By Sarah Snell Cooke, Principal, Cooke Consulting Solutions

Speaking with a SoCal credit union CEO last week, he let loose on the issue of credit union mergers that are not beneficial to the members. Some could be in the interest of the members; some are decidedly not. The question becomes not whether to merge but why is a credit union merging.

“I’m concerned that credit unions are not behaving like I believe credit unions ought to behave. Not that they have to behave the way I think they should but…members are at the back of the line,” this credit union community veteran stated. What made him say that was the way a recent merger in his area was handled, which is becoming more common among credit unions. The merging credit union CEO was given a cushy job and pay raise to run what had essentially become a branch of a much larger credit union. And part of his new job description is to recruit more CEOs at small credit unions to do the same.

Please join us for the Underground Collision in New York City on Monday, May 8 for discussions on mergers,  marijuana banking, whether big credit unions are carrying small ones or vice versa, ‘only if I win’ collaboration, and more.  Register here.

Surely there was more to it than that! The credit union rumor mill may have produced it: The board was tired of fighting with the NCUA. Looking at the financials, this credit union had little to fight about. But if that’s the case, this CEO said and I 100% agree, “Find a new board!” It’s the board’s responsibility to recruit new members when they’re tired.

So the larger credit union swoops in and will take over this one-branch credit union in about a month. The one-branch credit union, whose members used shared branching more than the home branch, will either 1) no longer have access to the local shared branches because the larger one does not participate; or 2) retain shared-branching access and place an added burden on the other credit unions in the network that are now serving this larger credit unions’ members. Shared branching does earn the participating credit unions some money, but when it affects service to the members of that particular credit union because shared-branch transactions take longer, one has to rethink their strategy. So this CEO is caught between being an upstanding member of the cooperative credit union community and ensuring the member service his members expect.

The SoCal credit union CEO said the only resolution he saw was for the NCUA to change its rules, and make the process and handouts to merging institutions public information. Something’s gotta be wrong when a credit union executive is asking for additional regulation! He pointed out that Callahan’s Chip Filson has been working on the issue, but the trade associations “don’t care one bit. They care about dues dollars.”

But here’s why everyone in credit unions should care:

1.       Unwanted attention from regulators that aren’t so tuned in to the credit union difference.

2.       The tax exemption, held so dear, rests on credit unions’ white-hat reputation.

3.       The integrity of the entire cooperative credit union community.

So who is going to work on it? This is one of many hard-hitting issues that the Underground is working on. Come join us at the Underground Collision in New York City May 8, and see what we’re all about. Can't make it? Learn more and sign up for the Underground newsletter FREE!