TX CU Commission To Hold Hearing On Conversion Rules

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The ongoing controversy regarding the attempts by two Texas credit union giants to convert to mutual savings banks has prompted a potential rewrite of the state rules on the charter switches.

The Texas CU Commission has called an open forum for next week to collect recommendations from the credit union community and other interested parties for potential changes to the state's charter conversion rules. "We're really just collecting information at this stage; trying to find out what's out there; are there things we can do to make the process better?" said James Deese, deputy commissioner for the Texas CU Department.

While the state regulator has some authority over state-chartered credit unions such as Community CU and OmniAmerican CU, it is only one of the regulatory agencies that exercise authority in the conversion process, noted Deese. NCUA, as the deposit insurer for all Texas credit unions, has the ultimate authority over the process. The banking agencies, such as the Office of Thrift Supervision and the FDIC, also have authority in the process.

In light of the recent controversies at Community CU and OmniAmerican CU, the regulator will be exploring a number of key questions (see box), including where there should be restrictions on the kinds of inducements, such as cash prizes or new automobiles, a credit union may offer members to get them to vote, Deese told The Credit Union Journal.

All of these issues were raised during the recent balloting at Community CU and OmniAmerican CU. Plano-based Community CU, with $1.4 billion in assets, and OmniAmerican CU, the $1.2 billion Forth Worth-based credit union, are the two biggest credit unions ever to seek bank charters.

Broad Sense

In a broader sense, the Texas regulator also wants to know if there are some economic forces or demographic trends that may be forcing credit unions to change to banks. Or, are there regulatory impediments that may adversely affect the future growth and development of state chartered credit unions, like Community CU and OmniAmerican CU.

The Commission is inviting both credit union parties and non-credit union parties to submit recommendations either in person or in writing. The forum will be held Aug. 29 at the offices of the Texas CU League, in Farmers Branch.

After reviewing the recommendations the Commission will probably discuss potential options at its next meeting, scheduled for October, according to Deese. Then anything that would be proposed as a change in rules would be submitted to the public for a public comment period.

Texas-Sized Questions

Among the questions related to charter conversions that are to be explored at a hearing in Texas are:

Do the state's current disclosure requirements give credit union members enough information to make an informed vote.

Should there be a minimum voting threshold for conversions to be approved.

Should there be some kind of special meeting before the vote is held to give members a chance to share their opinions and concerns.

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