The $388 million Educational Systems Federal Credit Union ofGreenbelt, Md. is rescinding the $35 merger conversion fee thecredit union had decided to impose on its new members following thetakeover of the $401 million, 57,700-member Montgomery CountyTeachers FCU of Derwood, Md.

Chris Conway, ESFCU president/CEO, said the decision was madeafter hearing objections from members, including board members, ofMCT, which under the July 31 merger, will be operated as a divisionof ESFCU.

The merger fee was expected to generate $2 million to defraymerger expenses, expenses the 39,800 members of ESFCU shouldn'thave 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“You ToldUs and We Listened” and “There Is a Better Way,” members weretold the “account conversion fee” was being rescinded and thatthrough greater product and service usage by MCT members financialhealth can be restored to the suburban Rockville credit union.

In elaborating on the switch, Conway told Credit UnionTimes late Tuesday that “as we talked about the accountconversion fee, I shared that we had only received about 50 or 60emails and only half of them were regarding the account conversionfee. Most of these members didn't like the fee but were willing todo their part to preserve MCT's legacy.”

He added, “The simple request by one member to “Please findanother way” got me thinking, 'With all of the love and support forthe credit union, isn't the better way to restore MCT by simplyasking the members to simply do more? Could this work?”

After spending Tuesday soliciting feedback from members, staffand the NCUA, Conway said, “I looked at our numbers to ensure thatwe will be well capitalized in short order and the conclusion thatI came to, and subsequently presented to my board, was thatrescinding the fee feels right.”

Moreover, he said “the outpouring of support that I havereceived from MCT members emails has demonstrated to me that we cando this without an account conversion fee.”

Thomas Hickman, chairman of the former MCT board, said, “I thinkit was a wise decision and we're grateful they made thechange.”

The former nine-member board had expressed deep regret at themerger fee and said they were surprised when it was announced onthe website a week ago, said Hickman.

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.

However, Hickman said his board had rejected the idea of mergingwith ESFCU based on a proposal once floated in merger discussionsof a “recapitalization charge.”

“Under the merger we knew and expected there would be higherfees that our members would have to pay but we but we felt that fees would be passed along to both credit unions,” saidHickman. “In our view in any merger there is a balance.”

He said the MCT board understood that a regulatory opinion wasbeing sought on the “recapitalization charge” but a final rulingwas not forthcoming.

The announcement of a conversion fee “took all of our board bysurprise” but there was not much to be done since the merger hadbeen approved, Hickman said.

Going forward, the former board is now enthusiastic, saidHickman, a retired Olney middle school principal.

“We have so much in common with the membership ofEducational,” said Hickman. “We are confident it will be asuccess.”

The website message outlined ways MCT members can contribute tothe credit union's financial condition in place of the $35 fee bytaking out car loans, signing up for e-statements, and refinancingmortgages.

MCT members can also use “your MCT checking and debit accountsand set up direct deposit and pay bills online,” the websiteannouncement said.