While NCUA has pledged not to certify the membership vote on the conversions of two Texas credit unions to bank charters until the CUs reissue their disclosure statements, the state regulator has declined to intervene with either of the two CUs. At least one of them has decided to continue the conversion process despite NCUA's warning.
Community Credit Union, Plano, Texas, has sent out its third and final disclosure notice, making the changes NCUA called for, but it is not starting the process over, as the regulator required.
This, NCUA says, is not good enough.
"Our regulations require that all three disclosures must be consistent, so the agency would disapprove this conversion," NCUA's Nick Owens said. The reason the three disclosures are not consistent is that when Community sent out the first two, the document was folded in such a way that the credit union's "rebuttal information" was on the front page with the NCUA's "box disclosure" information on the back. NCUA ruled the credit union must start the process over-negating any votes that have already been cast and causing months of delay-and reissue the disclosures with the proper fold.
Community CU, however, simply made changes to its third disclosure and is moving forward with the process, a move that will force NCUA to decertify the membership vote. Industry observers speculate Community's decision to continue with the conversion process in the face of NCUA's order to start over is an indication that the $1.4-billion credit union will end up taking the regulator to court over the matter,but Bob Freedman of Silver, Freedman & Taft, attorney for CCU, said the credit union continues to work with NCUA and hopes to resolve this issue.
With NCUA stepping into the fray, the Texas Coalition for Credit Union Members (which had to change its name from Coalition for Member Trust because it could not register a name with the word "trust" in it), is looking to take a backseat in the ongoing conversion battle.
"The way I see it right now, the real battle seems to be between NCUA and Community Credit Union," said Mark Arnold, a member of CCU and spokesperson for the coalition. Arnold is also a former employee at Community CU as well as the Texas CU League and is currently vice president at Neighborhood CU. "We aren't going away by any means, but it really seems like this is between NCUA and Community now."
While the coalition applauded NCUA's ruling, it was disappointed with Texas CU Commissioner Harold Feeney's response to the group's claims that Community CU has violated several state laws.
In a point-by-point response sent to the attorney representing the Texas Coalition for Credit Union Members, the state regulator denied the group's claims of wrongdoing on the part of CCU (see related story below).
"We did not find anything to substantiate their claims, "Texas Credit Union Commissioner Harold Feeney told The Credit Union Journal. "We certainly will continue to monitor the situation to ensure they continue to follow Texas regulations."
But that doesn't mean the state is ignoring the hoopla surrounding the conversion attempts by Community CU and OmniAmerican CU.
"The commission's legislative advisory committee has asked me to gather information on the conversion rules to determine if any changes are necessary," Feeney told The Credit Union Journal. "So I will gather that information and get it to them, and I expect it will be discussed later this summer."
Freedman and Community CU CEO Gary Base pointed to the Texas regulator's opinion as a victory for the CU. "The Texas decision is significant, and we would hope the NCUA would take that into account," Freedman said.
The credit union trade press isn't the only media outlet keeping tabs on the volatile situation in Texas-local media has been dedicating copious ink to the battle over Community CU's conversion, as well.
Still strangely quiet, however, is the OmniAmerican membership. This may be because the credit union allegedly doesn't allow former employees to maintain membership with OmniAmerican once they are no longer employed there, according to an industry source. OmniAmerican CEO David Duckworth did not return calls to The Credit Union Journal.
Given that former employees have played a part in the creation of conversion opposition groups like the one that successfully beat back the conversion of Columbia CU as well as the Texas Coalition for Credit Union Members, some industry observers have suggested that if the alleged policy at OmniAmerican is in place, it could be one reason that credit union isn't facing the same heated battle as Community CU.
