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NCUA liquidates Republic Hose Employees FCU

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ALEXANDRIA, Va. (10/1/14)--Republic Hose Employees FCU of Youngstown, Ohio, has been liquidated by the National Credit Union Administration, the agency announced Tuesday.

According to the NCUA, the decision was made to liquidate the credit union and discontinue operations after determining the credit union was insolvent and had no prospect for restoring viable operations.

Republic Hose Employees FCU served 455 members and had assets of $581,487, according to its most recent call report. It was chartered in 1940 and served the employees of Republic Hose Manufacturing Corp., Youngstown Steel Door Co. and their immediate family members.

Member deposits are federally insured by the National Credit Union Share Insurance Fund. The NCUA's Asset Management and Assistance Center will issue correspondence in the near future to individuals holding verified share accounts in the credit union.

Republic Hose Employees FCU is the eighth federally insured credit union liquidation in 2014.

Merrick Bank settles with FDIC for $16.1M due to deceptive practices

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WASHINGTON (10/1/14)--Merrick Bank has settled with the Federal Deposit Insurance Corp. (FDIC) for alleged unfair and deceptive practices related to marketing and servicing of credit card add-on products. The FDIC order, announced Tuesday, requires the bank to pay a civil money penalty of $1.1 million and restitution of approximately $15 million to affected consumers.

According to the FDIC, the South Jordan, Utah-based bank marketed a payment protection credit card add-on product that was sold from 2008 to 2013 to consumers who had a bank credit card. The product, called the PAYS Plan, provided a benefit payment toward a consumer's monthly credit card payment following certain life events, such as involuntary unemployment, disability and hospitalization.

The FDIC determined Merrick Bank violated federal law prohibiting unfair and deceptive practices by:
  • Misrepresenting that the PAYS Plan "monthly benefit" would equal the consumer's "minimum payment due;"
  • Misrepresenting that the PAYS Plan would protect the consumer's credit rating;
  • Misrepresenting that PAYS Plan payments would be made automatically;
  • Failing to adequately disclose material conditions and restrictions related to the PAYS Plan;
  • Failing to adequately disclose the terms and conditions for accessing the PAYS Plan hospitalization benefit; and
  • Requiring permanently disabled consumers to recertify their disabled status each month.
These actions violated Section 5 of the Federal Trade Commission Act and were discovered by an FDIC review of the bank's credit card products.

Use the resource link below to access the full consent order.

Inside Washington(1)

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  • WASHINGTON (10/1/14)--Today is the day the Consumer Financial Protection Bureau offers its third in a series of webinars on the new TILA-RESPA Integrated Disclosure rule . This session will address the loan-estimate form with a focus on questions raised by technology vendors, as creditors, mortgage brokers, settlement agents, software developers and other stakeholders work to implement the new rule by the Aug. 1, 2015, effective date. The 90-minute webinar s tarts at 2 p.m. (ET) . Registration is available at http://www.philadelphiafed.org/bank-resources/publications/consumer-compliance-outlook/outlook-live ...
  • SACRAMENTO, Calif. (10/1/14)--California Gov. Jerry Brown signed The Electronic Benefits Transfer Protection and Empowerment Act (AB 1614) into law this week, a measure that is intended to reduce the amount of ATM fees certain borrowers have to pay. The new law requires that state benefits recipients under the California Work Opportunity and Responsibility to Kids (CalWORKS) welfare program receive information that will help them avoid ATM fees being charged against them when accessing their benefits ( American Banker Sept. 30). The California Reinvestment Coalition, which advocates for equal access to financial services, issued a report in March that said CalWORKS and other public assistance recipients paid $19.4 million in ATM fees in 2012 to withdraw their benefits. American Banker says the report found that Bank of America earned $3.6 million from such fees, JPMorgan Chase received $2.8 million, while Wells Fargo obtained $2.3 million. The new responsibilities under the law fall on county CalWORKS administrators who must now inform recipients about direct deposit and other less-expensive alternatives to ATM services. Electronic benefit transfer (EBT) vendors who work with the program must provide a toll-free number and an online dashboard that allows recipients to report theft and track the use of their benefits. Jessica Bartholow, a legislative advocate for the Western Center on Law and Poverty, is quoted in the article as saying that improvements made by AB 1614 will increase the ability of California's poorest consumers to make choices and prioritize resources for their basic needs ...

Fraud, theft, money laundering get CU employees banned from work

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ALEXANDRIA, Va. (10/1/14)--Three individuals have been prohibited from participating in the affairs of any federally insured financial institution, the National Credit Union Administration announced Tuesday.

The individuals are:
  • Lisa Frace, former employee of Baker FCU, Phillipsburg, N.J., with $30 million in assets. Frace pleaded guilty to multiple charges of theft and forgery. She was sentenced to six months in prison, three years of probation and ordered to pay restitution in the amount of $68,387.74;

  • Anthony Raguz, a former employee of now-defunct St. Paul Croatian FCU, Eastlake, Ohio. Raguz pleaded guilty to the charges of bank fraud, money laundering and receipt of commissions or gifts for procuring loans. He was sentenced to 14 years in prison, three years of supervised release and ordered to pay more than $71.5 million in restitution; and

  • Melissa Shurina, a former employee of USX FCU, Cranberry Township, Pa., with $213 million in assets. Shurina was admitted into an accelerated rehabilitative disposition program for the charge of theft. She was placed on probation for a period of six months and ordered to complete 20 hours of community service and pay restitution.
Violation of a prohibition order is a felony offense punishable by imprisonment and a fine of up to $1 million.

Use the resource link below to access the NCUA's database of administrative orders.

Nussle in The Hill vows CU tax status defense

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WASHINGTON (10/1/14)--Credit Union National Association President/CEO Jim Nussle says that under his watch "the credit union tax exemption will be strongly and completely defended," in an op-ed published in The Hill Tuesday.

"I've done my share of reading and research in preparation for my new role at CUNA," writes Nussle, who started as head of CUNA on Sept. 22. "I know that banks and their lobbyists like to say credit unions are 'virtually indistinguishable' from banks and as such should not be exempt from paying federal corporate income taxes.

"But I've come to the conclusion that statement from bankers is just flat wrong.

"There is a strong and key distinguishing characteristic between credit unions and banks: Their beneficiaries," the former congressman from Iowa states.

Nussle notes a bank's beneficiaries are shareholders who expect as much profit to go to them as possible. At a credit union, the members--who own the credit union--are the beneficiaries.

Because of the cooperative ownership structure, any excess earnings of a credit union are redirected back to all members in the form of lower loan interest rates and higher savings yields.

"And credit unions deliver," Nussle declares. "The research that CUNA has shared with me shows credit union members in 2013 realized financial benefits of nearly $6 billion, just by saving at, borrowing from or acquiring other financial services from their credit unions, rather than from a bank."

Nussle, who served in Congress from 1991 to 2006, says he's no stranger to hearing bank complaints about credit unions' tax status and asking Congress to strike down the public policy that supports it.

He highlights the significance of the House Ways and Means Committee's decision earlier this year to leave the credit unions' tax status untouched while it hammered out a blueprint for tax reform that proposed removing more than 200 tax preferences, including some that apply to banks.

"As Rep. Denny Heck (D-Wash.) said at a recent Hill Forum: 'To keep coming to us and asking for that, waiting for it to happen, is a little bit akin to leaving the landing lights on for Amelia Earhart. Credit unions are not taxed the same as banks as a matter of policy,'" Nussle writes.

"Congress bestowed the tax exemption in 1934 based on credit unions' cooperative structure and mission to provide people with access to credit for provident purposes such as borrowing to buy a car, a home or to help finance a small business. The goal was to have credit unions compete with banks to ensure that consumers have access to affordable financial services."

CUNA seeks White House action on cybersecurity

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WASHINGTON (10/1/14)--The Credit Union National Association is asking President Barack Obama to establish a Cybersecurity Council that would report to the president and would be charged with "developing a comprehensive and timely approach to the range of issues associated with cybersecurity attacks on businesses and consumers in this country."
 
CUNA's new leader, President/CEO Jim Nussle, writes in a letter to the president, "We urge the administration to give this idea full consideration, coordinating with Congress, agencies that are already addressing aspects of cybersecurity including prudential regulators, and the private sector to establish it."
 
Nussle notes in his letter to Obama that most recent massive data breaches have taken place in systems operated by merchants, not financial institutions. 
 
"One important problem with current law is that, even when fault in a data breach lies with a merchant, credit unions and financial institutions are assigned many of the financial costs. 
 
"One job of the Cybersecurity Council should be to help align liability with responsibility for these breaches," Nussle writes, adding that such a system would give more incentives to all parties to "take cybersecurity seriously."
 
Nussle detailed another key credit union concern related to merchant data breaches: "When credit unions reissue compromised cards, under current rules they are not permitted to reveal the reason for the reissuance, leaving the impression among many credit union members that it was the credit union that allowed the data to be compromised."

Joint cybersecurity venture aims to ID, share info faster for FIs

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NEW YORK (10/1/14)--A joint venture between the Financial Services Information Sharing and Analysis Center (FS-ISAC) and the Depository Trust and Clearing Corp. (DTCC) aims to provide financial institutions and other organizations the latest information on cyberattacks.

The joint venture, named Soltra, will deliver software automation and services that collect, distill and speed the transfer of threat intelligence from a myriad of sources to help safeguard against cyberattacks.

FS-ISAC was established in 1999 as a nonprofit initiative to share timely, relevant information about physical and cyber threats and incident information for the financial services sector. It has more than 4,500 organizations, including credit unions of all sizes.

The Credit Union National Association is continuing its work with FS-ISAC to help credit unions monitor and respond to cyberthreats, as well as share information.

DTCC provides simplified clearing, settling, asset servicing, data management and information services to financial markets.

The software itself is called Soltra Edge. Soltra CEO Mark Clancy said it can take organizations up to seven hours to manually piece together enough information from multiple sources to properly evaluate a cyberthreat.

"With Soltra Edge, one organization's incident becomes everyone's defense," Clancy said. The system will enable clients to send, receive and store cybersecurity threat intelligence in a streamlined and automated format, enabling these firms to deploy safeguards against a potential cyberattack, he added.

Bill Nelson, president of Soltra, said that intelligence sharing must occur at "network" speeds, especially for smaller organizations.

More information on Soltra will be made available to credit unions and other small financial institutions in the coming months. Soltra Edge is currently being tested and should be available later this year.