CUs Face Off In Court With IRS Over UBIT
MADISON, Wis.-The long-simmering feud between state chartered credit unions and the IRS will finally come before a jury today at the opening of Community First CU's challenge of the IRS's calculation of unrelated business income taxes-or UBIT.
In this case, one of two UBIT suits pending against the IRS, the Appleton-based CU is asking the court for a $54,604 refund of UBIT taxes it paid in 2006 on credit life, credit disability and guaranteed auto protection, or GAP, insurance payments that it claims are "substantially related" to its tax-exempt purpose.
CUs have been fighting with the IRS for decades over the calculation of UBIT-which are only assessed state charters. They say products and services like insurance are essential to their regular business purpose. Bellco CU in Denver has also sued the IRS over UBIT.
WV Atty General Shuts Down Phony CU Website
CHARLESTON, W.Va.-West Virginia Attorney General Darrell McGraw says a bogus website that claimed to be operated by West Virginia State CU has been shut down. McGraw's office worked with GoDaddy Group Inc., a domain registration company, to shut down statecreditunion.net.Consumers applying for loans through the website received e-mails falsely identifying the company as West Virginia State CU. To qualify, consumers were told they had to pay $1,250 for insurance and were directed to wire the money to a location in Canada. After that, McGraw says they "never heard from the crooks again.''
McGraw says he will refer complaints about the scam to Canadian authorities.
PSECU Files Suit In Cards Breach
HOUSTON-Pennsylvania State Employees CU, roiled by the numerous data breaches forcing it to reissue cards, filed suit here against Heartland Payment Systems claiming the company's massive data breach violated payment card industry standards.
Citing breach of contract and negligence, the suit alleges that Heartland's failure to properly secure magnetic stripe information in Visa and MasterCard credit and debit cards resulted in over 105,000 Visa cards issued by the $3.4-billion credit union to its members being compromised, cancelled and reissued.
The suit also notes that Heartland failed to comply with card industry's own PCI standards, Visa operating regulations and MasterCard rules and "blatantly disregarded" its obligations as a payment card processor to store and safeguard private credit card information.
Earlier this year, three credit unions, Matadors Community CU, GECU and MidFlorida FCU, and two banks became the first financial institutions to seek recompense through the courts against Heartland.
PSECU has been one of the most aggressive credit unions in the pursuit of recompense for data breaches. It sued Fifth Third Bancorp, the merchant acquirer for BJ Wholesale Club in that company's 2004 data breach, a lawsuit that is still ongoing. In that case, the credit union spent almost $100,000 to reissue 20,000 Visa cards and to take other security measures.
Heartland Payment, which is the merchant acquirer for more than 250,000 businesses, said as many as 100 million consumer accounts may have been compromised in the data breach, making it one of the biggest cards breaches ever.
Erroneous Tax Refund Draws Charge
JACKSONVILLE, Fla.-A member of Coastline FCU was arrested after she spent most of an erroneous $8,345 tax refund she received in her credit union account from the IRS.
Danielle Scott was only entitled to $834.50, but when she was contacted by the IRS she told them she had made a few withdrawals over a two-day period, and the money was no longer in her account.
She told the credit union that since it was an IRS error, she shouldn't have to repay the money.
Scott was charged with grand theft.
