Like a number of leagues before them, the Florida Credit Union League and the New York State CU League, have established a policy statement regarding credit union conversions to bank charters.
Florida's policy, unanimously adopted by FCUL's Board of Directors, states that the option to convert to a non-credit union charter should only be used as a last-resort response to increased restrictions on credit unions, such as the removal of the CU tax exemption.
In suggesting that credit unions should only convert under such dire circumstances, the Florida league's conversion policy goes just a bit further than similar conversion statements adopted by other leagues, that have said that while the CU charter is "the charter of choice" that best serves credit union members, they recognize the right of members to decide to convert to a bank charter.
"The board feels strongly that the League has a role," said FCUL Board Chairman Trudy Prince, "to support a structure that provides information resources for credit unions, their members and boards, should they contemplate seeking a charter conversion."
The board adopted the policy at its Nov. 2 quarterly meeting following a three-month review of the issue.
Acknowledging that credit unions currently face more restrictions on their operations than do mutual savings banks or commercial banks, the policy states that "research has confirmed that even with these greater restrictions, the credit union charter provides by far the best deal for credit union members...Credit unions are able to offer a far better economic return to their members than would be possible for a stock owned bank or a mutual thrift."
The policy position recognizes that even more onerous restrictions or policies, such as removal of the credit union tax exemption, might alter the environment currently enjoyed by credit unions. "In that extreme scenario, it is possible that for the benefit of the members a conversion is the right choice, therefore, the FCUL Board policy continues to support the existence of the conversion option," the league said. "However, the board believes that such a possibility should exist only as a 'safety valve' and it cannot be misused by current credit union management."
There has been at least one attempt by a Florida credit union to convert to a non-credit union charter. Tallahassee-based Sunshine State CU attempted to convert, but the attempt failed.
Like a number of other leagues before it, both the Florida and New York leagues said they will seek legislative and regulatory changes at the state and federal level to beef up the credit union charter as a means of staving off conversion, but FCUL is also pledging to offer CU members opposed to a pending conversion help in the form of "information resources." The league also said it would attempt to persuade CU leaders contemplating such a conversion to reconsider such a move.
The NYSCUL took a similar tack. "Credit union conversions across the country have become a highly controversial subject within the movement, garnering its fair share of publicity along the way," said Vicky L. Matteson, board chair and manager, Jamestown Area Community FCU. "The league believes that the issue of a charter conversion should be approached from the point of view of the members since they own the credit union."
