16 News to Know
get consumers who are selling
things online, looking for jobs
online or applying for loans on-
line. The criminals then enter
into transactions with those peo-
ple and send them fake “official
checks” that are supposedly from
credit unions via UPS, certified
mail or regular mail. Many times
the criminals send checks made
out for more than the agreed upon
amount, and those checks arrive
with a request that the receiver
wire some or all of the excess back
to the sender.
The check amounts have typically ranged from $1,300 to $8,800,
the alert noted.
“So what’s going to happen is,
that member that brought the
check in, they go and spend the
money or they wire that money
to the bad guy. They’re going to
be out that money,” Davidson
Mary Torsney, who is a SVP and
CFO of Financial Partners Credit
Union in Downey, Calif., said that
a credit union it just merged with
was hit by the scheme in 2017.
Fake checks were caught right
“The fraudulent checks … they
were so bad that the institution
receiving them knew they were
fake,” she said.
Financial Partners has $1.3 bil-
lion in assets and about 75,000
Positive Pay, which matches information on issued checks with
information on those presented
for payment, can be an effective tool for fighting the growing
scheme, Davidson said. Credit
unions with Positive Pay can then
quickly kick fake checks back to
the financial institutions that accepted them. Credit unions that
don’t have Positive Pay might
clear the items instead, exposing
them to potential losses, she said.
Davidson said she talks regularly with credit unions but isn’t sure
how many use Positive Pay — or
even know what it is.
“I get kind of like a deer-in-the-headlights [look] when I bring it
up, because they’ll say, ‘Well, I
don’t know if I have it.’ And then
what really shocks me is some of
their vendors don’t even have it
available,” she said.
Other tactics are helping credit
unions detect fraudulent checks,
too, Davidson noted. Many re-
ject presented checks that whose
check numbers don’t fall with a
certain range or sequence, for
“Say they’re not using Positive
Pay but they’re using sequence
and that sequence is way out in
the future — that could be a loss
prevention mitigation measure,
too,” she said.
The most potent defense
against the counterfeiting crime
wave could be communication,
“Credit unions should be validating and confirming with other credit unions: ‘Is this really a
check that you wrote?’ Are they
putting a hold on it until that item
clears?” she said.
In any case, the trend highlights
a bigger issue at hand, Davidson
“A lot of credit unions don’t put
a lot of value on risk management,
but it’s huge in the industry today,” she said. n
CONT. FROM PAGE 1
Y Criminals have been sending consumers
“official checks” that are fraudulently written
out of credit union operating accounts.
Y The frequency of the crime has become an
Y Positive pay and monitoring check sequencing
could help credit unions fight back.
he federal Credit Union
Act is outdated and
needs to be modernized, CUNA officials
said, in announcing a comprehensive effort to send a plan to Capitol
Hill during the next Congress.
“It’s been about
20 years since the
Credit Union Act
has been updated,”
CUNA’s chief advocacy officer, said.
During that time,
state laws governing credit unions
have changed, as have federal
CUNA’s Credit Union Powers
Subcommittee has been exam-
ining the issue, he said, adding
the association also has contact-
ed member leagues and credit
unions to determine areas of the
law that are outdated.
Donovan said CUNA has been
asking credit unions about what
they would like to see in an updated law. That conversation continues, he said.
“We’re still talking with our
members,” Donovan said.
He said, for example, the federal law prescribes when a credit
union’s fiscal year begins, adding
that some credit unions might
want to have more flexibility in
determining their fiscal years.
He said that credit unions might
want more flexibility in scheduling their board meetings than is
allowed in federal law. And credit
unions might want more power to
expel abusive members.
Donovan also said any amended law should specifically allow
for balloting by electronic means
when members are asked to vote
In addition, he said, any exami-
nation of the federal law should in-
clude allowing credit unions to use
supplemental capital in certain cir-
cumstances and changes to mem-
ber business lending rules.
Donovan said CUNA officials
expect that Congress will not tackle such an issue and pass legislation overnight.
“We envision a long game here,”
he said, adding, “We understand
that something like this takes a
And he acknowledged that
once Congress begins examining
the Credit Union Act, CUNA and
others will have to be prepared to
play defense to ensure that provi-
sions are not added that will hurt
Donovan also outlined several
goals CUNA has for 2018. He said
Congress will be considering a
technical corrections bill to the tax
cut legislation enacted last month,
adding that the legislation could be
another forum for a fight over the
credit union tax exemption.
That fight also could play out in
state legislatures, where the bank-
ing industry typically attempts to
eliminate the tax exemption.
But Donovan said the credit union industry was successful in last year’s tax debate and
“We just won an enormous victory,” he said.
He said the trade group also will
push the CFPB to provide more
exemptions for credit unions in
its rulemaking process. And association officials want to convince the agency that the NCUA
should have the primary supervisory responsibility for large credit
Those efforts have been unsuccessful in the past, but the CFPB
will have a new director following the resignation of Richard
Cordray. Among the candidates
for that job is NCUA Chairman J.
Mark Mc Watters, who has pushed
the CFPB to provide such exemptions to credit unions.
Mc Watters wrote Cordray a let-
ter last year pressing the director
to expand the use of exemptions,
but that request was ignored.
CUNA will also press the CFPB
to fix rules that are burdensome to
credit unions and to slow the rulemaking process down.
And he said CUNA wants to
ensure that the CFPB retains the
Credit Union Advisory Council, which attempts to provide
the bureau with the credit union
perspective on the impact of
Donovan also said CUNA will
continue to push plans to enhance payment security to reduce
the impact that merchant data
breaches have on credit unions
and members. He said CUNA
will continue to pursue litigation
when data breaches occur.
Additionally, he said CUNA
will press state legislatures to enact strict data security legislation.
That type of legislation on a state
basis could help put pressure on
Congress to enact data security
legislation on a national level. n
CUNA Pushes to Update the Federal Credit Union Act
‘I’ve seen this over the
years, this has been
going on. But it’s really
picked up quite a bit.’