How The Board At DFCU Financial Can Tell The Truth

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"It was overall feedback from the membership at large."

-Kim Ward Gabbart, spokesperson, DFCU Credit Union

No one is permitted to pass out of childhood without first having had a wagging finger pointed at their face as they are simultaneously lectured that the problem with lying is that it leads to telling more lies to cover up the original lie, and it always ends up causing more trouble than just telling the truth in the first place.

Everything from great works of literature to The Unofficial Guide to Parenting to episodes of Seinfeld are founded upon that premise, the latest manifestation of which can be seen in the withdrawn application by DFCU Financial Credit Union to convert to a bank (see related stories, page 1).

The credit union (as with those before it) has never been truthful in almost every aspect of its attempt to shed its credit union charter, roots, mission and, most importantly, reason for being. It is widely believed the board discussed the conversion for a year or more before springing it upon the membership-a lie of omission. It finally made the announcement just shortly before its annual meeting, giving members little time to digest the news or respond, and at which it attempted to stifle any discussion of the issue, with the democratically elected board saying it wouldn't entertain any motions from the people it is charged with representing (and this after board members initially hid among the audience rather than stand up and be counted)-a lie of commission.

It has joined in the small chorus of other credit unions that have converted or attempted to convert by singing that it has no choice but to become a bank (banks being the same institutions that never hesitate to complain about credit union advantages). DFCU told local media and its own members it had to become a bank in order to "diversify" its FOM away from a core Ford Motor Co. membership, never bothering to add it could easily apply to NCUA for a broader membership via a little something called a community charter. It claimed members would be better off as customers (without ever explaining how the tax liability could be offset without reducing savings dividends, raising loan rates or adding fees), and has from almost the very beginning, repeated the same lie that it wanted to tell members more about the conversion plans but that NCUA regulations prohibit it. There is no such NCUA-mandated limitation-quite the opposite, in fact-yet it repeated that lie so often that the two major Detroit newspapers that have reported the story let the claim go without challenge.

It has even managed to lie by employing the truth, the ultimate propagandist's tool. As DFCU Spokesperson Kim Ward Gabbart stated in explaining the reasons it withdrew its application to convert, it was "due to the overall feedback of the membership at large." Makes it sound like quite the little membership-oriented credit union, doesn't it?

"Feedback" is the kind term. But "outrage" is more fitting. Within a week of starting to collect names nearly 2,000 members had signed a petition demanding that the board be recalled. (The next time you hear a conference speaker or consultant claim the CU charter is obsolete and consumers no longer see any value in it, hand them this.) That's 2,000 members angry over something that was spun by the credit union's board, management and the attorneys who make a fortune off these things as good for them. That's another thing about lying; you eventually get caught, and those who were lied to tend not to like it.

These charter conversions have always been the feature presentation at the Credit Union Theater of the Absurd, and DFCU Financial has certainly earned its place on the big screen. Most recently CEO Mark Shobe complained to the Detroit media about the board recall effort that in a credit union of 160,000 members it isn't right that a small group of members (bylaws require 500) could force a recall vote on the board. That's a rather ironic observation, given that a far smaller group could have voted on the conversion of the charter, as NCUA's rules for federal credit unions require only a majority of voters, not members. (Less than 15% of the total membership at Community CU in Texas voted in favor of converting, but today it's ViewPoint Bank.)

DFCU Owners United, the group that has led the fight to halt the conversion, said it will not let up in its plans to recall the board even though the credit union has dropped its application for conversion. And it shouldn't. The Credit Union Journal has already received one missive from one CU employee claiming DFCU Owners United should fold its tent, that all it is seeking to do now is "wreak havoc" on the organization. Therein lies the temptation of lying-you really can fool some of the people some of the time, who learn too late what it means to all of the people all of the time.

The board at DFCU Financial Credit Union shouldn't wait to be recalled. They should resign. While they did their darndest to change their status, they remain volunteers who are supposed to have a fidicuiary duty to act in the best interest of the members. They have not. The fact they were spending up to $1.2 million of those members' money on the conversion shows they clearly have no faith in what a credit union can be and why DFCU was organized in the first place.

It's time to hand in those resignation letters. For once it would be the most truthful thing they could do.

Frank J. Diekmann is Publisher of The Credit Union Journal.

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