolds, who also serves on the board of the National Association of State Credit Union Supervisors (NASCUS). “Last year I closed five banks," Reynolds said. “This year I have already closed 14 banks, including six banks last Friday just before leaving for Barcelona." U.S. credit unions have found themselves awash in the country's financial crisis fueled by mortgage defaults and loan losses. However, credit unions by their nature have fared better than many of their for-profit counterparts, largely due to the quality of their capital and their relative lack of involvement in commercial investments and loans. Reynolds urged participants to learn from the lessons of the past. "Profit from the experiences of banks that didn't do it right so that you can get it right in the future," he said. Credit unions in the United Kingdom avoided major losses due largely to their lack of involvement in the commercial market and minimal role in mortgage lending, according to Titcomb. Australian credit unions faced a crisis of member confidence when an irresponsible press last year began advising consumers that smaller institutions were not safe, causing a deposit flight to the bigger banks, said Khoo. Although conditions appear to be improving, many Australian credit unions still struggle with profitability and credit quality, he added. Several audience members raised issues with the panel, including whether regulators should drive reform for financial conditions that less-than-stringent oversight may have had a hand in creating. Opinions differed, but all panelists agreed that regulators would be more vigilant going forward, having learned from the lessons of the past. Opinions also differed as to whether the economy had bottomed out, a topic Crear raised with the panelists. “That's the trillion-dollar question," said Khoo.

Recession slowing growth of CU lending

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MADISON, Wis. (7/30/09)--The ongoing recession is taking its toll on credit union lending, according to a Credit Union National Association (CUNA) economist’s analysis of CUNA’s monthly sample of credit unions for June. “For the first six months of the year, credit union loan balances rose 0.7%, significantly lower than the 3.1% reported for the same period last year,” Steve Rick, CUNA senior economist told News Now. “Americans are deleveraging their balance sheets by paying down debt or slowing their debt accumulation.
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“Credit unions should expect the loan portfolio to rise 5% this year, below the past five-year average of 8.4%,” he added. Credit union loans outstanding, which totaled $584.5 billion, increased 0.2% during June. It also increased 0.7% during the first six months of 2009, down from a 3% increase during the same period of 2008. Fixed-rate mortgages led June loan growth, rising 1.5%, followed by credit card loans (1.4%), unsecured personal loans (0.9%), used-auto loans (0.7%), and home equity loans (0.2%). However, during this period, new-auto loans declined (-0.3%), as did other mortgages (-0.6%), other loans (-0.9%) and adjustable-rate mortgages (-1.6%).
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Credit union savings balances totaled $754.5 billion for June, declining 0.2%, but grew 8.2% during the first six months of 2009. During this period, money-market accounts led savings growth with a 1.5% increase, followed by regular shares, which increased 1.1%. Also during this period, one-year certificates essentially remained constant--increasing less than 0.05%--while individual retirement accounts and share drafts declined 1.1% and 5.6% respectively. “With fears of job losses on the minds of many Americans, the U.S. savings rate rose to 6.9% recently,” Rick said. “Credit union savings balances have responded with an 8.2% rise in the first half, up from 6.4% last year.” Regarding asset quality, credit union 60-plus-day delinquencies declined to 1.5% in June from 1.7% in May. The loan-to-savings ratio decreased slightly to 77.5% in June. The liquidity ratio--the ratio of surplus funds maturing in less than one year to borrowings plus other liabilities-- remained constant at 20%. The movement’s overall capital-to-asset ratio increased to 9.8% in June 2009. The total dollar amount of capital is $88 billion.