Johnson Issues Strong Statement Calling For More Conversion Disclosures

Register now

NCUA Vice-Chair JoAnn Johnson touched on everything from the controversy over credit union conversions and financial literacy efforts to serving the underserved to "leading with vision" in her remarks before CUNA's GAC.

"I strongly believe that leaders of credit unions-as member-owned financial cooperatives-have an ethical and fiduciary responsibility to be straight forward, open and transparent with all decisions affecting its membership, charter, and structure," Johnson said prior to discussing NCUA's new conversion disclosure rules. "The revised rule will enhance the members' ability to make informed decisions about the conversion option by making full disclosures of the following: The members will be informed that the conversion to a mutual savings bank may diminish voting rights. Instead of one member, one vote, which provides an equal voice to all members, including those of modest means, a mutual savings banks allots votes based on the amount of a member's deposits. Members will also be informed that their ownership interest may be lost, should there be a subsequent conversion from a mutual savings bank to a stock institution."

Johnson noted that some of improprieties NCUA said it uncovered in its investigation of Columbia Credit Union's attempt to convert to a bank have prompted discussions of other conversion issues the agency may need to address in the future, such as using a secret ballot system for such votes and independent third-party tabulation of votes. (At a separate session, NCUA Chairman Dennis Dollar's assistant, Kirk Cuevas, indicated Johnson may be interested in even stronger rules related to conversions.)

Having recently been appointed to serve on the Financial Literacy and Education Commission, Johnson noted the importance of NCUA's Access Across America initiative as well as credit unions' individual efforts to forge greater financial literacy among new immigrants, youth and the population in general.

"I know the credit unions represented here today have developed some of the most innovative financial education programs in the marketplace," she said. "Providing members with the tools with which to make financial choices stems from educating individuals on what those choices are-and more importantly what those choices mean to them."

Such education efforts will be increasingly important in the face of the challenges ahead, Johnson commented, pointing to the fact that the personal savings rate in America last year dropped to 2% of disposable income.

"This is half of the average personal savings rate of 4% over the last decade, and down substantially from the 7.7% savings rate in 1992," Johnson observed. "Personal bankruptcy continues to rise with the biggest increases seen for younger borrowers. More than 20% of teenagers have credit cards and in 2001, spent more than $172 billion. Individuals under the age of 25 are the fastest growing group filing for bankruptcy. Clearly, education will help to guide these individuals into sound decisions."

"Americans spent more time last year planning for holidays and social events than they did planning their retirement. Most Americans have not developed a financial plan," she continued. "We know that mortgage borrowers who receive homebuyer counseling have lower delinquency rates than homebuyers who have received no counseling."

For reprint and licensing requests for this article, click here.