Here are two tales from Texas. It's amazing what they have in common.
First, a story shared with me by Mark Arnold of Neighborhood Credit Union in Dallas. Neighborhood CU has been acting neighborly by reaching out to local Hispanics, many of whom are immigrants and low-income. As part of that it has been offering financial education classes on a variety of basic topics that you and I may take for granted but which many immigrants do not. In the course of reaching out, Arnold said the credit union has learned first-hand the often-shared cultural observation that most Hispanics are very distrustful of financial institutions.
While Neighborhood Credit Union has been looking outside, big changes have been going on inside two of its neighbors in the Dallas/Ft. Worth metroplex, which have announced they plan to become banks-Community Credit Union and OmniAmerican Credit Union. The initial reaction from the Texas league that two of its biggest affiliates were turning their backs on the credit union charter was muted. Instead, the league formed a task force and announced last week it was taking a firm stand on credit union conversions to mutual savings banks. Its position-it's opposed. Which is kinda what you want to hear from a group that has "credit union" in its name.
But the stand it's taken is one-legged at best. The Texas league released a statement saying its response has been to "embrace a plan to allow the league to serve as a source of information for credit union members who are trying to understand what such a conversion would mean to them."
That's all swell, especially since league CEO and CUNA Chairman Dick Ensweiler is an articulate spokesperson, but the phone calls coming into that hotline won't even disturb the Maytag repairman. After all, how many members, upon being informed their credit union wants to convert to a bank, react by saying, "Egad! I must call my state credit union league immediately!" Ask 99.99% of credit union members about "the league," and they'll respond by asking "National or American?"
Back at Neighborhood Credit Union Arnold said it found that by being patient and demonstrating it had the best interests of people at heart it was able to gain the trust of one Hispanic family who, over a period of weeks and months, arrived regularly at NCU with small amounts of cash to deposit. The ethnic groups may have evolved, but it's a story as old as credit unions themselves.
It's a story also true of Community CU and OmniAmerican. Both were founded in the 1950s and over the past five decades folks have learned to put their trust in them to the tune of more than a billion dollars in each. The CUs have always offered good service and good rates and done what's good for members. That's why waiting for members to inquire about whether a conversion to a mutual savings bank charter is good for them is akin to a patient calling the American Medical Association after his or her doctor told them the test results were just fine. After all, the patient takes the doctor at his or her word, just as members do with their CUs.
I recognize the tough position leagues are in when it comes to conversions. I've spoken to plenty of league presidents and have yet to meet one who doesn't believe the move to a bank charter is a bad one. But they also like their jobs, and have been told by some of their biggest dues-payers that they want the option to convert if all else fails. That said, if credit union leagues aren't willing to stand up and defend the value of credit unions, who will? To its credit, the Michigan league did.
The Texas league issued a statement noting that "while we do not wish to dictate to individual credit unions how they are to operate, we do believe there are certain principles to which credit unions must adhere to ensure they are truly doing what is best for their members."
The moment a credit union looks to convert it has ceased doing what is best for its members and started doing what's best for a core group of insiders. The league is right in that there are "certain principles to which credit unions must adhere." But principles are meaningless unless someone stands up for them. Finally, consider this. In a few years, if the management at Community and OmniAmerican get their way (and their members' equity), that's $3 billion in assets that will be joining a bank trade group. And just who do you think the bank trade groups will be attacking with those dues dollars?
As for that family of new members at Neighborhood CU, Arnold said they finally came to believe this union of people extending credit to one another would not be absconding with their savings, and one day showed up with more than $5,000 to deposit. They had been keeping the money at home in a mattress. Less than a week later thieves broke into the home and sliced open that mattress looking for the cash.
For the first time, that family found something into which they could put their trust. Too bad the trusting members of the other two CUs won't ever learn their own mattresses are being cut open. And worse yet, that those who know better aren't telling them.
Frank J. Diekmann is Editor of The Credit Union Journal.
Money isn't everything-but it's a long way ahead of what comes next. -Edmund Stockdale.
