Credit Union Times

in March 2008 that the corporate wouldn't require members to convert to imaging and said WesCorp would continue to process paper for members "as long as we can."

However, after the decision to close the facilities was announced, he said that in reevaluating WesCorp's previous strategy, "it's far more costly for credit unions and WesCorp to maintain that infrastructure."

Kitt said he's discussed the decision to consolidate processing facilities and more quickly convert members to imaging during WesCorp's town hall meetings with members, who have "responded well." WesCorp is currently converting members to imaging at twice the pace it was prior to the management change, but he said he didn't know if that pace would hold.

Kitt denied the decision was a significant strategy change for the corporate. Although, he said, "I've always told members paper processing would get more expensive as time goes on."

The affected employees represent 12% of WesCorp's workforce.

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Freedom of Information Filers WeighTheir Options on PIMCO Report Release

Groups that filed Freedom of Information Act requests to review the NCUA's corporate portfolio review have 30 days to contest the highly redacted information.

The NCUA released a copy of both the report and its contract with vendor Pacific Investment Management Co. on June 5, making the documents available on its Web site. PIMCO's evaluation of corporate investments was among the supporting documentation that the NCUA cited when it placed U.S. Central Federal Credit Union and Western Corporate Federal Credit Union into conservatorship on March 21.

All data and quantifiable information included in the report was declared confidential and was not made viewable. PIMCO cited Exemption 4 when it shielded its methodology and financial information. Exemption 4 "protects trade secrets and commercial or financial information obtained from a person [who is] privileged or confidential," according to information posted on the U.S. State Department Web site (www.state.gov).

CUNA and NAFCU both filed FOIA requests and received the information directly from the NCUA before it went public, representatives said. CUNA Vice President of Communications Pat Keefe said his organization is "expecting additional information from the agency on this," and said the group plans to file an additional FOIA request seeking new information, but he did not specify what information the group is requesting.

But Keefe added that events and legislation that have occurred since the NCUA hired PIMCO have decreased the report's significance.

Director of Regulatory Affairs Carrie Hunt said NAFCU received its FOIA response May 28 and is weighing its options to contest the lack of specifics because members are still asking for greater transparency regarding the NCUA's estimations of corporate losses.

Though PIMCO shielded corporate financial information, the firm's contract did reveal that it directly addressed conflict of interest concerns as a potential purchaser of distressed assets through the Treasury's toxic asset programs or other means.

"While adviser [PIMCO] does not make a market in the securities in the portfolio, adviser or its affiliates (for itself or on behalf of its clients) may own positions in such securities or the assets underlying the securities (whether long or short), and adviser and its affiliates (for itself or on behalf of its clients) shall not be restricted from transacting them in any way," the contract states.

PIMCO also disclosed that if it owns any reviewed securities, the valuations provided to the NCUA "may differ" from those it provides for its own portfolio management purposes.

The contract also revealed that the NCUA will pay $1.125 million for any future PIMCO reports. The agency paid PIMCO $4.5 million for the original report.

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California Supreme Court Ruling Upholds Social Security Overdrafts

California credit unions last week applauded a long-awaited ruling by the state's Supreme Court that upheld the right of banks and CUs to cover overdrafts and overdraft fees with Social Security funds and other protected public-benefit deposits.

In a statement, the California/Nevada Credit Union League praised the decision in Miller v. Bank of America for allowing CUs to continue serving Social Security recipients without difficulty.

"A contrary decision would have severely inhibited our ability to serve these members and may have, in many instances, caused them to become unbanked," said a league statement.

The state supreme court, overruling a lower court, said the overdraft practice did not violate the California Unfair Business Practices Act.

CUNA, which had filed an amicus brief in support of BofA, said it too has been watching this case for years as it has moved through the California court system.

CUNA General Counsel Eric Richard said the ruling helps to assure access to checking accounts for those receiving protected federal benefit funds.

"If a financial institution's ability to recoup losses and fees caused by overdrafts was invalidated because an account was funded in part or fully by protected federal benefit deposits such as Social Security funds, it could have the unfavorable result of making it harder for those consumers to have checking accounts and other services such as ATM cards," he said.

BofA had argued that federal law and regulation preempt a California law that prohibits tapping Social Security money in an account. However, in December 2004 a Superior Court of San Francisco upheld a more than $1 billion-dollar jury award against BofA for violating state law. Later rulings reversed that decision.

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