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WEST PALM BEACH, Fla. – In 2004 NACUSO reinvented itself and adopted a collaborative business model, and now six small credit unions in Michigan have come together through the association’s Flare Project to discuss the possibility of forming a CUSO to give them purchasing power to acquire products and services they couldn’t acquire on their own and to realize operating expense savings. Gateway Services Group’s Judy Sandberg, interim COO for NACUSO and whose background is in CUSO and cooperative formation explained that the Flare Project is designed to “send a flare in the industry on how the use of CUSOs and the collaborative model can be used as a solution to many of the challenges small credit unions face in their day-to-day operations.” “A lot of these credit unions aren’t interested in merging, they want to preserve their individual brands and the relationships they’ve built with their members. But there are still things they can’t do because of the expense and that they could if they had the scale,” she added. For the Michigan Flare Project, Sandberg identified the small potential group of CUs in Michigan that had expressed an interest in working together while maintaining their identity. She began working with this core group in July 2005, and Sandberg said six credit unions have since come forward and will likely be the initial owners of the CUSO. Since July, the credit unions have been busy putting a business plan and operating agreement together. Sandberg said they’re at the point now that they’re putting the legal documents together to take to their respective boards. She expects to know by the second week in March whether the CUs got approval to form the CUSO, but she’s confident they will get their CUSO. “Right out of the gate there’s been a focus on operating expense savings,” Sandberg said. “Without the CUSO each credit union has been going out and working with a vendor by themselves. If they pooled their resources and went to a preferred vendor, they could possibly get better services and see a price savings.” The idea behind the CUSO is that the credit unions would pool different things – healthcare coverage for their employees; collaborate on marketing on things like printing newsletters, supplies and postage; sharing of ATM/debit/credit card processing; sharing a collector or other person involved with collection fees. Sandberg says the six credit unions range from $15-$50 million in assets. She explained that most of the credit unions had participated in CUSOs in other areas before such as mortgage lending, but none had considered forming a CUSO to address the fundamental areas of operations. “Now they want to find out how they can work together and tackle those challenges,” she said. Once the CUs get their boards’ approval, the next step will be for them to formalize a plan of approach to the various projects. They’ve already formed two working groups on the operating expense and growth sides. They intend to work with vendors to acquire savings on products and then make them available to their members. They’ve also hired legal counsel to help them produce the necessary legal documents. NACUSO Counsel Guy Messick has helped them put an initial operating agreement together, and they also hired a local Michigan counsel to make sure the documents are legal by Michigan law. “The credit unions want to make sure everything is appropriate from Michigan state law and NCUA regulations,” said Sandberg. “A lot of time with small credit unions you don’t have access to the same resources larger credit unions do,” said Sandberg. “As a result of our efforts on this project and communications with NACUSO, we’ve learned of other groups of small credit unions that are also examining doing this. There are a lot of benefits that can be realized by the credit unions collaborating.” She added that, “With a CUSO like this one there’s not a huge amount of start-up capital that’s needed. The group intends to support the CUSO with time and staff resources beyond cash support. A lot of things can be done without having to write a check. The credit unions have identified what resources they’ll need to support their effort and have identified the initial capital investment needed. They’ve worked it out and are comfortable with it.” -

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