Reputation is everything, especially for an industry trying to define itself from another which is especially the case between Credit Unions and Banks. Credit Unions strive on being cooperative with each other and putting people and members first as a way to distinguish themselves from a bank. This distinction and reputation helps credit unions maintain their tax-free status. The industry is now scrambling to recover from an attempted hostile take over by Wings Financial Federal Credit Union over Continental Airlines Federal Credit Union as can be seeing in the following LA Times news post:
http://www.latimes.com/business/la-fi-wrap10.1mar10,1,3175489.story?coll=la-headlines-business&ctrack=1&cset=true
There seems to be a lot of activity amongst credit union advocates where such avid postings about this sort of behavior can be found at many sites including Trey Reeme's Opensourcecu blog and DougTrue's blog:
http://www.opensourcecu.com/articles/2007/03/16/is-wings-hostile-takeover-step-one-towards-conversion#comments
http://www.dougtrue.net/
Thank you Trey and Doug for bringing this issue to everyone's attention!! How will the credit union movement ultimately respond to this sort of behavior? What do you think they should do to salvage their reputation that they have painstakingly built for years?
Perhaps Wings Financial Federal Credit Union should lose their status as a credit union and be turned into a bank or better yet Wings Financial FCU should get a hostile takeover instead. What is the best remedy for the industry in this instance?
Saturday, March 17, 2007
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6 comments:
You say "Credit Unions strive on being cooperative with each other and putting people and members first as a way to distinguish themselves from a bank." I have two comments on this 1. The era of cooperation among credit unions began to die when NCUA broadened charters to the extent that many CUs compete head to head with one another in the same markets. 2. How is Continental FCU "putting people and members first" by not allowing them to vote on a proposal that is clearly in their financial best interests. Wings has lower rates on loans, higher rates on savings, lower fees and many more locations. How do the members lose in this case? The credit union's obligation is to the members and not to the institution.
It is in the members best interest to join a credit union and enjoy the benefits passed down to them through the tax-free status of this industry which differentiates them from a bank. There is a lot of noise out there to tax credit unions and treat them like banks and when credit unions act like banks - they add fuel to that arguement. Members have the right of course to find a better credit union if they wish or to simply put their money in a bank. As a whole: non-cooperative behavior will ultimately not serve the members when their memberships are changed into customer deposits of their new credit union now turned into a bank. Fighting fire with fire leaves everyone scorched and burned in the end.
Interesting article on this topic from two legends in the credit union world.
http://www.creditunions.com/home/articles/template.asp?article_id=1668
Thank you anonymous,
This is an interesting article about the differences between credit union mergers and bank mergers.
Due to membership requirements, it may be difficult for a credit union to grow membership size and a popular way for a CU to increase in size is through mergers.
I don't know that I agree with this article: Why A Bank Merger is Often Bad and a Credit Union is Often Good in that it claims that credit unions are uncomfortable with mergers. Pentagon Federal Credit Union merged with 2 other credit unions in 2005: Budget Federal Credit Union and Fort Buchanan Federal Credit Union. Clearly Pentagon Federal CU is very comfortable with mergers and has done them very well. I must admit that I am a fan of Pen Fed!!
Mergers are great and neccessary for credit unions. It's the new attempted hostile takeover that has caused a great concern amongst the industry.
Well put, Stephanie!
Aside from looking at what this does to the spirit of the credit union movement (if there is a movement left), there are quite a few precedents this could set: Should one CU board be able to influence/force another board? What about the $200 payment itself - is it a dividend? Doesn't it disproportionately benefit folks who have less money with the credit union?
I'm also concerned with the end game (is Wings' next step conversion) - and should that even matter?
Great coverage here, and I'm with you. Cooperation does matter. Yes, charter expansion has had its effects, but it hasn't killed the cooperative nature of credit unions.
And rates are not the measure of the value of a credit union to its members.
Thank you for your comment Trey!
I agree that rates do not measure the value of a credit union. Credit unions are distinct from banks with good reason.
A credit union tryng to act like a bank is as unproductive as a dinner trying to act like a fast food chain.
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