State Employees' Credit Union's decision to disaffiliate from CUNA and the Carolinas League has some CUs supporting the move, while others contend that the nation's second-largest CU has quit on the community.
What the decision by the $27 billion-asset credit union may have ultimately accomplished, several industry executives say, is to focus attention on an issue that has been brewing for some time — the ability of the state leagues and CUNA, under their current rules and structure, to effectively serve credit unions of varying size and need.
Industry insiders also say it's time to have a discussion among credit unions, leagues and CUNA about the matter.
A central issue credit unions point to is the inability to choose whether to join their league, CUNA, or both. The current CUNA structure requires dual membership — the primary reason the Raleigh, N.C.-based SECU pulled.
Reasons for choosing between the league and the trade association are often CUNA meeting the needs of the credit union while the league does not, and vice-versa. Sometimes, CUs simply can't afford both sets of dues.
SECU CEO Jim Blaine said he also had issues with CUNA's board structure, which he said has representation from only six of the 40 state leagues.
Chell Callaway, CEO at the $50 million Kellogg Co Employees FCU, in Omaha, Neb., understands why SECU disaffiliated, saying her credit union left CUNA and the Nebraska league at the end of 2012 due to the league failing to serve the credit union's needs.
Callaway said KCEFCU sees a great deal of value in CUNA and wanted to remain a member. She hopes that SECU walking away with its $346,000 annual check for combined dues has some effect on the thinking at CUNA.
"We disaffiliated about six months before I came on board in the summer of 2013," said Callaway. "I wrote [CUNA President Bill] Cheney a letter last year expressing the need to have other options to belong to CUNA instead of belonging to the league. There are many credit unions paying league dues just to belong to the CUNA. I received no response."
Callaway also wrote that she would be willing to sit on a board or focus group "just to see if there is problem that needs to be addressed. Again, and I did not get a response."
CUNA Is Reviewing Structure
Susan Newton, EVP of credit union system relations at CUNA said the trade association has been reviewing its structure and how CUNA is positioned to serve its members in the future.
Before SECU disaffiliated, CUNA charged "a group of people from the leagues to look at a number of things we have had in place for many years," said Newton, noting that CUNA performs the reviews every few years. "Incoming Chairman Dennis Pierce, as well, is appointing a renewal review committee and will look at a number a number of issues related to our governance structure, including the dual membership requirement."
The committee will be made up of a cross section of CUNA member CU leaders from across the country. Appointments, Newton said, could be announced in early March.
Several sources, however, question whether CUNA is really listening.
"We have a fiduciary responsibility to be good stewards of our members' money and it would be irresponsible to continue to contribute considerable dollars to an under-performing league when it is apparent there is significant resistance to change," said Carol Irby, CEO of RiverLand CU in New Orleans.
The $184 million RiverLand is not a CUNA member, according to Irby, due to dissatisfaction with the Louisiana league. "I served on the league board at one time and suggesting change to the heavily entrenched status quo was akin to treason," she said. "Unless there is an effort to instill changes starting with CUNA out to the state leagues, the most impact CUs can make is to vote with their feet. If enough dues dollars leave, change will be unavoidable."
Irby continued: "Unfortunately there are no operating standards in place for the individual leagues so the structure assumes that every league provides a value for the dues dollars paid — which is clearly not the case. We were willing to participate in CUNA and contribute to lobbying efforts at the state level."
RiverLand has had this issue with CUNA since Dan Mica was in charge and had expressed its concerns then. "We received no help. CUNA constantly challenges individual CUs to evolve to meet the ever-changing needs of members — too bad they don't practice what they preach."
Need For Choice
Henry Wirz, CEO at the $2 billion SAFE CU in North Highlands, Calif., sees a big need for credit unions having choice in joining their league or CUNA, saying his institution gets value from both memberships.
Emphasizing the California League's state legislative and regulatory advocacy effectiveness, Wirz said, "CUNA does not provide any state legislative or regulatory advocacy."
But Wirz pointed to what a large number of CEOs are saying, including Blaine, that leagues in many states don't provide enough value.
Wirz advocates addressing the problem by credit unions working together within the state league structure to address the issues and fix the problem. Sources, as well, emphasized how CUs leaving the leagues or merging — prompting leagues to consolidate — is contributing to slumping league effectiveness.
"This [SECU disaffiliation] is another classic example of credit unions bailing out rather than fixing the problem," said Wirz. "Bailing out from CUNA will not fix the problem. The end result will be a further weakening of the credit union national voice. And it appears we will have no voice in many states—either because the state league is weak and ineffective or in some cases because there is no state league."
A 'Standing Ovation'
But Joe Tofte, CEO of the $42 million Benton County Schools Credit Union in Corvallis, Ore., hopes SECU's move will prompt CUNA to reconsider its rules.
"As a CEO of a small credit union that has supported both our state and federal associations, I give Jim Blaine a standing ovation. I am a profound supporter of our national associations and I have served on their boards. I believe they are necessary to provide that unified voice for credit unions of all sizes."
But during the economic crisis, BCSCU had to reduce operating costs, which meant eliminating league dues because of the "substantial expense."
"Once yields begin to improve and we can afford it, we plan on re-affiliating," explained Tofte. "Meanwhile, we could — and would be able to — pay the more affordable dues to CUNA in order to support the national association but we are prohibited from doing so. There are many other small CUs that are in the same boat and maybe with Blaine's actions CUNA will realize the support they are losing and the lost voices of many small CUs."
David Proffitt, CEO at the $184 million Alcoa Tenn FCU, Alcoa, Tenn., said he knows that many small credit unions struggle paying both league and CUNA dues.
"We haven't given our tellers a raise in the last 12 months, and you wonder where you are going to cut expenses and then you look at the dues going to the trade association, and that is a lot of money," offered the CEO, who sees value in his state league but is not so sure about CUNA, pointing to what he feels is questionable political advocacy effectiveness.
"I think SECU paid more than $300,000 in membership dues to CUNA and the league last year," said Proffitt. "If you are not totally satisfied, that is a big check to write."
But to step away from the problem is not the answer, reiterated SAFE's Wirz, urging credit unions to work together to solve issues surrounding league and CUNA membership.
"If we don't have state regulatory advocacy and state legislative advocacy we put at risk the dual charter system," said Wirz. "At least we have the option of state credit union charters. That option may be at risk if our state leagues become weak, or worse, go away. State level advocacy is hugely important to credit unions.
"We have to address the concerns raised by Jim Blaine," continued Wirz. "I think those of us who remain members of our league and CUNA have a far better chance of fixing the problem than those who leave the trades."
Mike Dillon, marketing director at the $50 million South Division CU in Evergreen, Ill., said the decision by SECU was "bad timing. I'm a bit surprised by Jim Blaine since I never saw him as a quitter. [This is] just another widening of the gap between large and small, rich and poor that weakens the whole movement."
But Callaway says differences need to be put aside, at all levels. "Some say get rid of the leagues, some don't like CUNA, others say fix the dual membership problem... Since there is such difference of opinion, let's establish a focus group to find out what is going on and really needed here."
