NCUA Empowers Members in Conversions to Banks

ALEXANDRIA, Va. – The NCUA Board passed new rules this morning to shift the powers in conversions to banks to members, from credit union boards and management, who are increasingly manipulating the process. The new rules will require boards to notify members of a proposed conversion before the Board, itself, votes, and will help members organize to express their concerns over a switch to bank. The new rules come as boards and management trying to convert their credit unions are putting up ever-larger roadblocks to member opposition. At Columbia CU, where the employees were organized to oust directors who opposed conversion to bank; Lafayette FCU, where management refuses to share a running tally of the 90-day vote with members; and DFCU Financial, where the board voted to pay its members a record $17.5 million dividend in January, just weeks before the members will vote whether to dump directors for their support of an ill-fated conversion to bank. The new rules reduce the balloting period from 90 days to 30 days; require a credit union to share internal documents on the conversion with members who request it; and restrict the ability of outside speculators in accessing any potential initial public offerings. The rules go into effect in 30 days. The new rules are expected to attract a legal challenge, by the bankers, who want to see more credit unions convert to banks. The banking lobby was especially angered yesterday over so-called box language required in all ballots that tell voting members that credit unions offer better rates than banks. While voting on the conversion, each member must be told, “Available historic data suggests that, for most loan products, credit unions on average charge lower rates than banks. For most savings products, credit unions on average pay higher rates than banks.”