PHOENIX Arizona FCU, recently rebounded from deep financial troubles, has become one of the first credit unions in the country to charge a monthly membership fee, a $3-per-month assessment for all members over 18 years old.
"We made a dramatic, and probably unprecedented, change in how we interact with our members," Steve Kelley, senior director of marketing, told Credit Union Journal. "We have not written any press releases; it is between us and our members."
The $1.2 billion credit union began charging the membership fee, as well as a "membership restoration" fee of $25 for former members to rejoin, on Jan. 1.
Arizona Federal, which lost $159 million from 2008 through 2009 while its net worth ratio plummeted to 2.89% ("significantly undercapitalized"), has reported a major turnaround the past two years, with $90 million of net income in 2011 and 2012, and net worth rising to 9.72% ("well capitalized") at year-end 2012.
Driving Arizona Federal’s decision for the monthly dues was recognition it had had as many non-participating, low-relationship members as it had those who were getting the most out of the relationship as they possibly could, according to Kelley. "The goal was to change the ratio.”
"We have 160,000 members, and certainly no one woke up in December and hoped their credit union would start charging them dues," he said. "We went into it with our eyes open. It is an intentional, strategic move on our part that had nothing to do with revenue and had everything to do with membership and participation. It is a single piece of a much larger strategy. Certainly some members have expressed concern, and others have chosen to terminate membership. We take it upon ourselves to make membership worth far more than $3 per month, and we feel we are doing so."
An open letter to members outlining the new dues structure was sent on Dec. 1, 2012. Kelley said inactive members who only had a $25 share account were proactively contacted via mailings and phone calls.
According to Kelley, Arizona Federal believes the concept of member-ownership is "critical" to being a financial cooperative, as demonstrated by the fact it shares the proceeds at the end of the year with all participating members. On Dec. 31, the credit union returned $3 million to roughly 77,000 contributing, participating members who had completed a certain number of transactions.
The new membership dues have seen some backlash from some members who questioned the need, considering Arizona Federal's recovery in recent years.
