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SAVANNAH, Ga. – For many credit unions, converting to a community charter has more upsides than down, but the long-term effects are varied and unexpected. Since the passage of the Credit Union Membership Access Act of 1998, new community charters have doubled and 14% of all federal credit unions now operate under them, the NACUC reported. In a series of roundtable discussions held by NACUC here attendees shared their personal credit union stories on community charters. Many of them have added the underserved, a group, one chairman reminded, that isn’t necessarily poor but “are those that the banks have left behind.” Another chairman from New York said its credit union has grown 20% each year since converting but not all from the charter change. “The best marketing approach we used is through SEGs,” the chairman said. One Florida credit union went community in 2000 but chose to keep its name the same, instead, focusing more on branding. It also experienced some “backlash” because with the addition of “different classes of membership,” loan losses followed. A firefighters credit union has yet to entertain the thought of converting saying “our (FOM) will be the same forever. It would probably have a negative impact on our current members.” Competitors like Bank of America and Liberty Mutual are trying to bring back the customers they “pushed out into the street” years ago and that has had an impact on whether some credit unions have expanded their charters, said the director from the $126 million California-based firefighters CU. A board secretary from a $1 billion credit union in Virginia said there is still some reluctance from its board to go community but it’s hoping that new branches in local schools will help ease the transition. “I see a change coming in the next two years,” the secretary predicted. An influx of Mexicans to the area, “forced” a credit union in the South to convert to a community charter, said the chairman. The credit union does risk-based lending to accommodate them and most come in the door with “E paper.” If they make their payments on time, they’re moved to “C paper.” It’s nearly 93% loaned out, he added. “A lot of illegal aliens are still afraid to come in because they think the (Immigration and Naturalization Service) is going to come in and get them,” he said. A credit union initially chartered to serve General Motors employees in 1965 was also “forced” to go community after a number of small credit unions in the area “were going under.” “We were almost forced to go community to help these credit unions out,” the chairman recalled, adding the change has reaped benefits: the CU has grown from $140 million to $250 million in four years. The majority of chairmen from one of the sessions said their board makeup did not change as a result of converting, but some did add younger members and others relied less on those from sponsor groups. And, in spite of converting, recruiting volunteers is still a big problem, said one chairwoman from California. -

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