Wednesday, February 10, 2010

Velocity Reverses Course on Private Insurance

On January 6, I wrote that members of Velocity CU had voted to switch from being federally-insured to privately-insured by American Share Insurance (ASI).

However, in a February 9 letter, Velocity announced that it decided to remain federally-insured with NCUA.

The credit union said that one of its primary reasons for considering a conversion to ASI was to avoid future premium assessments. Velocity paid approximately $675,000 in premiums to the National Credit Union Share Insurance Fund in 2009.

The rationale for selecting ASI was that ASI had not ordered a single assessment in its 35 years of doing business and ASI had assured Velocity that premium assessments were highly unlikely for the foreseeable future based upon the financial performance of privately insured credit unions.

But Velocity had a change of heart after finding out that ASI announced an assessment 0.15 percent on deposits at privately-insured credit unions.

"Frankly, we were surprised and disturbed by the timing of ASI’s announcement and by their decision to assess the credit unions they serve. Given ASI’s surprise assessment, we have reconsidered our recommendation to convert to the private insurer," wrote Debbie Mitchell and Carl Lynch, respectively CEO and Chairman of Velocity.

While Velocity CU decided to remain federally-insured, SafeAmerica CU in Pleasanton, CA became privately-insured at the end of 2009 citing the cost of future corporate credit union bailouts as the reason for getting a divorce from NCUA.

Are we going to see more credit unions flee from the NCUA over the future cost of the corporate credit union bailouts? However, I will leave that topic for a future posting.

1 comment:

  1. Something is fishy. When Velocity announced that its members had voted for the switch, here's what the Austin Statesman reported:
    Velocity's president and CEO, Debbie Mitchell, said that the new charge that ASI announced affects only those credit unions insured with ASI as of Dec. 31.

    "It has no impact on Velocity Credit Union at all," Mitchell said in an e-mailed statement Tuesday
    Why was this ASI assessment inconsequential last month, but now it's disturbing?



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