Letter: CUs Have an Obligation to Consider Charter Change
There would appear to be disproportionate anguish in some credit union circles about the recent announcement that Technology Credit Union is considering changing its charter to that of a mutual savings bank.
On its website the credit union has responsibly communicated to its owner-members why the structural change is being considered as well as the potential pros and cons. The general membership has been invited to the discussion table early-on, and the highly supervised process leading up to a membership vote on the required transparent conversion plan has just begun. Technology Credit Union deserves to have the industry’s support during this important decision-making process.
I know of other credit unions that have actively looked at a conversion as part of their contingency planning. I think that the board of directors and management of every credit union have the obligation to consider all strategic and organizational options. I am disappointed to see any credit union seek a different charter and regret that currently the credit union charter is not sufficiently versatile to meet everyone’s needs. However, I respect Technology Credit Union officials’ right to present this business model option to their membership, and I strongly support each member’s right to choose whether to support it or not. Regardless of the balloting outcome, members-customers are best served when their neighborhood financial institution survives and thrives, be it a bank or a credit union.
Unfortunately, I am also disappointed to read the CUNA leadership’s recent comments, as well as the initial communication about Technology Credit Union received here in California from the California and Nevada Credit Union Leagues, which made it sound like they are knee-jerk opposed to the conversion at the outset. They appear much too quick to mouth with unconvincing philosophical platitudes, alarmist member-experience scenarios and unsubstantiated marketplace claims. There are lots of good reasons to be a credit union, but it is not the only legitimate financial institution charter in existence. Credit unions and mutual savings banks have more in common than some would have you believe, and both charters can be extremely customer friendly and successful.
For example, here in California in 1999, there were six credit unions serving the Kaiser Co. Today only two of them remain as credit unions and one as a bank. It was in 1999 that Kaiser Permanente Federal Credit Union converted to Kaiser Federal Bank, and it is today the only really successful financial institution from the former group of six. It has a full menu of services and a great reputation for serving customers. Its assets grew from $174 million to over $900 million (up 417%). Kaiser Federal Bank’s one-year certificate of deposit interest rate is higher than the two remaining credit unions’ rate, and its courtesy pay overdraft fee is $5 less. Of course, I could share many credit union success stories as well, but the point is the credit union charter is not inherently blessed, and the bank charter is not necessarily the road to perdition.
Too often in recent charter conversion efforts, state and national trade associations have misapplied their sense of pride in credit unions’ accomplishments by aggressively interfering in individual institution’s conversion efforts. When they have not engaged in these unwarranted interventions themselves, they have brought in their surrogate mercenaries like the National Cooperative Business Association or the Center for Member Trust. Some of these anticonversion groups appear much too willing to substitute their narrow judgment about what is good for the member of a particular credit union rather than respecting that those members and the credit union’s officials are much better positioned to make that decision themselves.
As a dues paying member of CUNA and the California Credit Union League, I will be greatly disappointed if either organization does anything overt to oppose this conversion effort or to so-called “educate” the Technology Credit Union membership to vote against the conversion plan.
Messing with any credit union’s internal governance affairs is an ugly business and is not proper behavior for a trade association or other misguided outside groups. The Technology Credit Union’s officials and membership should be allowed to take care of their own business without having to fend off external hysteria and disparaging misinformation. Let’s have some respect for the democratic process that we so often rely on to explain the benefits of the credit union charter.
First Entertainment CU