CEO's Letter Shows How Enormous Are Hurdles Being Faced

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In the wake of Hurricane Katrina, perhaps no credit union leader was able to make clearer the enormous hurdles being faced than Audrey D. Cerise, president of the $208-million ASI FCU, who sent a letter to NCUA pleading for help.

Below is a copy of the text of the letter sent to NCUA Board Members Debbie Matz and JoAnn Johnson:

Dear Board Members Matz and Johnson, NCUA Board and staff:

As a credit union struggling to assist over 80,000 displaced members as a result of the hurricane, we want you to know what ASI has done and what we continue to do to restore order to our operations.

Here is a brief sequence of events of the past week:

* We remained open for business on Saturday, Aug. 27th, the day before the mandatory evacuation orders were announced to most of our members to allow members extra time to access funds. We also raised our offline limits for ATM and debit cards to $300 and $500 respectively in anticipation of members' evacuation needs, knowing that we would experience losses as a result.

On Saturday, our IT staff and several dedicated employee volunteers stayed late to brace our branches for the hurricane.

The hurricane began to affect the region served by ASI on Sunday evening, by which time most members who could evacuate had been moved to safe ground. Many of our members have no means of transportation and were not moved to safer ground. Our system went offline approximately 3 a.m. Monday morning as the hurricane began pounding our area with a devastating storm surge, flood waters, and winds in excess of 175 mph.

Our Ville Platte office opened on the 30th, as did our temporary headquarters. One of our branch managers made arrangements to open a temporary branch in the photo lab of a Winn-Dixie grocery store, one of the only buildings in town with water and electricity. We negotiated with other CUs in several states to cash our members' checks and allow withdrawals. ASI also issued a one-month grace period for loan payments.

We are coping with a number of issues. All but 12 of our 250 employees have been displaced by the hurricane. We have not yet heard from all of our staff members and we fear for their safety. Even for those employees that are safe, it is virtually impossible to find housing. There are gas shortages, lost family members, lost homes, and destroyed neighborhoods. We are operating with roughly 20 staff members in space generously donated in DOW Federal Credit Union by DOW's CEO, Jeff Hendrickson, until other arrangements can be made. Only two of our 16 branches were unaffected by the hurricane.

Our core processor, XP, has been paid for several years by ASI to create an emergency plan to be implemented in the event of a natural disaster. XP's plan had no contingency for a disaster that disabled phone lines.

Our staff members have been working 12-hour days. We remain open late on Saturdays; we were open for 12-hours on Labor Day. The calls from members are pouring in by the thousands. Our membership is low-income and our members do not have the luxury of going online to check balances. Most don't want to use our automated phone line; they want to speak to a person. They want to tell us what they have lost, to vent frustrations at a system that moved to slow. They are desperate.

Members are waiting for hours in line at the AstroDome and other temporary shelters in order to check balances, transfer funds, ask about FEMA deposits, and vent. Many members call seven or eight times a day to check to see if a FEMA check has come in yet. We've taken calls from members running out of money because their employers haven't posted payroll since the hurricane. Members and employees are openly weeping in frustration.

The issues ASI is facing are overwhelming because our membership is not that of a typical financial institution. A typical bank customer might have a credit card, a debit card, an ATM card, and checks. This customer would have a variety of methods of accessing funds, including advancing money online or over the phone on an automated system. The problems ASI experiences are indicative of the membership served. Our members are the ones left behind when the city was evacuated-the customers banks don't want. Half of our members do not qualify for checking accounts. At least one in four lives below the Federal Level of Poverty.

Closing Out 20-Year-Old Accounts

There are members whose debit and credit cards have been lost or stolen. We have an equal number of members trying to use lost and stolen debit and credit cards. Our members want us to mail checks, new credit and debit cards via general delivery mail to shelters. There are members who have relocated to at least nine states in the union who want to be able to walk into an ASI branch. We have lost members by the thousands. We are wiring tens of thousands of dollars to other banks and credit unions daily to close out ASI accounts that have been open for 20 years.

Other credit unions have called to complain that our members are flooding their lobbies and they refuse to leave. Members in various states want to apply for loans and add other family members to accounts when we have no expedient way to do these things. For days we were unable to block stolen cards; we anticipate taking a big hit on fraudulent activity. Because we'd raised our stand in limits, members who had little or no money (many even with negative balances) were able to withdraw money from our ATMs again and again. Because these members with nothing on deposit were able to withdraw $300 at ATMs, a rumor quickly spread that ASI was "giving $300 free money away to all members" so more members with no money made withdrawals for money that they did not have. We have negative balances in the thousands as a result. We had hoped that when the FEMA checks began posting, it would alleviate the losses, but many of our members have been issued pre-paid FEMA debit cards rather than having funds direct deposited. As soon as we were able, on Sept. 4th, we reduced the offline limit to $100, but the overdrawn accounts are prolific. We are waiving NSF fees more frequently than not, and we've waived wire fees.

We've done many things to allow members immediate access to funds, taking into account that many members evacuated with nothing. Our Ville Platte branch remained up and running throughout the storm so that members could call in. ACH deposits and payroll direct deposits are being posted immediately. FEMA checks are being posted by hand - 1,100 emergency relief payments rejected and rather than return the checks, our employees went through the labor-intensive process of matching up names and member numbers for members who didn't provide FEMA with the correct account information. The total deposit totaled $10 million.

Our employees are assisting members balance checking accounts over the phone. ASI has joined the credit union service center network to allow our members increased accessibility and convenience. Next week, ASI will open a temporary headquarters in Baton Rouge in order to expand our emergency call center.

The consequences of this disaster will not be the end of ASI, but we have and will continue to experience a significant negative impact. Right now, our largest problem is that we are being left unprotected against fraudulent activity and we are powerless to do anything about it. Some of our systems are still crippled, and though we are rebounding as quickly as possible, it will take years for us to get back on our feet. We've seen the postings and news release on the NCUA website and we appreciate your attention to this situation. Please continue to keep the credit unions affected by this terrible national tragedy in your thoughts; we need your help.

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