KENSINGTON, Md. -- Members of the $332 million Lafayette Federal Credit Union who oppose the credit union's proposed conversion to a mutual bank have written an eight-page letter to the credit union's board of directors which questions, among other things, the CU's contention that it would enjoy a "more flexible regulatory environment" as a bank than as a CU.
Existing federal regulations allow a federal credit union to have free office space and other support and do not offer the same benefits to for-profit banks, the members pointed out in their Oct. 3 letter. Then they noted that the Office of Thrift Supervision, which would be the CU's regulator should it change charters, actually regulates the process of opening new branches more than NCUA does.
"In contrast to the regulatory flexibility of an FCU, before a federal savings bank can change the location of or establish a new branch office, it must file an application or notice with the Office of Thrift Supervision and receive OTS approval or nonobjection," the members wrote. "This approval process is quite extensive. Also, unlike FCUs, federal savings banks must follow notice procedures prior to closing any branch office."
The members said that their discussions with administrators of the Small Business Administration and the U.S. Agency for International Development led them to question whether the former CU would even be able to keep two branches in those agency headquarters at all.
The members challenged the CU's claim that it needed to become a bank in order to open new branches in the Northern Virginia area. They asked why the CU had not considered joining the shared branch networks, which would have allowed CU members access to branches in the area at only a fraction of the cost of building new branches and without having to change the charter.
The members further argued that the credit union's thrust to be able to offer more business loans would merely serve a very small minority of members at the expense of the majority.
Currently less than one-half of one percent of the members use member business loans, according to the CU, and Lafayette said it needed to become a bank to double that capacity. But even if it did so, under OTS rules, the former CU still would serve only a tiny number of its depositors. "Therefore, even if LFCU were to convert, and thereby 'double the current capacity' as a bank, LFCU would only be serving a mere 1.5% of the total members," the members wrote. "Put another way, one of the primary arguments for conversion will provide no benefit to at least 98.5% of LFCU's members."
Audrey Sturdivant, an SBA employee, credit union member and one of the signatories of the letter, explained why the members took the step. "The credit union largely ignored our elected representatives," she said. "Our request is a reasonable follow-up to ensure that member-owners make an informed choice about the future of the institution we own. We need to understand how selling what we own for nothing, and paying taxes, is going to be off-set by better, more affordable services." --email@example.com