Many worried credit union eyes now are on July 1, the date when the NCUA has said it will bump up ACH fees for U.S. Central Bridge customers by 80%. That looming price hike has triggered a quick rush to the exits as corporates and their members race for alternatives.
The good news is that most credit unions said their exit plans are taking shape.
The bad news is that there are anxieties that there will be delays as literally thousands of institutions seek exit routes and every conversion out of U.S. Central Bridge is a meticulous, time-consuming process that involves making certain forms are properly executed and processes are implemented.
One corporate chief operating officer, speaking off the record because he was not authorized to reveal these details, indicated deep frustrations with the ACH conversion race. “We are in the process of completing our transition plan for APEX-ACH. However, the very short timeline [permitted by the NCUA, which revealed its U.S. Central Bridge closure timetable in late December] to execute the ACH transition eliminates some potential solutions. There just isn’t the time to create an informal model of cooperation and aggregation between the corporates. If we could eliminate at least some of our duplicate efforts, it would be more efficient and cheaper for credit unions. Unfortunately, the compressed deadlines do not allow for this to occur.”
That executive had been active in the plan, floated last year, for a coalition of corporates to buy ACH out of U.S. Central, but that scheme was short circuited by the NCUA amid pervasive doubts about the potential solvency of the effort, said executives who had been involved in the drive.
Other options are plentiful, however, and include an offering from Wichita, Kan.-based Lending Tools as well as a new offering via Jersey City, N.J.-based financial services provider Fundtech, which recently announced ACH tie-ups with Columbus, Ohio-based Corporate One and Warrenville, Ill.-headquartered Alloya. The Federal Reserve also has been active in directly contacting corporates in an effort to put more credit unions directly on Fed systems. Sources also have indicated that yet more conversion plans may be forthcoming from other financial services providers.
Add that activity up and that is why there is optimism that credit unions that act promptly will be able to avoid the 80% fee increase. In fact, at least one corporate credit union said that it has already moved off the U.S. Central Bridge ACH tools. At Corporate America in Irondale, Ala., CEO Thomas Bonds said, “We converted 99% of our member credit unions off of the USC ACH platform last year in anticipation of this failure. We have only three CU's still using APEX and they are in the process of converting as we speak.”
Bonds added, “What is surprising, is that the failure of the ACH and automated settlement functions at USC is, in fact, surprising to some folks.”
At Plano, Texas-headquartered Catalyst Corporate, Vice President Amy Fuller said that it has been assuring its members that it will get them converted off the U.S. Central Bridge platform before the July 1 date. A similar assurance has been offered to Western Bridge users who decide to capitalize Catalyst, said Fuller. Both groups will be converted to a Catalyst home-brewed service called ACH Online. Pricing for that will be comparable to the fees members had paid for using U.S. Central Bridge ACH, indicated Fuller.
Perhaps the loudest drum beats around ACH have emanated from Lending Tools, which has announced deals with five corporates–Louisville, Ky.-based Kentucky Corporate, Westbrook, Maine-based Tricorp, Nashville-based VolCorp, St. Louis-based Missouri Corporate and Wichita-based Kansas Corporate. And Lending Tools is said to be working on other pacts.
Kansas Corporate sings the praises of Lending Tools, saying its tools enabled KCC to convert 50-plus members off U.S. Central Bridge and into the Lending Tools processes before the end of 2011, according to CEO Larry Eisenhauer and Operations Manager Tonya Johnston. They indicated that additional conversions, triggered by members of Montana-based corporate Treasure State, which now has merged into KCC, will be implemented by May 1, “well ahead of the required deadline established by the NCUA or before any member incurs the significant increase in fees planned for July 1st,” said the Eisenhauer-Johnston email.
They added, “ As we’ve made the transition away from U.S. Central, we have to be able to offer the same quality products and services without adding resources and keep the expense structure in check.”
Meanwhile, the Fundtech ACH service, presently offered to credit unions via the 800-member Corporate One and Alloya, which claims over 1,100 natural person credit union members, is said to provide stable pricing, according to both Corporate One and Alloya. Neither corporate would offer assurances that it could get all members to Fundtech ACH converted by July 1.
At Alloya, spokesman Vic Vrigian said, “Alloya would not guarantee a July 1 conversion, but we will cover any additional costs imposed on members who are working with us.”
At the day’s end and despite this flurry of initiatives, will providing good ACH be a winning differential for particular corporate credit unions? Consultant Marvin Umholtz is skeptical about that. To him, ACH is a necessity but not a difference maker. “ACH is a useful service, but I would definitely call it a commodity service to credit unions. ACH is a relationship builder, but it would be crazy to build a revenue-seeking business plan around it.”