BofA, Tech CU Are Not the Enemy

When Technology Credit Union posted its announcement that it was exploring a conversion to a mutual savings bank, CUNA and the California Credit Union League made some noise. CUNA CEO Bill Cheney said his organization feels credit unions are the best providers of service to consumers. 

They can be but not always. Credit unions used to their fullest potential are amazing entities hands down. If a credit union isn't offering products or services that the members want because it's restricted in capital building–as Tech CU said in its letter to members–then that's a real problem for the business and how and whether it can continue serving its members.

If Tech CU members really want business loans, which the credit union cited as another reason to convert, but the credit union runs up quickly on that 12.25% cap, then Tech CU could be doing the right thing by its members. 

The credit union community must drop its preconceived notion as the only way to truly serve consumers well. If that were the case, banks would be the ones controlling just 6% of the market.

Tech CU's disclosure was very boilerplate, and the credit union did not return Credit Union Times' call for further comment. The disclosure noted that a conversion to a mutual savings bank would mean that members would still have voting rights, which the trades did not acknowledge in their statements. However, it also didn't mention that those voting rights are often based upon deposits. One dollar, one vote to play off the credit union one member, one vote philosophy.

Neither Cheney nor CCUL President/CEO Diana Dykstra accused the credit union board or management of converting out of greed. However, the CCUL's statement jumped Tech CU straight to a stock-held institution serving the interests of stockholders, which Tech CU clearly said it didn't have plans to go beyond the mutual bank charter at this point. It may (22 of the 35 that have converted are stock form plus five are hybrid models, according to CU Financial), but the possible stock conversion cannot be a foregone conclusion.

The membership gets plenty of disclosures and the ultimate vote. It is, after all, their institution. If they decide a bank charter is best, that's their call. If the credit union ultimately converts to a stock charter, that also is the MSB members' call. No good can come from keeping a credit union a credit union if it does not want to be one. In reality, credit unions have not cornered the market as the only good option for consumers. 

The trades hate when banks try to define credit unions but, when a credit union tries to redefine itself, they hate that, too. Note that NAFCU has remained completely silent on this matter. Smart move.

Cheney went so far as to draw a parallel to the BofA debit fee controversy. “That point [that consumers are best served by credit unions] was made acutely over the last several days when Bank of America announced a monthly debit card fee–which was followed by a resounding and sharp outcry from across the nation by consumers and the news media alike that credit union membership is the natural haven from such high fees, typically charged by banks.”

The trades should turn the conversion scenario around and tell members of Congress, “Look how difficult our charter is to operate in. We need capital reform and expanded business lending authorities.”

In a capitalist society, with acutely targeted reining in by the government, I find it unfathomable that Americans raise such an outcry over the $5 fee. A for-profit institution, cut off from one revenue stream by the Durbin amendment, will naturally seek out another. 

BofA would be in violation of its fiduciary duty to its stockholders. Seeking replacement revenue is  not a sin. How much has any bank or credit union lost in data breaches or paid in infrastructure that was previously covered by interchange fees?

Sen. Durbin was reportedly “outraged” by the BofA fee. That's outrageous. The entire industry (never mind common sense) said this was coming. President Obama declared that this is exactly why the Consumer Financial Protection Bureau was necessary. Dodd-Frank, which created the CFPB, also imposed the interchange cap that led BofA to establish the fee. The Consumers Union has even called for an investigation into the fee. What do they expect to find? It is not a crime to charge a relatively nominal fee to cover the cost of a service provided. 

The world needs all kinds of financial institutions. Consumers can vote with their money if they really don't like the one they're at. Credit unions must take advantage of the buzz the BofA announcement has stirred up. Give consumers the tools and knowledge to actually make the move to a credit union.