After more than a year of debate, CUNA reversed course and announced its board is drafting a bylaws amendment that would allow credit unions to choose to belong to either just the national trade association or their respective state leagues instead of both.
As part of Credit Union Journal's annual Year in Review, we look at how the largest credit union trade association finally got to this point.
The credit union industry is extraordinarily cohesive—so much so the term "movement" is preferred to "industry"— which is why the controversy over membership requirements for the state and national trade association is so unusual.
In recent months CUs have been debating about "optionality" and "interdependence." The former refers to CUs having the choice to belong to either CUNA or their state CU league; the latter alludes to the long-standing requirement that credit unions belong to both CUNA and their respective state leagues.
It all started back in February 2014, when the second-largest CU in the nation—State Employees' CU of Raleigh, N.C.—disaffiliated with both CUNA and the Carolinas league. In an exclusive interview with CU Journal, SECU CEO Jim Blaine said a key reason for the move was dissatisfaction with CUNA's dual membership requirement. "It gets to, who, in the real world, is paying for what and what value are the members getting," Blaine said at the time. "Many smaller credit unions feel they are not represented well or get the support they need, and the larger credit unions feel they are not getting enough value. These are very real issues and if they are not addressed we will run into a brick wall and have to address them in a catastrophic context."
On Task
In September 2014 CUNA created a System Structure and Governance Task Force with Benson Porter, CEO of $12.5 billion BECU, Tukwila, Wash., as chairman. By the time the task force issued its final report, Tom Dorety, CEO of Suncoast CU in Tampa, Fla., was chairman. The group made several recommendations in its final report, but the bullet point that drew the most attention was its advice to allow CUs to choose to belong to either CUNA or their state league.
The debate went quiet as credit unions waited to see what CUNA would decide to do, until the other national trade association made its own big membership requirement announcement.
In June, NAFCU opened up its membership to state charters. Though the association already had a handful of state charters among its membership, those were former federal charters that had converted to state charter but wanted to remain active in NAFCU, so they were grandfathered in.
On the heels of NAFCU's announcement, some industry observers suggested this could put further pressure on the CUNA/League system of interdependence if state charters wanted to join NAFCU but, since NAFCU made it clear it will not be getting involved in state-level advocacy, those state CUs might still want to belong to their state leagues but not CUNA.
Months later CUNA's board of directors voted against the task force's recommendation for membership choice. This led to an immediate backlash from many in the CU community. One CU CEO, who asked not to be named, told Credit Union Journal: "Why ask the hard questions if you're just going to ignore the tough answers?"
Dorety, of $6 billion Suncoast CU, said the reason the membership debate has become such a large story is because, "A lot of credit unions care deeply about the issue."
"We have done things the same way for a long time, and when some seek change there are going to be disagreements," he noted. "Everyone cares deeply about the future of credit unions and this will affect the future of credit unions."
In the weeks that followed the CUNA board's vote, some state leagues took matters into their own hands by allowing CUs in their states to have direct membership in their league without having to belong to CUNA.
The Michigan CU League was first, followed by New York, Ohio and the Carolinas League. On the other side of the fence, the Mountain West CU Association (representing Colorado, Wyoming and Arizona) issued a formal statement supporting the dual membership requirement, as have the leagues in Wisconsin and Utah.
Bill Mellin, president and CEO of the New York CU Association, said the dilemma has engendered a passionate debate. "At the league/association level, the issue has certainly generated different perspectives and strong opinions. That is not entirely unexpected, given the significance of the issue and the shared history between leagues and CUNA."
Choice 'Here to Stay'
Dues optionality is "here to stay," according to Mellin. "In 2016, I would expect support for it to grow across the country and, looking several years down the road, for it to become the standard."
At the California and Nevada CU Leagues' Annual Meeting in early November, president and CEO Diana Dykstra said sticking with the present system makes sense from the standpoint of preserving CUs' strength in advocacy. But for all that Dykstra communicated strong support for the status quo, she was also careful to add that there would be further discussion of this debate.
Blaine of $31 billion State Employees' CU said he believes the final outcome of this debate is a foregone conclusion.
"It is just an honest difference of opinion on how credit unions can best succeed in politics in the future," he said. "The credit union movement is changing and consolidating rapidly, which would strongly suggest that the trade associations must change also. I believe the debate is over how and when—not if!"
Blaine said the CUNA board has three choices, two of which in his opinion are "reasonable": One: maintain the status quo, two: permit direct membership by CUs or three: table the discussion and do nothing.
"The only mistake the CUNA board can make is to not choose between one or two now," Blaine said. "CUNA senior staff and board need to 'call the shot' and move on or risk being permanently labeled as weak and indecisive."
Dorety pointed out the discourse "is not nasty or vitriolic," but he noted there are different opinions.
"I don't think it is dividing the industry," he said. "I think once the CUNA board comes to a conclusion, CUNA and the leagues will be able to resolve this quickly. There may be some disruption in some areas of the country, but CUNA management and the leagues will work closely to make sure there will be a strong system going forward."
Dr. Brandi Stankovic, partner at Las Vegas-based CU consultancy Mitchell, Stankovic & Associates, noted that it is "always good to have a competitive spirit" that is created through a capitalistic/free market economy shift. She drew a parallel to the deregulation of the airline industry in the late 1970s.
"We want our leagues and association to deliver quality products, services and solutions, and be hungry for growth and quality improvement. However, as an industry, we should tread very carefully on anything that may appear as if we are not working together cooperatively," Stankovic warned. "Our power with the regulators is through our collective membership strength and numbers. If we begin to promote a more fragmented approach, we lose this momentum. Credit unions, the leagues and CUNA need to work together."
Scott Earl, president and CEO of the Mountain West CU Association, noted that: "We often deal with multiple thoughts and directions from credit unions and leagues. What continues to make us strong is that we find a way to make it work. I am confident that will be the case now, as well. There is too much at stake for us not to find a way to work together for the good of all credit unions and their members."
Earl said he did not want to speculate as to the future of the debate, other than to say he is "certain" CUNA will take the feedback it has received and review the decisions made by individual leagues under advisement.
