GLENDALE, Calif.-An advertisement in a local credit union's member newsletter and on its website is kicking up controversy with federal regulators.
In its Winter 2009 "Insider," Glendale Area Schools FCU displayed an ad asking members to consider how safe their money is by displaying institutional rankings put together by bankrate.com. The ad lists Glendale Area Schools FCU as a "five-star" financial institution while big competitors like IndyMac, Washington Mutual and Wachovia were given only one star as was a fellow cooperative, WESCOM. Telesis Community Credit Union and SchoolsFirst FCU were listed as two and three star institutions respectively.
At press time NCUA had not disclosed how it received notice of the advertisement, but on Feb. 12 regional director Melinda Love sent a letter to Glendale Area Schools FCU CEO Stuart Perlitsh asking the $500-million institution to "work toward a common goal of a safe and secure financial industry for the entire nation" by taking the ad down from its website. She told Perlitsh that the ad "implies that money is not safe unless it is deposited at financial institutions such as your credit union with a four-star rating or higher" and reprinted a late 2008 letter from chairman Mike Fryzel that implored credit unions not to display ads that could undermine confidence in the country's financial system.
In a similar situation late last year, TDECU CEO Ed Speed released video ads stressing the safety of the credit union movement and, according to the Texas CU League, implied that major banks were unsafe.
The league requested he change those advertisements and Speed complied.
But Perlitsh defended the advertisements and the credit union appears to have no intention of removing the information from its website right now.
"As the CEO I have a fiduciary responsibility to share with the membership safety and soundness concerns especially in these precarious times," he said. "I thought it would be productive to make that information available to the members."
Perlitsh noted that credit unions across America are stressing their safety and soundness to the public in order to generate new business and he believes that one fair way to do that is to point out other institutions that are losing money.
"When other credit unions such as SchoolsFirst and WESCOM are in your community and are aggressively market to your membership I feel a moral obligation to caution our membership about their financial condition. I didn't choose this fight, but if they are choosing to undermine our credit union then we are going to do what we can to deal with their encroachment." he explained. "[And] I find it disconcerting that NCUA would seek to censor information to the membership that relates to safety and soundness concerns. All our website shows is where the members can obtain bank ratings and credit union ratings. I wasn't sending a missive to the members that they should close accounts, I was just giving them cautionary advice."
WESCOM, which reported a $9.9-million loss in its Q4 2008 5300 report, declined to comment on the story. Telesis Community CU and SchoolsFirst FCU had not responded to inquiries by press time.
