RUTLAND, Vt. — One CEO here is wondering if the rate his corporate is paying is reflective of market realities, or is it a punishment?
After the conservatorship of US Central and WesCorp and numerous other shocks to the corporate system, Credit Union of Vermont CEO Brian Fogg was simply looking out for his members, he said, when he gave Tricorp its 36-month notice that it intended to withdraw all of its funds from the corporate.
Nearly two months after that notice was given, Fogg was surprised to hear from Tricorp CEO Steve Roy that the corporate's board decided to place all MCS accounts from credit unions that had given notice into a different classification and cut their dividends to just one basis point. Because the corporate was paying just 12 basis points on the $110,000 that CU of Vermont had with Tricorp, the move was not one to save money but was instead a "slap" at CUs that were looking outside the corporate system, Fogg contended.
"Corporates have cost [natural person] credit unions tremendous losses with their actions and are taking steps in further penalizing those credit unions who are preparing for the possible change in the corporate system and looking out for their best interests," he continued. "The corporate system is changing we may find there are preferable solutions out there that aren't going to come back and bite us."
Fogg expressed that sentiment in a chain of e-mails to the Tricorp CEO, but Roy rebutted the idea that CU of Vermont, and another unnamed credit union that gave Tricorp notice, was being "singled out."
Punishment Wasn't the Aim
"The intent was not necessarily to penalize-but there was a sentiment that there needs to be some way to acknowledge the credit unions who have not given notice," Roy wrote. "The decision was based on ensuring there was no devaluation of members with MCS accounts that have not given notice," Tricorp VP Fred Johnson told Credit Union Journal. "You can certainly make business decisions as you see fit. We respect the Credit Union of Vermont highly, respect the business they've done with us and we respect their decision."
Fogg took his concern to NCUA, where senior corporate specialist David Shetler advised Fogg to send a letter to the regulator's legal counsel. Shelter did point out that CU of Vermont was not the first natural person credit union to deal with a dividend cut from a corporate after giving notice that it intended to withdraw its funds, but would not disclose the names of those other credit unions to Credit Union Journal. Johnson also confirmed that other unnamed corporates have made decisions similar to theirs.
NCUA said it could not comment until its attorneys review the request Fogg sent Aug. 12.
The dispute may sour a relationship that Fogg appeared hopeful would continue, while still leaving the possibility open that CU of Vermont could withdraw its capital if there were major shakeups in the financial sector over the next three years.
CU CEO Still Hopeful
"I am very hopeful that we can continue to participate in the corporate credit union system, particularly with Tricorp Federal Credit Union. Nevertheless, a big lesson learned from the last several months is that nothing is guaranteed or certain," he told Roy in a e-mail and went so far in a future correspondence to ensure that the 36-month notice did not require the credit union to terminate its relationship with Tricorp. Even after learning of its decision to cut CU of Vermont's dividend, Fogg had nothing but praise for how the corporate navigated through the murky economic waters.
"Tricorp is to be commended for its responsible actions of the past," he wrote to Roy. "It should not now sink to the level of penalizing natural person credit unions that now take responsible steps to minimize possible future losses, especially while holding them captive."
