MADISON, Wis. - Two new white papers are available from the CUNA Councils. "Partnerships Power Business Lending" from the CUNA Lending Council discusses the competitive advantages that credit unions have with localized decision making based on the best interests of the community as well as local partnerships. The paper then distinguishes between a number of internal and external partners and provides demographics and advice on cultivating relationships for each of these groups.

MADISON, Wis. - CUES said it has entered into a partnership with Houston-based Strunk & Associates to offer a premium checking product to promote membership growth. Called "Reward Checking" and built on a platform provided by BancVue, the product "delivers a high interest rate checking account to credit union members in exchange for their use of the institution's online services and products," CUES said.

WARRENVILLE, Ill. - The shrinking corporate CU network will lose another member if all parties approve the proposed merger of Members United Corporate FCU and the Central Credit Union Fund.

HARRISBURG, Penn. - In a case that could reverberate nationwide, the Pennsylvania Supreme Court is scheduled to hear arguments this week challenging the exemption from state taxes for state chartered credit unions.

RUSSELLVILLE, Ala. - Police are searching for a ring of check counterfeiters who have passed dozens of fake payroll checks on area institutions, leaving some of them with thousands of dollars in losses. Listerhill CU reported that 17 checks, which appear to be payroll checks from Pilgrim's Pride convenience stores, were returned because they were bogus.

BROOKLYN, N.Y. - Polish & Slavic FCU, which has been beset by political turmoil for the past eight years, it has hired Bogdan Chmielewski, a former branch manager, as its new president and CEO.

RALEIGH, N.C. - State Employees' Credit Union (SECU), working in conjunction with the Office of State Personnel and various other state agency representatives, is once again helping promote state employees and the services they provide to North Carolinians, sponsoring the "What's In It For You" (WIIFY) Image Campaign, which includes a one week radio promotion airing on stations throughout North Carolina.

PFCU Adds Shared Services

Are credit unions simply looking at the world through rose-colored glasses? In the first part of this two-part series (CU Journal, May 7), we agreed that two industry trends of great concern are lagging membership growth and deteriorating earnings. CU membership growth since 1996 has been a lackluster 2.5%, and only 1.5% since 2002. Factoring out temporary members from indirect lending, net growth has likely been flat, if not negative.

It isn't often a credit union CEO gets a call that "takes your breath away." Then again, it isn't every day you pick up the phone and hear, "This is the White House and we'd like for you to come and meet with the President."

Awareness surveys can be valuable tools in a credit union's marketing toolbox and can be customized for a wide variety of applications. One of the most popular uses is to ascertain non-member awareness of the credit union in conjunction with marketing outreach. These surveys show whether consumers are aware of their eligibility and of the institution's services, which is particularly critical when contemplating a community charter. For example, one institution's awareness survey showed that its marketing messages were not compelling. Potential members were either unaware they could join, or if aware, did not know what the credit union had to offer.

LAWRENCE, Kan. – The former head of CU Group, a conglomerate of four credit unions recently released from conservatorship, was charged last week with making false reports to NCUA to pump up the credit union’s net worth and stave off the regulatory takeover. Federal prosecutors charged Mark Kasson, 38, of falsely recording that $3 million in loans had been sold to other credit unions. The charges come after NCUA ended a 14-month conservatorship and returned the credit union to its members. At the time of the conservatorship CU Group had $20 million in assets, but the assets have been whittled down to $11.5 million at the end of 2006. CU Group was originally comprised of Free State CU, Metropolitan CU, Employees CU of Puritan Bennett and Colgate-Palmolive Employees CU, until last year when Colgate-Palmolive Employees CU was shut with the local Colgate-Palmolive plant.

ST. PAUL, Minn. – A man shot dead by police after robbing The Retail Employees CU last Thursday had a long criminal record and had been paroled form prison ust last October. Wilfred Hines, 46, had bene in and out of prison on drug, robbery and weapons convictions and was released in October after serving almost three years for trying to sell 52 grams of crack cocaine. Hines was shot by police as he was escaping last Thursday’s robbery and was transported to the hospital where he died later.

WASHINGTON – Members of the Senate Banking Committee introduced a bill last week that would prevent commercial entities, like Wal-Mart Stores, from entering the banking business by acquiring an industrial loan charter. The bill is similar to one that passed the House Financial Services Committee last month and would require an entity acquiring an ILC charter to have at least 85% of its business already in financial services. The legislation was prompted by the two-year battle by Wal-Mart, since abandoned, to acquire an ILC. The Senate bill has rough sledding because a major proponent of ILCs, Robert Bennett, the senator from Utah where two-thirds of the 90 ILCs are chartered, is an influential member of the banking panel.

PHOENIX – Desert Schools FCU said it is relocating its in-store branch from the Albertson’s supermarket to another spot in the same shopping center. Officials of the $3 billion credit union said the move will give them more room and facilitate the new technology of remote tellers. The new branch is scheduled to open next Saturday. Desert Schools also plans to open its 60th branch this summer in nearby Gilbert.

AUSTIN, Texas – A credit union-backed data security standard advance last week when the House unanimously approved the measure and sent it on to the Senate. The bill would enact as law the credit card industry’s Payment Card Industry security standard, which requires, among other things, that merchants destroy all identifying consumer information after completing a card transaction. The standard is monitored and enforced by MasterCard and Visa but both card companies conceded that a majority of merchants continue to ignore the standards. The Texas bill also makes merchants not in compliance with the PCI standards liable for costs associated with plugging a data breach, like those accrued for blocking and reissuing cards. The credit union, which heavily support the Texas bill, also helped get a similar bill passed by the Minnesota House last week.

HOUSTON – ATM ISO Cardtronics, operator of the nation’s largest ATM fleet, reported Friday that losses increased in its first quarter to $3.4 million, from $3.1 million for the first quarter last year, even as revenues continued to build. The operator of 25,000 U.S. ATMs and parent of the surcharge-free Allpoint network said first quarter revenues rose 8% to $74.5 million. Cardtronics attributed some of the first quarter losses to expenses accrued to make its ATM compliant with the Triple DES security standard, as well as impairment charges related to a previously acquired ATM portfolio. First quarter highlights included the roll-out of 190 ATMs in Mexico; a multi-year branding deal with Guaranty Bank and the expansion of Allpoint to England. Cardtronics is one of several major ATM ISOs, including TRM Corp. and Global Axcess, reporting financial difficulties.

HARRISBURG, Pa. – In a case that could reverberate around the nation, the Pennsylvania Supreme Court will hear arguments this morning challenging the exemption from state taxes for state chartered credit unions. The case could have severe ramifications for Pennsylvania’s credit unions, as the state Department of Revenue, one of the defendants in the suit, estimates that the tax exemption saves credit unions as much as $20 million a year in corporate, sales and other state levies. The argument, part of a major offensive brought by the bankers over the expanding fields of membership by state charters, was dismissed by the lower court, the state’s Commonwealth Court, where other aspects of the case are still pending. If the state’s High Court rules for the bankers, it will send the tax issue back to the lower court for a hearing, according to Raymond Pepe, a Harrisburg attorney representing the Pennsylvania Bankers Association and the Pennsylvania Association of Community Bankers. The state high court will hear the bankers' argument that the tax exemption violates a section of the state's constitution that delineates exactly which entities the legislature may exempt from taxation. The bankers claim that credit unions are not among those entities delineated as tax-exempt, and therefore, the tax exemption granted credit unions by the legislature is unconstitutional. “The only issue is whether the Commonwealth Court may consider Article 8, section 2, of the Constitution,” Pepe told The Credit Union Journal. Richard Wargo, legal counsel for the Pennsylvania CU Association, said he is confident of their case. “We think and we believe and we have presented a lot of case law and precedent to the Supreme Court that the tax scheme for credit unions is consistent with the Pennsylvania constitution,” said Wargo. The Commonwealth Court has yet to rule on the bankers' other tax arguments: that the tax exemption for credit unions violates state and federal statutes on uniform treatment of similar entities; that large, diversified credit unions have outgrown the original intent of the tax exemption; and that the tax exemption is discriminatory because it benefits only certain residents, members of credit unions. As state chartered credit unions are being granted ever larger FOMs, the Keystone state has become the main battleground between the credit unions and banks, which have filed suit in both the state and federal courts challenging large FOM grants.

WASHINGTON – A banking expert told staff members of the House Financial Services Committee Friday that credit unions converting to mutual savings bank are increasing the risk to the FDIC deposit insurance fund, and thus to taxpayers. Consequently, said Dr. Haluk Unal, professor of finance at the University of Maryland and an FDIC consultant, credit unions should not be able to convert to bank charters. Unal was appearing with several other experts on the issue in an informal, closed-door education session for congressional staffers who are drafting legislation on credit union conversions, with only the lobbyists from CUNA, NAFCU, NCUA and the National Federation of CDCUs, among the only outsiders permitted to attend. Buck Sebastian, president and GTE FCU and head of the National Center for Member Trust, showed the staffers a series of articles published by The Credit Union Journal last week illustrating the increasing compensation among managers and directors of converted credit unions. “There is absolutely no reason for credit unions to convert other than insider greed and profit,” said Sebastian, according to one individual who was present. Alan Theriault, the long-time credit union consultant who invented the conversion to mutual savings bank, told the staffers that credit unions ought to have the option to convert if they find the bank charter more suitable. The CU Regulatory Improvements Act, introduced into the Financial Services Committee, would make it harder for credit unions conversions by requiring at least 30% of members vote and by proposing the conversion to members and allowing them to discuss it before the board votes.

DENVER – In an extraordinary plea, NCUA on Friday publicly urged the insurer for subprime auto lender Centrix Financial to continue paying out claims to hundreds of credit unions even while the insurer presses a civil fraud case against Centrix founder Robert Sutton. The suit by Everest National Insurance, and a separate action in U.S. Bankruptcy Court by another Centrix insurer, Lyndon Property Insurance Co., threatens to destroy any chance of Centrix rebuilding its industry-leading subprime auto program, and to bring down dozens of credit unions that still have substantial claims against the company. At least one credit union, $300 million New Horizons Community FCU, has failed because of its Centrix business and is now under NCUA conservatorship while the federal regulator tries to sell it. Officials at Centrix, which recently changed its name to Flatiron Financial Services, did not return phone calls Friday. Everest and Falcon Investments, who financed Centrix, bought the Centrix assets out of bankruptcy and the two companies own Flatiron. Sutton is apparently no longer involved in the operation. In a civil fraud suit filed in U.S. District Court in Newark, N.J., Everest charges that Sutton breached his contract to reimburse the company for payouts to credit unions of default insurance protection, and also siphoned millions of dollars out of Centrix through sham reinsurance agreements. In a letter sent Friday, NCUA urged Everest to continue making insurance payments to credit unions while it litigates with Sutton. “We further believe Everest has a legal obligation to continue to pay DPI claims regardless of what Centrix, Everest’s agent, did or did not do with (optional insurance),” said the letter, signed by NCUA’s General Counsel Bob Fenner. In a separate suit, Lyndon Property Insurance, claims Centrix and its credit union customers failed to follow appropriate underwriting guidelines for originating and servicing subprime auto loans covered by Lyndon under a DPI policy and that Centrix misrepresented the losses on the credit union loans in order to obtain favorable premiums. The Lyndon suit also names Credit Union of Texas, Landmark CU, Meadows CU and F&A FCU, the biggest Centrix credit union customers, and all the other Centrix credit unions as a defendants. The two suits allege a twisted case of self-dealing in the Centrix case, with claims by Founders Insurance, a reinsurer owned by Sutton, that Everest owes it $6 million for a policy to limit Everest’s losses; and that the proposal to buy Centrix out of bankruptcy was an elaborate scheme to hide the various financial interrelationships. In other words, that Sutton agreed to reinsure his insurer. The stakes in the Centrix battle are enormous for more than 100 credit unions, who still have more than $1.5 billion in auto loans being serviced by the company.