MT. PLEASANT, Mich.-Barely three years after being chartered, Chippewa Eagle FCU is set to close its doors in a merger that two people say is the result of a dispute with the Saginaw Chippewa Tribal Council.
The $2.2-million CU was chartered in 2010 to provide financial services for the community of the Saginaw Chippewa Indian Tribe.
"We have a large number of predatory lenders as far as the Native-American community is concerned," said Board Secretary Gloria King. "When I say predatory, I'm talking upwards of 25% interest for a used car loan-and new car loans are right up there, too. That's not to say all of the car dealers in this area do that, but enough of them do it that it was a real, real problem in our native community."
King said the new CU had been fulfilling its charter by serving members, including granting small personal loans regardless of credit scores, as well as improving members' financial knowledge and savings habits.
But its own bottom line has not been improving. According to its most recent Call Report, CEFCU has $970,000 in loans, concentrated primarily in used car loans and unsecured lines of credit. The CU lost $343,000 last year, and was in the red more than $100,000 just in Q1 of this year.
The balance sheet issues are challenging enough, especially for a small start-up credit union. But King said there are other issues at play, including the primary reason for the merger, a dispute between the CU and the tribal council over whether monies initially used to help start the credit union were a grant or a loan. "It was a grant, granted by the then-reigning tribal council," argued King, explaining that the council's leadership has changed since the CU was chartered. "The council...decided they wanted to turn it into a loan."
Recategorizing the funds as a loan skewed Chippewa Eagle's asset numbers and depleted its capital, added King.
The Final Straw
After multiple meetings between the credit union's legal team and the council, it was finally determined that the monies were a grant, said King. However "in naming that grant they told us that they owned everything in the building," a move that King and CEO Joni Freel say depleted the CU's capital. The final straw, said King, was when the rent on the CU facility was doubled.
The CU agreed to be absorbed by $90-million Isabella Community CU, and NCUA waived a member vote on the merger because of Chippewa Eagle's depleted capital situation. Two employees will lose their jobs and two others are moving on to ICCU. CEO Joni Freel has taken a position at another CU.
According to King, CEFCU members are angry and confused. "They call it 'our credit union,'" she said. "I've had a number of calls and that's the question: 'What has happened to our credit union?' They truly have taken ownership of what has been going on here, because they were treated so well and they've been able to come in and be treated with respect, which was new to some of them. They just are saddened by it, as we all are."
