Take a good, hard look at the front page of Credit Union Times. Look at the items making headlines: credit union-to-mutual savings bank conversions, taxation, mortgages, and wise-use of technology. This is not an exercise in self-promotion but more to underscore the dramatic week credit unions faced. Are there any more core issues credit unions could be contemplating within the space of a week?
As if Americans aren't oversaturated with the 2008 presidential campaign, NCUA's new rules regarding conversions have created their own campaign season. I ask again, what could be more basic to the very philosophy of credit unions than providing the members an opportunity to make an informed vote about the future of their institution?
NCUA's new rules allow members opposed to a credit union conversion to send out materials, at their own expense, to the membership on why they believe a conversion would not be beneficial to the credit union and its members. In the Beehive Credit Union situation, the opposition movement was required to fork out extra money to pay for hard copies and snail mail delivery of its communication to those members who opted with the credit union for both.
Recommended For You
While it upped the aggregate mailing costs for Beehive Members Protecting Member Interests by nearly $5,000, it was the proper call by the agency. If Beehive Credit Union has to deliver by both methods under NCUA regulation, so should the opposition. What's good for the goose is good for the gander.
However, a terrible breakdown in communication occurred in the First Basin Credit Union attempt at conversion. The credit union sent out the proper disclosures to the membership in English but neglected to mail Spanish translations. The 24,000-member credit union merged with primarily Spanish-speaking Neighborhood Credit Union, which was only founded in 1994, in Odessa, Texas.
This has members in an uproar and should. Not only is the credit union not complying with the spirit of the regulation–no, there is no specific requirement in the regulation to provide translations–it is leaving presumably a decent portion of its membership out of the democratic process that defines credit unions. Data was not available on how many of the credit union's members are Spanish-speaking. Fortunately, some bilingual members have organized to inform this portion of the membership about what is going on.
This was a poor public relations decision for First Basin in two ways. First Basin should note that their lack of information sharing in this regard will likely lead to a bad image of the institution among the Spanish-speaking, Hispanic members who are ultimately going to vote on whether to convert to a bank or not. Additionally, the Hispanic population generally distrusts formal banking institutions and this situation will not help.
NCUA also really should amend its regulation so this First Basin scenario does not happen again.
Turning to the unrelated business income tax, credit unions, after more than a decade of trying to get answers from the IRS on what qualifies for UBIT, got their answer and are not pleased. While the issue made headlines throughout 2007, a lawsuit was finally filed lasts week by $918 million Community First Credit Union in Wisconsin. The suit challenges the $54,604 payment the credit union made to the IRS last year for credit, disability, and GAP insurance sales, which the IRS has said are not part of the business of a credit union.
Not part of the business of a credit union? How can the same federal government that brought us Gramm-Leach-Bliley, which blended some banking and insurance functions, state that insurance isn't part of the banking business–particularly insurance directly intended to mitigate loan risk? That is aside from the fact that credit unions have been offering these products for decades.
I am glad to see the credit union movement behind the lawsuit and hope that more credit unions will
step forward as their refund requests are rejected. That is money the credit union could be using to better serve its members.
And, speaking of lending, everyone knows the housing market is tanking and last week Bank of America announced a proposal to purchase Countrywide, which played a key role in the subprime debacle, for an enormous chunk of change while offering its CEO a handsome severance package. For Bank of America, it is probably a good business move and for the government, which must approve the package, it seems a no-brainer as a bailout would come from taxpayers' wallets in an election year.
If the deal goes through, credit unions, however, are losing an option for selling their mortgages on the secondary market, and facing an even more mammoth competitor in the new BofA that can also cross-sell their other products to all their new customers. Since many credit unions have sold their loans to Countrywide, some these are your members. Consolidation in any regard is a sign of the times and credit unions will have to get even more proactive in their marketing to combat this beast. The HLPR–Home Loan Payment Relief–program is a good start and many credit unions are making concerted singular efforts as well. However, credit unions must continue to be creative and look for ways to work together to compete with BofA's superior accessibility.
One great equivocator here is technology. So you may not have a branch on every corner like BofA, but $790 million Los Angeles Firemen's Credit Union has just deployed the CUDeposits program where members can remotely deposit checks (see our story, page 8) and $2.9 billion PSECU offers its similar UPost@home service. I'm fascinated with this service and think more credit unions should look into it, especially when trying to attract small businesses or the younger generations.
© Touchpoint Markets, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more inforrmation visit Asset & Logo Licensing.
