The letter states:
As your entrusted Board of Directors, we must alert you to something that jeopardizes the very existence of YOUR credit union. As you know, SFCU serves the employees and family members of the Los Angeles Unified School District (LAUSD) and Community College District, as well as other local educationally-based fields of membership. Now, a predatory credit union from Orange County is attempting to confuse and steal away our members, using its deep pockets to buy access to our field of membership at their work locations.The letter goes on to point out that SchoolsFirst operates more like a bank than a traditional credit inion.
The tactics of this credit union include misrepresenting itself and confusing our members due to the similarity of its name with ours. This similarity has made it easy for them to gain entry to our campuses. Their representatives regularly attend classified, certificated, and other LAUSD events. They donate generously to these organizations, thus making it very difficult for our credit union to compete and participate.
"Today SchoolsFirst has nearly 700,000 members and $11.7 billion in assets compared to our 15,000 members and our $110 million in assets. Since 2005, using tactics that include mergers and acquisitions, they have become the fifth largest credit union in the United States. Needless to say, these multi-billion dollar credit unions operate more like banks than traditional credit unions."This letter is a classic tale of a credit union "David" trying to fight off a credit union "Goliath."
Unfortunately, too many of these traditional credit unions have succumbed to these large credit unions.
The time has come to end the favorable tax treatment of these large credit unions.
Really, Dr. Leggett. What has this name and service dispute have to do with taxes? I read many times per week how community banks suffer at the hands of the TBTF banks and no mention of anything else is in the conversation. Even if the community banks happen to be Subchapter S banks.
ReplyDeleteI think the more important take away from this is that even some (smaller) credit unions see that the giant credit unions are acting more like regional banks than cooperatives. The "cooperative" spirit of large credit unions is we are coming into new markets regardless of who already serves that membership base.
ReplyDeleteCredit unions may still be cooperative with one another, but only if they are not in the same market. Within markets, it is extremely competitive and the one with the deepest pockets will be the most likely survivor.
Community charter and charter expansion has done more to consolidate credit unions than to help small credit unions expand and will likely lead to indistinguishability between their regional bank competitors.
It will be surprising what (if at all) the credit union trade organizations say about this.
Good point.
DeleteTrade associations, as proven convincingly over the last 15 years, have no solution for credit unions and are compromised by self preservation. Their interests are not aligned with our needs (except the tax code).
The scoreboard is zeros.
Sorry. Service expectations and expanded compliance/BSA requirements are what is causing smaller credit unions to seek merger partners. The services consumers expect today are not cheap and are much more affordable when serving a larger membership base. Government is dumping more and more and more compliance/BSA "stuff" on financial institutions of all size making those costs increase greater than smaller institutions can afford.
DeleteThey're being allowed to chew up capital that would be put better use at banks or cus that would use it to improve their members value.
DeleteAlthough I do enjoy your blog, quotes like "The time has come to end the favorable tax treatment of these large credit unions." just reflects what one would expect from a retired ABA member.
ReplyDeleteWhat your ilk is worried about is the competition that large credit unions present to banks - not that large credit unions pose a threat to small ones. That's a typical misdirection tactic.
I've been involved with credit unions for fifty years now. I've watched as the smaller ones have contracted with larger credit unions to piggyback on their IT systems. Most of these smaller credit unions end-up merging with the larger one to become more cost efficient.
At the end of the day this does benefit the average credit union member. Lower costs mean marginally higher dividends on share accounts and marginally lower interest on loans. For poor people, these marginal benefits help a lot.
That's what really bothers the ABA. Since the shareholder's profit is taken out of the equation, the credit union member gets a better deal as a consumer. Study after study has proven that to be true (especially on loans).
Where was the ABA when their membership ran amok and practically destroyed the world financial systems? And, your reply to Dodd-Frank is that it's gone to far? Most American taxpayer's don't agree with you on that one. If a bank is "too big to fail", then it's "too big to exist"!
Why don't you spend your retirement years as a champion of small and regional banks? The TBTF crowd has all but destroyed them. You'd have a unique insight into the industry that you served so well for over 20 years.
Each of the top 4 banks have assets that are greater than all of the credit unions in this country. Those are the financial instutions that need the most scrutiny. The fact that they've had to pay billions of dollars in fines is a testament to that fact.
Why are the tbtf even part of this dialogue?
DeleteWhere was the aba you ask?
Who cares?
Where was cuNa during ccu meltdown?
Oh, on the board of us central.
Wake up.
And the CEO at Schools1st FCU is Bill Cheney. Bill Cheney was a director at WesCorpFCU before it was placed into conservatorship. Bill Cheney was the President of CUNA before moving to Schools1st FCU. Let's hope he can read the balance sheet and income statement at Schools1stFCU better than he did while at WesCorpFCU. Where was the NCUA? Why no work PROHIBITION orders on these former Corporate FCU directors for breach of fiduciary duty, fraud, negligence and basic incompetence? Is anyone at NCUA tuned in? I didn't think so.
ReplyDelete