Why would a credit union want to offer little-known, highly specialized accounts that often carry very small balances, could sit on the books for more than a decade, and aren't a real profit center?
The answer from credit unions that offer Coogan accounts, as they are called in California, reflects classic credit union philosophy-because our members need them and we're here to serve our members.
California's Coogan law dates back to 1939 and was named after child actor Jackie Coogan, who discovered when he turned 21 that the money he had earned as a top movie star was gone. Under the law at that time, his earnings had belonged to his parents.
Coogan wasn't the only performer whose earnings disappeared. For example, during her 19 years of stardom Shirley Temple earned an estimated $3 million to $5 million. All that was left was $44,000.
Coogan accounts, also known as child performer trust accounts, blocked trust accounts and trust accounts, are required in California, New York, Louisiana and New Mexico. Fifteen percent of the gross earnings of a child actor, athlete or other performer must be deposited in the account and can only be accessed by the child when he or she turns 18.
Few financial institutions offer these accounts, because the typical credit union or bank may not have a single member who needs one. But they're important for credit unions such as AFTRA-SAG Federal Credit Union, First Entertainment Credit Union and Actors Federal Credit Union.
AFTRA-SAG FCU has approximately 4,000 Coogan accounts, which the credit union considers very significant. Donna Hurst, assistant manager of operations/Coogan account expert at AFTRA-SAG FCU, identified two big challenges in handling those accounts.
"First, a lot of production companies, studios and management companies would like the parents to open a Coogan account prior to the child getting work when in fact they don't actually need an account until they're working," she said. "So parents sometimes get caught on a Coogan carousel, and they're not sure where to get on and where to get off.
"Another significant problem is that not all states have a Coogan law. I believe four states do. It's not called the same thing in each of those states, and the laws are not reciprocal. That can be very confusing for a parent. California has some of the strictest standards, and other states tend to recognize a California Coogan account, so if a child living in New York opens a Coogan account in California, it meets New York legal requirements. But the reverse is not true."
Hurst said that even in the Los Angeles area, availability of Coogan accounts has become more limited. Originally most financial institutions did offer them, and they often levied high minimum balance and fee requirements to open an account.
But at AFTRA-SAG FCU, "It really is our niche market," Hurst said. "It's not a money-maker for us, and I think that's why a lot of institutions have shied away from it. The payoff for us, if you will, is building long-term relationships."
First Entertainment Credit Union, which also serves the film and related industries, has more than 2,000 Coogan accounts.
"The Coogan Act here in California covers all minor performers whether in film, television, music, dancing and so on," explained Roy MacKinnon, vice president of marketing. "Children cannot perform until a Coogan account is established. From what we understand, and I haven't confirmed this, a lot of casting companies won't even let a child audition without proof there is a Coogan account established.
"So we get a lot of parents of young performers opening up Coogan accounts. It's now considered part of a package a child needs such as photos, an agent and so on. A lot of these accounts are established and the children never end up working in the business. They don't get the part, or they get one small part and never work again. The account just sits there with a very low balance."
The question, MacKinnon said, is how to develop a relationship with these young members when their primary reason for opening the account was the expectation they could succeed in the business. The harsh reality is tens of thousands of people strive to be an actor but very few get their lucky break.
So why even offer Coogan accounts? Mackinon suggested a long-term view.
"Our whole mindset in offering Coogan accounts was there was a need and it was a natural fit for us because we hope that people who end up in the entertainment industry will continue to have a financial relationship with us. The bulk of our Coogan accounts are for performers between 1 and 10 years old, young children just getting into the business. There isn't a lot we can provide them other than a basic savings account until they at least hit their teenage years when we can offer them a checking account."
When the state of New York passed its own version of the Coogan law in October 2003, offering child trust accounts seemed like a no-brainer for Actors Federal Credit Union, whose Los Angeles branch already offered the accounts. By early 2004 AFCU was offering child performer trust accounts in New York. The credit union now has 5,000 child performer and Coogan accounts.
Steven Sobotta, director of marketing, said: "After New York passed its law, no banks were willing to do it. When it came to our attention, we spoke with our lawyers and we felt it was very doable. Parents have to understand the money is locked until the child is 18, period, but it is only 15% of the gross."
One sign of how specialized these accounts are is the fact that major New York banks often refer parents looking to open a child performer trust account to AFCU. "Who is that?" the parents wonder. They may even be uncertain about what a credit union is.
"Our child performer trust accounts have no maintenance fee, no balance requirement, and no initiation fee," Sobotta said. "The credit union does have carrying costs. The kid may appear in an ad when he is five years old and the money just sits in the account. But credit unions have an obligation not just to do things that make money, but to do things that serve your membership and your clientele in the community. If not for us, there would have been no place to turn for child performer trust accounts in 2004."