MCUL Asks DFCU, 'Where's the Value?'
The Michigan league said it has "serious concerns" related to the bid by DFCU Financial credit union to convert to a bank.
In the wake of release of the disclosure materials the credit union is providing to its members, and plans that include cash prizes to those who vote on the conversion, the league issued a public statement questioning the reasons for the charter conversion, arguing that what has been provided to members fails to "to answer the underlying question of member value."
"This formula has proved perilous for other credit unions that have unsuccessfully attempted to convert from credit unions to mutual savings banks," the league said in its statement.
"The NCUA's response to this conversion plan should raise serious concerns," said MCUL President David Adams, referring to specific elements of DFCU Financial's conversion plans that relate to raffles, board and supervisory committee enrichment, and the absence of meaningful due diligence (see related story, page 1).
The league highlighted NCUA's response to DFCU, which also includes requests for an explanation to members of the credit union's rationale behind including the supervisory committee members as board members of the newly formed mutual savings bank. Current board and supervisory committee members are not compensated.
Overseeing The Oversight
"As board members of the new thrift, they will have opportunities for compensation and potential participation in stock option plans unavailable to credit union volunteers," the league said. "The NCUA letter points out that 'the supervisory committee at a federal credit union has important internal oversight functions, including the power to audit the credit union, the power to suspend credit union directors, and the power to call a meeting of the members to remove directors or to consider any violation of the law. In fact, if any members of a federal credit union believe that the credit union's board has acted improperly, the supervisory committee is the one and only internal entity to which those members can turn seeking review and relief.' Accordingly, we think that you should explain to your members why members of DFCU's supervisory committee will become part of its future board and why this will not undermine the supervisory committee's oversight function with respect to the ongoing conversion."
Adams said that the Michigan league supports the rights of members to convert a credit union to another charter, but that there must be a fair voting process with members fully informed of what the conversion process means. This is the second time the Michigan league has taken a stance calling for greater disclosures to credit union members; it also did so in 2004 when Lake Michigan Credit Union attempted to convert. That conversion was not approved after it failed to get the necessary two-thirds approval members, although more than 50% did vote in favor.
The Michigan league also continues to back a website at www.memberinform.org which has additional information for members.