CHICAGO - The moves by Texas' Community Credit Union andOmniAmerican CU to convert to mutual savings bank charters are notthe first CUs in the state to do so, but they're certainly thelargest, and it's the size of the two credit unions that has putthe Texas Credit Union Department "under the spotlight." "WhenShare Plus FCU converted to Share Plus Federal Bank, hardly anyonetook notice because they were very small at the time," CommissionerHarold Feeney told Credit Union Times during an interview atNASCUS' Annual Conference & Symposium. "But with Community andOmniAmerican both being billion-dollar credit unions, that'sgetting us a lot more attention," he said, adding that he's gottentelephone calls from some credit unions that are concerned that theway the Texas Credit Union Department deals with the conversionapplications and ensuing situation "could set a precedent" aroundthe country. Feeney emphasized that the precedent-setting concernis not so much among state-chartered credit unions. Citing NASCUSdata, he said of the 47 states with credit union laws, 26 prohibitstate-chartered credit unions from converting to a non-credit unioncharter. That means any SCCU that wants to convert out of thecredit union system has to first convert to a federal charter."Most state regulators take the position that if there isn't aregulation that says you can convert, then they assume you can't,"said Feeney. But how can a state prohibit a credit union fromconverting to a non-CU charter if the CU is owned by its membersand they demonstrate that's what they want? Feeney said not allstate credit union regulations use members and owners synonymously.The Texas statute, for example he said, only refers to `members'and not to `owners.' "The statute specifically give authority tomembers to do some things, but the statute puts the authority forthe activities of the credit unions in the hands of the board.Anything the credit union wants to do has to come from the board.It gives the board the authority to make recommendations tomembers, but doesn't give members the authority to makerecommendations to the board," Feeney explained. "The ownershipissue of a credit union isn't the tangible right that it's made outto be," Feeney said pointedly. "The only time it kicks in is if thecredit union liquidates and is solvent. Then the surplus equity isshared with the members, based on their deposits," he said. Oncethe Community CU and OmniAmerican CU conversion situation isresolved - whatever the outcome is - Feeney said the Credit UnionDepartment "would want to take a look at the statute to make surethe credit union charter is attractive and that credit unions canserve their members effectively without feeling they have to go toa non-credit union charter." Feeney said his office hasn't receivedinquiries from other Texas state-chartered credit unions aboutconverting to a non-CU charter since it received the applicationsfrom Community and OmniAmerican, "but then we didn't have anybefore those either." He added that he's also been traveling aroundthe state talking with presidents of state-chartered credit unionsto get their perspective on conversions, and "in general none saidthey're considering converting," he said. In talking with thestate-chartered credit union leaders, Feeney has also been askingthem what changes if any they'd like to see made to the Texascredit union statute. "Most didn't have any recommendations forwhat they'd like to see changed in our statute, but they would liketo see more things changed at the federal level with things such asthe member business lending limit and alternative capital. Theyalso understand it would take an act of Congress to change that,"said Feeney. "The OmniAmerican and Community Credit Union issuecame down to capital and their ability to generate secondarycapital. Their ability to do that didn't meet what they want todo," Feeney explained. "The idea of slowing down their growthdoesn't meet with their business strategy. They tried and theirboards tried to find ways for their capital to keep pace, but theydecided that wasn't possible short of slowing down. That wasn'ttheir strategy. Both credit unions wanted to be leaders in theirmarkets," he added. On Aug. 29, the Texas Credit Union Departmentheld a forum to give credit union members and representatives theopportunity to express their opinions on the issue of creditunions' ability to convert to mutual savings banks. Feeney said oneof the outcomes of that meeting was that there will "likely" be achange in the existing rules and regulations for credit unions inTexas that address the issue. Feeney explained that the currentregulations "lumps all types of credit union conversions together"including state to federal charter, and federal to state, as wellas CU to MSB. "At this point, I'm not exactly sure what change willbe made, but the Commission will probably recommend repealing theexisting rules and adopt new ones that break out creditunion-to-credit union conversions, from credit union-to-thriftconversions," said Feeney. A second meeting was held Aug. 30 togive the general public - including banks - the opportunity tocomment. Feeney explained that every four years the Credit UnionCommission is required by law to review its rules and regulations.Before it does that, the Department typically makes recommendationsto the Commission based on the feedback it receives from publicnotices it posts asking for comments on the rules and regulationsbeing reviewed. The Commission, he said, "wants to give everyonethe opportunity to give their input." "If the conversion situationhadn't come up we would not be holding the forums," said Feeney.Once the forums are over, the Department will make itsrecommendations to the Commission for changes to that regulation,and the recommendation will then go through the same process as anyother it makes to the Commission. Feeney is not concerned that theCommunity and OmniAmerican controversy will dilute the public'sperceptions of credit unions. "If credit unions maintain theirphilosophy of being socially responsible, I don't think there'sanything the banks will be able to do to change the public's needfor credit unions." He added, however that, "Credit unions need todo a better job educating members about the benefits of creditunions. I'm not sure the members of Community Credit Union orOmniAmerican Credit Union understood the difference," said theCommissioner. -


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