AUSTIN, Texas — A rule that would prohibit a Texas credit union from offering a merger inducement to another credit union's members as a means of promoting a merger of the two credit unions was recently approved by the Texas Credit Union Commission.
The commission approved the rule at its Oct. 19 meeting, according to Gary Janacek, chairman of the commission and president/CEO of Scott & White Credit Union. The tentative effective date is scheduled for Nov. 11, said Betsy Lor, a spokeswoman with the Texas Credit Union Department. The commission received three comment letters on the proposal, Lor said.
At its June meeting, the Texas Credit Union League board adopted a resolution that speaks out on unsolicited merger attempts by credit unions. The league has said that it would vigorously defend the targeted credit union and its charter, and "strongly admonish the actions by supporting credit unions to the fullest extent
possible." Several state
leagues have also adopted similar resolutions.
Both the commission and the league's moves come as a result of a failed merger attempt by $1.8 billion Wings Financial Federal Credit Union towards $179 million Continental Federal Credit Union. In early March Wings Financial sent a merger proposal to Continental FCU, which turned down the plan. Wings Financial continued to court Continental's membership with a campaign that lasted nearly a month and a half. NCUA essentially stopped the campaign in mid-April when it ruled that $200 payments Wings Financial had promised to Continental's members were impermissible under the Federal Credit Union Act.
The Texas league had taken a firm position on "hostile takeovers" calling them a "serious and imminent threat." League President/CEO Richard Ensweiler has said the league would "vigorously defend" targeted credit unions and their charters through "strong countermeasures."
NAFCU said the commission's recent approval of a rule prohibiting merger inducements is one step in the right direction.
"The Texas Credit Union Commission has taken a proactive role in making sure that credit union boards have the ability to evaluate merger options without external inducement of the membership," said Carrie Hunt, NAFCU's senior counsel and director of
regulatory affairs.
Hunt said the commission's approval "is only one solution to
a complex issue."
"We appreciate that NCUA continues to examine this issue on the federal level," Hunt said. "NAFCU believes that credit union boards should be able to make decisions that are in the best interest of the credit union and an informed membership."
CUNA said it is supportive of the commission's ruling because it helps members to have a clear understanding of what's at stake, said Eric Richard, general counsel and executive vice president at CUNA.
"Credit unions should make the most objective decision without any incentive that could distort their decision," Richard said.
Richard said it also supportive of NCUA's earlier ruling deeming the $200 payments from Wings Financial illegal.
–msamaad@cutimes.com
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