Banking trade groups have already gone on record criticizing the National Credit Union Administration's proposed regulation on credit union conversions.
The view among credit unions that have filed comment letters with the NCUA is much more divided.
Some were hostile to the idea in a way not often seen in public correspondence between credit unions and their regulator. Letters from the Credit Union National Association and the National Association of Federal Credit Unions were among many that suggested tweaking various details but supported the measure as a whole.
A majority of the 52 comment letters on file at the agency as of Aug. 31 generally backed the measure.
Randy Chambers, the vice president and chief financial officer of the $238 million-asset Self-Help Credit Union in Durham, N.C., said he supports the agency's efforts to give members advance notice of boards' deciding to vote on conversion. He had been "saddened," he wrote, "by the disregard most converting credit unions have shown their members by failing to inform their member-owners of their conversion plans at the same time they inform their regulators."
The Alabama Credit Union League's president and chief executive, Gary B. Wolter, wrote that it is appropriate for the NCUA to increase disclosure requirements, because "there simply is no other decision a credit union could ask its members to make that could have such a profound effect on the rights the members themselves have in the credit union."
"Hope your courage becomes contagious in Washington!" wrote Jim Blaine, the president of the $14 billion-asset State Employees' Credit Union in Raleigh.
Some credit union officials said the NCUA wants to flat-out prevent conversions.
"We believe both the current and proposed disclosure requirements imposed by NCUA are overreaching and beyond the scope of regulator responsibility for safety and soundness," wrote Paul V. Parish, the president and CEO of the $1.6 billion-asset Wings Financial Federal Credit Union in Apple Valley, Minn. "The proposed rules appear to be motivated by the self-interest of NCUA's continuing as an entity rather than regulation intended to serve the public good."
His counterpart at the $53 million-asset Building Trades Federal Credit Union in Orange, Calif., William W. Byerly Jr., wrote, "Industries which rely on regulations to protect themselves from competition inevitably build a coffin instead of a wall."
One provision would require boards to certify that a conversion would be in the credit union members' best interest. Max Giovannini, the chairman of the $3.8 billion-asset Security Service Federal Credit Union in San Antonio, said in his letter that the provision could "serve to discourage even the most well-intentioned officials and executives from proposing a conversion, as the standards for fiduciary responsibilities would be left to the discretion of the NCUA."
Mr. Parish wrote, "A board member's fiduciary duty is not fulfilled by blindly maintaining the status quo in the face of changing member behavior."
The proposal, issued June 22, seeks increased disclosure and more information from credit unions that are considering converting to mutual savings banks. Specifically, they would have to inform their members 30 days before the board of directors could formally discuss the possibility of converting. Boards would also have to certify before going ahead with the plan that the conversion would be in the best interest of the credit union's members.
Another stipulation is that ballots would have to be sent to members exactly 30 days before the vote takes place.
The NCUA says the proposal as a whole would protect consumers by ensuring they have all the information needed to decide which charter would be best for them. Conversion opponents have long argued that conversions work only to enrich board members, while robbing consumers of the services that brought them to the credit union in the first place.
Bank groups have also attacked the proposal.
"Neither the OCC nor the OTS require the boards of converting banks to notify their members 30 days in advance of a board meeting to consider a mutual stock conversion," wrote Christopher Cole, a regulatory counsel for Independent Community Bankers of America.
Dawn Causey, the general counsel for the American Bankers Association, wrote, "It is clear to the casual observer that the NCUA's proposed procedure rests solidly upon a prejudice that no rational person with all the facts could possibly choose to convert from a credit union to a bank."
The agency's director of public and congressional affairs defended the proposal.
Credit unions "like the idea of having the option to convert, and we agree," John McKechnie told American Banker last week. "We just want the people who own the institution making the decision, and we want that decision to be an informed one."
Two similar regulations, adopted in 2004 and 2005, have stalled and even upended several credit unions' conversion plans. In April of this year a member revolt forced the $1.8 billion-asset DFCU Financial Federal Credit Union in Dearborn, Mich., to abandon its plan to become a thrift.
