Technology Charter Bid Draws Industry Concerns
The California Credit Union League and CUNA CEO Bill Cheney both expressed concern that Technology CU members be completely informed about the impacts of potential move to a mutual bank charter.
The $1.5 billion San Jose credit announced Monday on its website that it would be seeking to convert to bank, citing as a major reason the ability to go after more profitable commercial and small industrial lending business.
“Charter conversions should be approached from the viewpoint of the members-owners of the credit union,” stated CCUL CEO Diana Dykstra. “While a credit union’s management may experience the operational advantages of a bank charter, the benefit does not necessarily extend to the credit union’s members. In the end, those members could be left with a financial institution that no longer strives to put their interests first.”
The association also pointed out that research shows CUs “typically” offer better rates on loans than do banks and that consumers save money by using a credit union over a bank. “In California, that savings amounts to about $930 million, or $183 per member household,” the league said.
Cheney expressed similar skepticism that a bank charter would serve Technology members better than a CU charter.
“We continue to believe that the credit union charter remains the best option for serving the interests of consumers,” Cheney said. “That point was made acutely over the last several days when Bank of America announced a monthly debit card fee – which was followed by a resounding and sharp outcry from across the nation by consumers and the news media alike that credit union membership is the natural haven from such high fees, typically charged by banks.”
He also pointed out that, in terms of deposit insurance premiums, changing charters might lead Technology from a less expensive option to a more expensive one.
“All credit unions should recognize that estimates of their shares of the costs of the corporate credit union resolution have been dropping,” Cheney observed.
“As result of recent announcements by the NCUA – which are likely to affect credit unions over the next several years – credit unions will likely pay less in the combined costs of NCUSIF premiums and corporate resolution than similarly sized banks will pay in their premiums to the FDIC over the coming decade,” he said.