The genesis of Honda FCU's 2002 resolution goes back nearly a decade.
The credit union has long sought to serve Honda employees all over the world. One option has always been to convert to a California state charter that would have allowed for such an international field of membership. But Honda Federal wanted to stick with the federal charter. Instead, it's chartering a second credit union.
Ten Years Of Work
"This is the culmination of a 10-year project," said Jim Updike, CEO of HFCU. "Honda has facilities all over the world, and in particular there is one in Ontario. But we can't serve them as a federal credit union, despite NAFTA. But California adopted a law that allows for international commerce."
So, why not join the growing number of FCUs that have converted to state charter in California? For one thing, with facilities all across this country, the federal charter makes interstate branching easier, Updike explained.
For another, there was the insurance to consider. The credit union would have had to convert to private insurance, no small matter for a $204-million CU.
"So, we're applying to charter another credit union. We'll have a management contract with the new credit union, so we'll be running it, it's essentially a paper credit union," he commented. "The field of membership will be anyone eligible to join Honda FCU."
HFCU's drive to go international started out as a Honda corporate initiative to build deeper relationships with both their customers and their dealerships. With the new credit union in place, all members of the Honda Riders Club of America, in which any owner of a Honda motorcycle is given membership, will be eligible to join the new credit union to be called Honda Central CU.
Rewarding Dealers
"So Honda is able to say, 'Not only can you buy this great product from us, but you can also get all your financial services through our credit union, too,' " Updike offered. "On the dealership side of things, we have formed a CUSO to provide small business services to these people, things like employee benefits, payroll processing and other services. It's a way for Honda to reward those dealers that only sell Honda products."
There is no move at this time to make Honda automobile owners potential members like their motorcycle brethren, but it could happen. "When the auto division sees the success we have on the motorcycle side, they're going to want this, too," he suggested. "Of course, I suspect Honda America Finance might not be particularly happy with that, so we'll see."
Updike said HFCU had originally hoped that NCUA would draft regulations that would have allowed the credit union to branch into Canada and Mexico, at least, but despite repeated efforts to lobby for such an initiative, Updike said he had seen no real progress on that front and decided to charter the second credit union under California laws, instead.
But again, deposit insurance was a hurdle. "We had to find someone to insure the deposits. We've been working with American Share Insurance, Dublin, Ohio for about a year, and they have said they will do it," he related.
What's the hold up? The unprecedented flight to state charter in California.
"In meetings with the DFI, they have said they are very impressed with our application, but there are so many federal charters converting to state charters that their resources are spread really thin," he explained. "We've been told it could take six months to a year."
HFCU has gotten a lot of support from Canada, where the first international branch is expected to be located.
Do People Need Us? Yes
"I've met with the Ministry of Finance, a whole host of officials up there, and they have all been supportive," Updike reported. "Do the people in Canada really need another credit union? Maybe not, but this will also allow us to branch elsewhere. There's a Honda plant in Guadalajara, Mexico. Do the people in Guadalajara need a credit union? Damn right they do. Could we help them charter their own credit union? Sure, but would it have the resources to really make a difference? Not for a long time. But can we, with all our resources, go in there and start making a real difference immediately? Damn right we can."
