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AUSTIN, Texas -Do regulatory impediments exist that adversely affect credit union growth? Should limitations be imposed on prizes used to encourage member participation in the charter conversion voting process? These are among the questions the Texas Credit Union Department explored at two hearings last week – one open to Texas credit unions and their members; the other open to the public – in a review of its Rule 91.1004 that governs credit union charter conversions. In addition to the above questions, TCUD specifically requested comments on charter change disclosure requirements, factors causing credit unions to consider charter alternatives, number of members that should be required to approve a conversion, means for members to communicate opinions about a charter change, and data suggesting mutual savings banks may not fulfill member needs to the same extent as credit unions. Six individuals testified at the first hearing Aug. 29 at Texas Credit Union League headquarters, dishing up at least two dozen specific suggestions for amending the agency’s charter conversion regulations. Texas Credit Union League President/CEO Dick Ensweiler was the first of five Community Credit Union members to take the podium. Suggestions included requiring the following: a credit union considering charter conversion to hold a membership notification meeting 30 days prior to any balloting; a credit union board to vote unanimously for the conversion; and all official ballot mailings to be mailed on TCUD letterhead. Community Credit Union members Martin Sisk, Mark Arnold, Joe Arnold and Elaine Laroa lobbied for other changes. As members also of the Texas Coalition for Credit Union Members, each expressed concern over “shortcomings” in the current conversion process and the need for more stringent regulations. A prepared statement read, “Credit union members have been denied any real opportunity to express their concerns, to communicate with other credit union members, or to change their vote during the voting period. Perhaps most distressingly, credit union directors are presented with a clear conflict between their fiduciary duty to represent the interests of the members and the likelihood of receiving significant, personal financial gain as a result of a conversion.” In support of that position, the Coalition recommended that TCUD: *Ensure a full and open conversion process starting with a well-publicized discussion of the possibility of conversion; *Allow members not supporting a conversion to communicate to the full membership by making available a membership list and resources for communications equal to those sent by the credit union; *Prohibit undue gain by board members, executives and insiders; *Ensure that voting members can change their votes while the voting process is open; *Adopt the pre-1998 federal standard requiring 50% of all members to vote for conversion; *Require a credit union to conduct and publicize an unbiased, third party analysis of the likely effects of a conversion and whether it is in the financial interest of members. Regardless of the outcome of the hearings, Joe Arnold told the Department, “CCU members have already suffered irreparable harm, but I’m happy we’re now addressing these issues.” Moments later, he expressed extreme disappointment in learning that TCUD was conducting its hearings as part of the agency’s normal rule review process, which occurs every four years, and not in response to Community Credit Union’s handling of the charter conversion voting process. Hal Coffman, president/CEO of Gulf Employees Credit Union in Beaumont, was the sole credit union CEO to attend the hearing. He took the podium to chide TCUD for allowing Community Credit Union CEO Gary Base to remain on the Texas Credit Union Commission after Community had begun steps to convert to a bank. Texas Credit Union Commissioner Harold Feeney noted that some of the suggestions offered at the hearing were outside the agency’s control, but others had merit. “I think minimizing the disclosure so that it is easier to read and understand is a good idea, as is holding the special membership meeting prior to balloting so that members have the opportunity to ask questions and gather more information,” he said. Three people with a markedly different message showed up to comment at Texas Credit Union Department’s public hearing the next day, Aug. 30, on rules governing the state’s credit union charter conversions – all representing banking entities. Officials from local trade organizations Independent Bankers Association of Texas and Texas Savings and Community Bankers Association made an appearance, as did an attorney for Cuero State Bank located in south central Texas. “I’d summarize their comments as `pro-choice,’” said Texas Credit Union Commissioner Harold Feeney. “Basically, they were saying don’t do anything to inhibit a credit union’s ability to convert from a credit union to a bank charter. Don’t place unreasonable constraints on them.” TCUD expects its Legislative Advisory Committee to meet in mid-September to review suggestions. Recommendations will be presented to the full Commission for their consideration in January 2006. -

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