Richard S. Garabedian, a Washington attorney who specializes in credit union charter conversions, doesn’t think HarborOne Credit Union’s conversion to a state co-operative bank, approved by its members last Monday, will trigger a wave of credit union charter conversions.
“Every credit union conversion is unique,” said Garabedian. “But I don’t think it means you are going to see a wave of charter conversions. It’s hard to predict what impact it will have but it may give some credit unions an incentive to look at the charter option because this one was passed by member.”
But he also noted that other charter conversions have failed. For example, the members of the $1.7 billion Technology CU in San Jose, Calif., voted overwhelmingly not to convert to a mutual bank in 2012.
And even though members of the $187 million HAR-CO Federal Credit Union in Bel Air, Md., approved the CU’s plans to convert to a mutual bank, it pulled its application to convert last year.
Last Monday, the $1.9 billion HarborOne CU in Brockton, Mass., announced members approved the charter change proposal with nearly 62% of its 22,433 voting members casting ballots in favor of the proposal.
The Bay State’s largest state-chartered credit union has said its reasons to convert were the flexibility to expand HarborOne’s markets and customer base, increase its lending authority, including small business lending, and gain access to additional capital.
However, longtime credit union attorney Steven R. Bisker of Alexandria, Va., said members who voted for the conversion were not voting for their own best interest. He argued that NCUA data has consistently shown that when a credit union converts to a bank, the rates charged for loans and the rates paid for savings are not as good as when they were operating as a credit union.
“If my credit union were to say to me that it wanted to convert to a bank, why would I want that? I am taking advantage of my credit union’s services because they offer things to me that my bank doesn’t,” Bisker said. “Why would I want to make my CU a bank? The reason why I’m doing business with my credit union is because it is a credit union. If [HarborOne members] thought their credit union should be a bank, then they should not have been doing business with the credit union in the first place.”
“It’s a shame that we are losing another credit union,” said E. Andrew Keeney, a 35-year credit union attorney in Norfolk, Va.
Nevertheless, Keeney doesn’t think the HarborOne conversion will weaken the.
“I think that those that want to belong to a credit union are solid credit union members. We have some great, great credit unions and great management,” he said. “Occasionally, one will fall from the flock. It’s regrettable, but it’s not something that is totally unexpected.”
Douglas Faucette, a spokesperson for America’s Mutual Banks in Washington, an organization that represents mutual savings banks, said he believes the HarborOne conversion is a positive development.
“I think [the HarborOne conversion] is positive because the credit union has evolved to a point now that it can stand on its own two feet and it doesn’t need the help from anybody other than its membership and its customers,” said Faucette. “In this particular case, it just enhances [HarborOne’s] mission. Why would anyone be opposed to this? I am not sure.”