Aiming to put a lid on any more lost members, the Pennsylvania Credit Union Association is ditching the concept of mandatory dues to fund awareness campaigns and the switch has already paid off with its first convert, the $475 million Merck Sharp & Dohne CU.
In reaffiliating, the CEO of the Chalfont CU, David Whitehead, told Credit Union Times Wednesday he is now “most satisfied” with the policy switch announced this week by the PCUA board to reverse a four-year-old mandatory rule.
That policy has rankled a number of small and medium-size CUs, triggering some disaffiliations. The vast majority, however, ended up paying the ad assessments to cover the $1.1 million iBelong TV/radio campaign which its backers claim has been highly successful in reaching a younger and female demographic.
“It always bothered me and I felt it was wrong for small credit unions which really rely completely on the league for basic services to be locked in to pay that assessment,” said Whitehead, citing the financial burdens small CUs already were facing with tight margins and NCUA assessments in a down economy.
As a single-sponsor CU with a handful of SEGs, the awareness factor for the Merck CU was mostly inconsequential, said Whitehead but “having that lobbying presence was important to us” and that was something Merck was willing to pay for.
“We wanted to rejoin and once they changed the policy, I wanted to keep my word,” said Whitehead.
Last year the PCUA board said it recognized the mandatory rule was having a negative impact on small CUs and so it cut the support fees by a third, but still small and mid-size CUs continued to drop out. Among them was the $689 million Franklin Mint CU.
The end of the mandatory rule comes as part of an overall dues and governance restructuring initiated by the PCUA board last year with full implementation expected next year.
In a letter sent to CEOs this week, the PCUA “this decision was based on a recommendation given to the Board by a Governance and Dues Task Force made up of 14 leaders chaired by Bill Lavage, CEO of Service 1st FCU.”
The new dues structure with lower fees for small CUs “will be based on the square root of a credit union’s assets times a factor of 1.1165, a factor to be in effect for 2012 and subject to change in the future,” said PCUA.
While iBelong, which has been franchised to several states since it started in 2007, is expected to continue, Michael Kaczenski, PCUA chair and president/CEO of Sun East FCU, has appointed a new Task Force “to look at how iBelong can continue to be relevant without the financial support of the mandatory assessment,” the PCUA said.