The $388 million Educational Systems Federal Credit Union of Greenbelt, Md. is rescinding the $35 merger conversion fee the credit union had decided to impose on its new members following the takeover of the $401 million, 57,700-member Montgomery County Teachers FCU of Derwood, Md.
Chris Conway, ESFCU president/CEO, said the decision was made after hearing objections from members, including board members, of MCT, which under the July 31 merger, will be operated as a division of ESFCU.
The merger fee was expected to generate $2 million to defray merger expenses, expenses the 39,800 members of ESFCU shouldn’t have to bear for consolidating an ailing MCT, ESFCU officials said when the fee was announced.
On the MCT website posted Wednesday under the headings “You Told Us and We Listened” and “There Is a Better Way,” members were told the “account conversion fee” was being rescinded and that through greater product and service usage by MCT members financial health can be restored to the suburban Rockville credit union.
In elaborating on the switch, Conway told Credit Union Times late Tuesday that “as we talked about the account conversion fee, I shared that we had only received about 50 or 60 emails and only half of them were regarding the account conversion fee. Most of these members didn’t like the fee but were willing to do their part to preserve MCT’s legacy.”
He added, “The simple request by one member to “Please find another way” got me thinking, ‘With all of the love and support for the credit union, isn’t the better way to restore MCT by simply asking the members to simply do more? Could this work?”
After spending Tuesday soliciting feedback from members, staff and the NCUA, Conway said, “I looked at our numbers to ensure that we will be well capitalized in short order and the conclusion that I came to, and subsequently presented to my board, was that rescinding the fee feels right.”
Moreover, he said “the outpouring of support that I have received from MCT members emails has demonstrated to me that we can do this without an account conversion fee.”
Thomas Hickman, chairman of the former MCT board, said, “I think it was a wise decision and we’re grateful they made the change.”
The former nine-member board had expressed deep regret at the merger fee and said they were surprised when it was announced on the website a week ago, said Hickman.
MCT had been under a regulatory watch after it suffered large losses in secondary mortgages racking up a $6 million loss for 2010 and $739,000 last year and has been at 4.4% net worth. It also had recently been hit by an NCUA cease-and-desist order for exam exceptions.
However, Hickman said his board had rejected the idea of merging with ESFCU based on a proposal once floated in merger discussions of a “recapitalization charge.”
“Under the merger we knew and expected there would be higher fees that our members would have to pay but we but we felt that fees would be passed along to both credit unions,” said Hickman. “In our view in any merger there is a balance.”
He said the MCT board understood that a regulatory opinion was being sought on the “recapitalization charge” but a final ruling was not forthcoming.
The announcement of a conversion fee “took all of our board by surprise” but there was not much to be done since the merger had been approved, Hickman said.
Going forward, the former board is now enthusiastic, said Hickman, a retired Olney middle school principal.
“We have so much in common with the membership of Educational,” said Hickman. “We are confident it will be a success.”
The website message outlined ways MCT members can contribute to the credit union’s financial condition in place of the $35 fee by taking out car loans, signing up for e-statements, and refinancing mortgages.
MCT members can also use “your MCT checking and debit accounts and set up direct deposit and pay bills online,” the website announcement said.