GLENDALE, Calif. – NCUA cited Glendale Area Schools FCU for running an ad on its website that negatively compares ratings at local banks by name to its own ratings, and called on the credit union to pull the ad.
In a Feb. 12 letter to Stuart Perlitsch, president of the $500 million credit union, NCUA said the ad, which lists bankrate.com’s rating for four local banks and credit unions, implies that money is not safe unless it is deposited at financial institutions with a four-star rating or higher. Three of the banks listed with a one star rating have "Bank Failure" along with the date of the failure noted in parentheses.
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. Wescom CU. Telesis Community CU and SchoolsFirst FCU were listed as two and three star institutions.
But Glendale Area Schools’ Perlitsch is refusing to pull the ad. "As the CEO I have a fiduciary responsibility to share with the membership safety and soundness concerns especially in these precarious times," he told The Credit Union Journal. "I thought it would be productive to make that information available to the members."
The letter from NCUA’s Region Director Melinda Love urges the credit union to "work toward a common goal of a safe and secure financial industry for the entire nation" and to remove the ad from its website "as soon as possible."
In a similar situation late last year, Texas Dow Chemicals Employees CU released video ads stressing the safety of the credit union movement and implying that major banks were unsafe. The credit union pulled the ad after directed to do so by state regulators.
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."
