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New round for Bellcos UBIT case

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DENVER and WASHINGTON (8/20/10)--The U.S. government has notified a court of appeals that it will dispute a federal judge’s favorable credit union rulings in a case that challenged the Internal Revenue Service’s (IRS) policy toward unrelated business income tax (UBIT) and its application to credit unions. In a suit brought by Bellco CU of Greenwood Village, Colo., Judge Christine M. Arguello ruled in November 2009 that investment products that Bellco sold to its members, including stocks, bonds, mutual funds and annuities, were "substantially related" to Bellco's tax-exempt purposes, and therefore the income from those activities was, under the law, exempt from UBIT. Bellco had challenged the IRS's assertion that UBIT was due on the three products and sought $199,293 in tax refunds from the IRS. The same judge also ruled in April of this year that the income derived from credit life and disability insurance, sold directly or indirectly, as well as royalty income from accidental death and dismemberment (AD&D) insurance should not be subject to UBIT. The Colorado decisions were hailed by the Credit Union National Association (CUNA) as substantial victories in credit union court challenges to the IRS’s UBIT policy. For instance, Arguello’s ruling noted, "In the banking and credit union context, the concept of thrift is tied to sound financial management." "Credit insurance does just that. It permits a borrower to guard against certain difficult circumstances and to know that, if the unfortunate event of death or a serious disability occurs, the borrower's family and/or assets would be protected. For a relatively marginal payment, the borrower buys peace of mind," she added. The government will file its appeal with the U.S. Court of Appeals for the Tenth Circuit. CUNA will be closely monitoring developments. CUNA General Counsel Eric Richard said the government’s announcement that it would appeal may end up being a strong positive for credit unions on the UBIT issue: “We may get a powerful favorable precedent out of this at the Court of Appeals level. Obviously, we will be fighting hard.” Richard is CUNA's representative on the UBIT Steering Committee, which supported Bellco. Other groups on the committee are the American Association of Credit Union Leagues (AACUL), CUNA Mutual Group, and the National Association of State Credit Union Supervisors (NASCUS).

VACORP transitions services from U.S. Central

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LYNCHBURG, Va. (8/20/10)--VACORP FCU has ceased processing domestic wire transfers through U.S. Central and begun processing directly through the Federal Reserve Bank, and is planning to withdraw more services. Don Chapman, VACORP president/CEO, said in a letter to member credit unions on VACORP's website that the corporate will work with members to "transition them away from using U.S. Central's cash concentration and automated deposit transfer services" and actively pursue "alternatives to U.S. Central's securities safekeeping and international payment services. "These actions, as well as others we will undertake in the future, will continue to ensure that VACORP and our members have viable, cost-effective alternatives to U.S. Central's products and services regardless of the final outcome of the National Credit Union Administration's (NCUA) conservatorship of U.S. Central," the letter said. The corporate noted that VACORP never purchased toxic or legacy assets, so NCUA's resolution of the legacy assets issue "should have no direct impact on VACORP or its members." The Lynchburg, Va.-based VACORP will conduct several town hall meetings and webcasts in late October and early November to discuss its business plan. "The critical component of the plan will be the willingness of our members to convert their existing Membership Capital Accounts (MCA) to Perpetual Contributed Capital (PCC)," the corporate said. "VACORP is only asking for the existing MCA to be converted to PCC." Chapman said the corporate needs a commitment of about $16 million to PCC to meet what the corporate believes is NCUA's minimum Tier 1 risk-based capital ratio of 4%. "VACORP and its members have been adversely impacted over the last two years by the investment decisions made by U.S. Central," said Chapman. Like other corporates, VACORP was required to write off all of its capital at U.S. Central. That reduced VACORP members' capital by about 66%, he said.

Maine warns of credit card advance fee scam

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AUGUSTA, Maine (8/20/10)--A Maine credit union has reported an “advance fee” credit card scam that prompted Maine’s attorney general to issue a warning to consumers. PeoplesChoice CU, a $120 million-asset, Saco, Maine-based credit union, reported a scam in which fraudulent callers claiming to represent PeoplesChoice offer a credit card in exchange for $200 and bank card information ( Aug. 19). Maine Attorney General Janet T. Mills said a so-called “advance fee” credit card requires pre-payment and bank account information to receive a credit card with a $2,000 credit line, the newspaper said. During the past three weeks, the credit union received 25 phone calls from people contacted by the scammers, Mills told the paper. “PeoplesChoice CU has nothing to do with this illegal offer,” Brenda Piecuch, the credit union’s compliance manager and information security officer, told the paper. Consumers should never give bank account information over the Internet or phone without confirming the identity and location of persons soliciting the information, Mills wrote in her warning. “Verify, verify, verify,” she added.

League to TCUD Fees rule will deplete capital

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FARMERS BRANCH, Texas (8/20/10)--The Texas Credit Union League (TCUL) has sent a comment letter on proposed rules about recommended new fees and proposed revisions to loan rules from the Texas Credit Union Department (TCUD) that the league says will deplete credit union capital. The league noted its opposition by citing concerns that the proposed fees are “punitive and will deplete credit unions of capital when they need it most.” It also said that several of the changes in the proposed loan rules are subjective, leaving credit unions exposed to interpretation, rather than offering a clearly defined procedure (LoneStar Leaguer Aug. 19). The new fees are proposed in 97.115. Reimbursement of Expenses for Legal Services and 97.116. Recovery of Cost for Extraordinary Services. Both of the proposed rules would allow the regulator to charge new and additional fees, on an individual basis, to credit unions for:
* Reimbursement of legal expenses from the attorney general, and * A decision by the Commissioner of Credit Unions to send examiners into a credit union beyond the regularly scheduled exam.
TCUL cited key concerns in the comment letter:
* The proposed rules take away predictability as to the cost of regulation; * The fees would have a disproportionate impact on small and mid-size credit unions; and * The penalty fees are unlimited and would be completely at the discretion of the credit union commissioner.
TCUL noted that the proposed rules do not eliminate burdens on credit unions or provide new authority. Rather they add unnecessarily subjective language. Such broad language leaves credit unions vulnerable to interpretation during the exam process, the league said. The feedback from credit unions indicated they prefer the existing loan regulations, TCUL added. “This has traditionally been covered as part of the TCUD budget through the regular assessment made on credit unions for operations at the TCUD,” Jeff Huffman, league vice president for government relations, said in an e-mail to News Now in July. “The system of funding the agency that has been in place for many years has served Texas credit unions well, in good times and bad. “This proposed rule further expands the power of the regulator, giving great discretion to the commissioner. It takes away predictability of regulatory costs for state-chartered credit unions,” he added (News Now July 9). “If these types of rules are implemented, state charters in Texas will not only have to pay their regular assessments, but will also be faced with individual assessments from the TCUD when they are least able to afford additional unanticipated and unlimited regulatory costs,” Huffman said. The Credit Union Commission will consider the proposed rule changes Oct. 15.

Beall to head MCUA effective Nov. 1

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ST. LOUIS and COLUMBIA, Md. (8/20/10)--Michael V. Beall, current president/CEO of the Maryland and District of Columbia Credit Union Association (MDDCCUA), has accepted the position of president/CEO of the Missouri Credit Union Association (MCUA), effective Nov. 1. He will replace Rosie Holub, who plans to retire in December, the associations announced Thursday. "During her 11 years with MCUA, Rosie's exemplary leadership well positioned the association for the future," said MCUA Board Chairman Stan Moeckli, adding that the board has a high level of confidence in Beall and his leadership abilities. Beall has served in his current position since 2004. "Mike leaves the association much stronger after his nearly seven years of service," said Miguel Boluda Jr., chairman of MDDCCUA and CEO of PAHO/WHO FCU, Washington, D.C. "He has been a tireless advocate for the credit unions of Maryland and D.C., and has elevated our advocacy, training and community outreach activities." Moeckli said Beall plans to attend MCUA's upcoming convention and exposition in Branson, Mo., Sept. 14-16. His last day with MDDCCUA will coincide with the opening of the Volunteer Leadership Conference in Ocean City, Md., Oct. 22. Beall spearheaded efforts to merge the Maryland and DC associations in January 2006 and was instrumental in the National Credit Union Foundation's development of its REAL Solutions project. Previously, Beall managed the governmental affairs and partnerships for World Council of Credit Unions, served as executive vice president and lobbyist for the North Carolina Credit Union League, and served as a credit union general counsel where he developed, training and implemented compliance programs. He serves on the Credit Union National Association's (CUNA) Governmental Affairs Committee, is a director of the Consumer Credit Counseling Service of Maryland and Delaware, and is a lead facilitator for the Credit Union Development Education program. He earned a juris doctorate degree from the University of Richmond and a bachelor's degree in government and politics from the University of Maryland. Holub, who had had become CEO of MCUA in 1999 and announced in December 2009 she would retire at the end of this year, said, "Mike's background of strong credit union advocacy will greatly benefit the (Missouri) association in addressing the legislative and regulatory issues during these difficult times." Boluda will work with MCUA's executive committee to conduct a search for the next CEO at MDDCCUA. Member credit unions will receive details in the next few weeks.

Holy Infant CU merges with Gateway Metro

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ST. LOUIS (8/20/10)--Holy Infant CU, Ballwin, Mo., merged with Gateway Metro FCU, St. Louis, Aug. 1. Gateway plans to open a student-assisted branch office within Holy Infant School in St. Louis County, said the Missouri Credit Union Association (The Missouri difference Aug. 18). Gateway sponsors student-assisted branches at three Catholic elementary schools and opened a high school branch at Trinity Catholic High School, St. Louis, last spring. When it decided to merge with Gateway, Holy Infant considered its members’ access to innovative credit union services, and the ability of the credit union to offer financial education and a student-assisted credit union branch in the school.

CU forms first-of-kind solar group buy program

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SAN JOSE, Calif. (8/20/10)--Members of San Jose (Calif.) CU can go solar through a new program that allows them to purchase residential solar electric and solar thermal systems at a reduced cost. The first-of-its-kind San Jose Employee Solar Group Buy program results from a partnership between the credit union and San Jose’s Solar America City Program. A group of 130 city employees and retirees negotiated the group buy. Both organizations will provide technical and strategic help to group members. The group buy model lowers solar system costs for homeowners and encourages community participation. The group aims to install solar power in more than 130 homes. SunPower Corp. and SunWater Solar will provide solar power for the group. The companies will work with homeowners to perform site assessments to determine sizes and design. Installations will take place between September and February. “Solar thermal can significantly reduce utility bills today while insulating system owners from the high energy costs of tomorrow,” said Justin Weil, president, SunWater Solar. San Jose has installed more solar power than any city in the state. From Jan. 1, 2007 to July 7, 2010, the city installed 14.9 megawatts of power across 1,737 sites, according to the California Solar Initiative. San Jose CU has $125 million in assets.

CU System briefs (08/19/2010)

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* ST. LOUIS (8/20/10)--Credit unions in Springfield, Mo., met Tuesday with Billy Long, Republican candidate for the U.S. Congress District 7 seat vacated by Roy Blunt (R), at
Click to view larger image Click for larger view
Postal Federal Community CU. There he learned more about credit unions from industry experts, according to the Missouri Credit Union Association. Long said he hopes to add a business perspective to Capitol Hill and that too many unintended consequences are passed in legislation. Credit unions explained the fundamental differences between banks and credit unions and highlighted the challenges of blanket financial reform. "We deal with the member directly, and we're a cooperative," said Cathy Stroud, Community Financial CU, Springfield. "We tell the consumer the facts without the smoke and mirrors." Long is seated in the front row, second from left, with representatives from Assemblies of God CU, Community Financial CU, Educational Community CU, Metro CU, Postal Federal Community CU and TelComm CU. He faces Scott Eckersley (D) in the Nov. 2 election. (Photo provided by the Missouri Credit Union Association) ... * RALEIGH, N.C. (8/20/10)--At a recent State Employees' CU (SECU) statewide managers' meeting, SECU friends paid longtime PSCU CEO David Serlo tribute with a donation to SECU Family House in his memory. The gift will provide furnishings for one of the 40 bedrooms at the House. The gift and a plaque for the family was presented to PSCU Financial Services Group executive Chuck Fagan III, who spoke at the meeting. Fagan is shown with Leanne Phelps, senior vice president of SECU's card and record services department. Serlo lost his long-time battle with cancer in June. SECU Family House is located in Chapel Hill, N.C. The gift freed enough funds to provide 115 families a seven-night stay at the house for seriously ill patients and their caregivers. (Photo provided by State Employees' CU) ...

Georgia CUs poll Members gain confidence

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DULUTH, Ga. (8/20/10)--Georgia consumers are growing more confident about the economy but are keeping a tight hold on their wallets, according to a Georgia Credit Union and Affiliates (GCUA) survey from 162 credit unions in the state. The credit unions placed links on their websites for members to respond to the survey. The questions focused on spending, savings habits, retirement and their feelings about the economy. Only credit union members were involved in the study. Roughly 53% of 6,000 accountholders the organization surveyed said they expect to be in better financial shape a year from now. About 17% said they didn’t expect their financial situation to improve, while 31% didn’t know (The August Chronicle Aug. 19). Credit card balances have decreased by 2%, and new-vehicle borrowing has dropped 9%. Used-card lending rose 9%, the survey found. There is still a lot of uncertainty about the economy, said Mike Mercer, GCUA president. A lot of people are doing “okay” and building security, but some have neighbors or family members who are out of work, he added. Fifty percent of respondents said they could make it just three months or less on their savings, while 26% said they had no savings cushion if they became unemployed. Three out of four consumers aid they will remain focused on building their nest egg than making major purchases. Those planning a major purchase said it would be for home improvements--56% said they would use cash from savings rather than a credit card or loan, the newspaper said. Mercer also warned retailers to be cautious about Christmas-season orders. The Georgians surveyed didn’t indicate they would spend more money anytime soon--including holiday purchases.

NEW Missouri CU Assn announces Beall as new presidentCEO

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ST. LOUIS (UPDATED 8/19/10, 9:50 a.m. E.T.)--The Missouri Credit Union Association (MCUA) announced today that its board has selected Michael Beall as the new president and chief executive office (CEO) of the league. Beall, who will succeed Rosie Holub in the top MCUA position, will do so effective Nov. 1. He is currently president/CEO of the Maryland and District of Columbia Credit Union Association. Stan Moeckli, chairman of the MCUA board, said of the changing leadership, “During her 11 years with MCUA, Rosie’s exemplary leadership well positioned the association for the future, and the board has a high level of confidence in Mike and his leadership abilities to provide our state’s credit unions with dedicated support to meet the challenges ahead.” Beall has served in his current position since 2004. His leadership at the Maryland and District of Columbia Credit Union Association include orchestrating credit union efforts regarding member business lending, alternative and risk-based capital, mergers and conversions, and outreach and development products and services. He is considered instrumental in the National Credit Union Foundation’s development of the REAL Solutions project.