The president/CEO of Educational Systems Federal Credit Unionsaid Friday that charging members a fee in a merger deal may bebreaking new ground but that it's only fair to his existingmembers.

The $388 million, 39,800-member ESFCU of Greenbelt, Md., ischarging members of the $401 million, 57,700-member MontgomeryCounty Teachers FCU of Derwood, Md., a $35 one-time fee as themerger nears conclusion.

“We've already gone through quite a bit to put togetherthis merger and so we feel it is only fair that our own members donot get saddled with the expense, which is why we have asked forthe extra fee,” said Chris Conway, who was a former executive andlongtime member of MCT FCU before taking the top job at ESFCU.

Conway said Friday that there have been extraordinary field ofmembership and policy circumstances to consider before his boardformally decided last month to move ahead with the fee.

“Sure, there are members of Montgomery County who don't likethis fee but I've heard from many more that understand ourreasoning and the need to be fair to members of EducationalSystems,” Conway said Friday.

“You have to realize that we are taking on a credit union largerin size than our own and one that experienced serious financialproblems,” he said.

MCT had been under a regulatory watch after it suffered largelosses in secondary mortgages racking up a $6 million loss for 2010and $739,000 last year and has been at 4.4% net worth. It also hadrecently been hit by an NCUA cease-and-desist order for exam exceptions.

Conway said he and his board were prepared for some criticism ofthe fee but decided that such a course served the Beltway educationcommunity of Maryland in the long run by discouraging outside “megacredit unions which would have little regard for the needs of thisarea and might end up firing a lot of back office employees” toassume a takeover of MCT.

However, he stressed, “We are not trying to set some kind oftrend here because our situation of two like-size credit unions isso different” from such takeovers.

MCT is headquartered in a suburb of Rockville and got intotrouble several years ago over secondary mortgages.

Conway said the $2 million raised from the fees would defraycostly merger expenses ahead for ESFCU during the remainder of thisyear and into 2013. He mentioned signage, credit cards and adata processing conversion that involves hardware and softwareupgrades and leasing charges.

Asked why MCT members were not told about the $35 fee beforevoting on the merger, Conway said the MCT board had alerted itsmembership that there would be higher fees resulting from anyconsolidation given its financial condition.

Thus the issue of how MCT would handle the anticipated cost “wasan issue for them, not for us,” Conway said.

As the computer conversion is completed, EFSCU expects theconsolidation to go forward smoothly with an expanded branch andservice network “as we both continue serving a special heritage,”Conway said.

MCT FCU will be operated as a division of ESFCU, the creditunions have said.