The concept of mandatory dues to pay for industry-sponsored awareness campaigns looks to be ending.
The Pennsylvania Credit Union Association said it was ending a four-year-old rule financing the iBelong campaign out of concern it might lose disaffiliating members because of the economy and internal costs.
The switch already brought one member back in the fold, the $475 million Merck Sharp & Dohne CU of Chalfont.
In reaffiliating, the Merck CEO, David Whitehead, said he is now “most satisfied” with the policy switch that he said he found unfair since it financially injured small and medium-size CUs which could ill afford the ad assessments but needed the league for basic services.
Whitehead said his CU is now willing to pay its fair share of the iBelong assessments. Backers of the campaign claim it that over the years the regular TV and radio commercials have been highly effective in reaching a younger and female demographic.
But Whitehead in originally dropped out said, “I always felt it was wrong for small credit unions which really rely completely on the league for basic services to be locked in to pay that assessment.” Those burdens have only worsened as CUs face tight margins and NCUA assessments in a down economy.
As a single-sponsor CU with a handful of SEGs, the awareness factor for the Merck CU was mostly inconsequential, said Whitehead but “having that lobbying presence was important to us” and that was something Merck was willing to pay for. “We wanted to rejoin and once they changed the policy, I wanted to keep my word,” said Whitehead.
Last year, the PCUA board said it recognized the mandatory rule was having a negative impact on small CUs so it cut the fees by a third, but small and mid-sized CUs continued to drop out. Among them was the $689 million Franklin Mint CU of Broomall; the $139 million Penn State FCU, Bellefonte, and the $435 million Patriot FCU, Chambersburg.
End of the mandatory rule comes as part of an overall dues and governance restructuring initiated by the PCUA board last year, which will be fully implemented in 2012.
In a letter sent to Pennsylvania CEOs, the PCUA in ending the mandatory rule, said, “This decision was based on a recommendation given to the board by a governance and dues task force made up of 14 leaders chaired by Bill Lavage, CEO of Service 1st FCU.”
“The new dues structure with lower fees for small CUs “will be based on the square root of a credit union’s assets times a factor of 1.1165, a factor to be in effect for 2012 and subject to change in the future,” said PCUA.
Michael Kaczenski, PCUA chair and president/CEO of Sun East FCU, has appointed a new a new task force “to look at how iBelong can continue to be relevant without the financial support of the mandatory assessment,” said PCUA.