By Frank J. Diekmann
Well, here’s the column that I had hoped/thought/prayed had been put on the shelf in the CU History Museum to forever grow ever more yellow, and yet now I find myself blowing off the dust again.
As CUToday.info’s Ray Birch was first to report last week, a credit union is looking to become a bank. In this case, it’s the $824-million Thrivent Credit Union in Appleton, Wis., which is seeking to combine with the to-be-formed Thrivent bank, which would be an affiliate of Minneapolis, Minn.-based financial services firm Thrivent Financial for Lutherans. The new institution would operate with a Utah industrial charter.
At the heart of this attempt to convert to a bank are two questions that are always more important than any others: Is the move truly in the members’ best interests? And who is really looking out for the interests of the members?
It’s been some time since we’ve had to ask those seemingly simple questions when it comes to credit union boards that conclude the not-for-profit, democratic-control, people helping people thing just isn’t good for the rank and file any longer; what they really need is a for-profit bank charter.
NCUA Steps Up
If you weren’t around at the time or perhaps have forgotten it, in the mid-2000-teens CUToday.info was providing extensive coverage of extraordinary compensation packages lining the pockets of management team members and boards during a period of what can only be described as some shady mergers, attempts to convert to a bank, and actual bank conversions. Six- and seven-figure payouts. No-show jobs. Season’s tickets to sporting events, and more. ALL of it was coming out of capital that belonged to everyone who was a member of those credit unions, yet it was going to only a few insiders who, and this will surprise you, didn’t disclose the payola to the membership.
Much to their credit, as reported here, then NCUA board members J. Mark McWatters and Rick Metsger responded with rules that require greater transparency when mergers occur, most especially around what credit unions disclose about any benefits being paid out as a result of the proposed deal. You can read the disclosure statements for pending mergers for yourself here. How those rules apply to attempts to convert to a bank remains to be seen.
Remembering Joe Average
Look, I get it. Joe Average Member is pretty unlikely to receive a notice from his credit union about a proposed merger and immediately respond by saying, “I must go to the NCUA website to see who’s benefitting!” But at least the information is available, and in some cases members have used it to question the deals, as the new rules also call for giving members the ability to have greater input. The member is also at a disadvantage because the credit unions involved in mergers still control the messaging, and as has always been true, this is the double-edged sword of having “trust” in your credit union—the member takes the CU at its word. Too often in the past that trust was betrayed.
Let me be very clear: none of this is to imply Thrivent plans to betray trust or dip into the capital cookie jar to reward insiders. The credit union hasn’t revealed any of its plans to date beyond the intent to become a bank.
But it will need to answer the question about how members will benefit. And not with one of those Thesaurus-stretching, slippery PR firm tongue-spinning, public vapor-statements that seem to say a lot while saying nothing all while making vague references to “improved products and services.” Instead, members deserve a response with specifics. Specifically, in dollars and cents, how will members benefit? How much lower will loan rates go? How much higher will the savings rates be? What fees will be lowered or eliminated?
Thrivent uses the tagline, “Do More With What You Have.” The credit union will need to answer how the members will have more as bank customers.
Also Deserving of An Answer
Beyond those questions, what products/services currently not available will be introduced? And who on the board will come to every meeting thinking first about the former members who are now customers and not just about certain shareholders?
Thrivent Credit Union reported $1.872 million in income at the end of the first quarter of 2021, and net worth of 8.04%. Where will that money go should it ever become a bank?
Speaking of the board—and volunteer boards are one of the points of CU uniqueness the movement consistently points to––there is also the question of who will represent the members if it converts charters?
According to a statement on the website of the Department of Financial Institutions for the state of Utah, where the proposed bank would be domiciled and which is 1,465 miles away from its current headquarters in Wisconsin, among the factors the regulator considers before granting an industrial bank charter is the selection of a “board of directors, the majority of who, must be outside, unaffiliated individuals, some of whom must be Utah residents.” Who will these individuals be? Will the board members be paid? How much?
Perhaps you’re thinking, hey, it’s summer, I’m taking a little time off and anyway, this is a matter between members of Thrivent Credit Union and its management and board, and not me. But that’s the thing about democracy—as we are seeing in the country at large right now—everyone has a stake in it and you can never take time off. Which is also why I was wrong thinking those old columns about standing up for CU members’ rights belonged on a shelf, as the work was done. It is never done.
The Second Question
And that brings me to the second question I posed above: Who is looking out for the interests of the members? The credit union community itself has a responsibility to speak up—and loudly—anytime members of a credit union aren’t being told everything they need to know. That’s how communities are supposed to work.
It means nothing and is just hollow sanctimony if the same CU community that spent last week singing the praises of credit unions and using the hashtag #ilovemycreditunion, if it isn’t even more willing to stand up and defend the model. Otherwise, it’s just #ILoveMyCreditUnionWhenIt’sEasyAndConvenient.
Who will step up if stepping up is needed? During that prior round of CUs attempting to become banks, several high-profile CEOS created an informal group that worked to inform members of those CUs what was happening and what their rights were. Many of those real leaders have retired. Are there standup CEOs now who will stand up and do the same?
Will the state league act? The national associations? The credit union trade groups fall all over themselves when it comes to talking about “advocacy.” If you aren’t an advocate for the very fundamental idea a credit union is better for consumers than a bank, then all your meetings with Congress are as empty as the rest of the fumes pouring out of the capital.
The Job(s) Ahead
What’s ahead for Thrivent CU? I don’t know. Perhaps it will fully disclose everything and lay out a dollar-and-cents case for how members will come out financially ahead. That would be commendable, and we’ll see. If it does so, CUToday.info will have coverage of how its members are now better off as customers.
For now, it also has a high bar to clear, again thanks to the new NCUA rules. As Richard Garabedian, counsel with Washington-based Hunton Andrews Kurth LLP explained, the CU must get a majority of its 56,000 members to approve the proposal and must also have at least 20% of the members vote.
But that’s not the only high bar here. The country’s credit unions and its leadership also have to make the leap. CUToday.info will continue to monitor Thrivent Credit Union’s bid to be Thrivent bank. That’s our job. But you need to do the same. That’s yours, too.
Frank J. Diekmann is Cooperator in Chief of CUToday.info and can be reached at Frank@CUToday.info. Mr. Diekmann is also author of a brand new book, “The Last Lyric,” a humorous satire about a murder investigation at the Rock & Roll Hall of Fame in which every line of dialogue is either a classic pop/rock song title or lyric. Available on Amazon, Apple iBook, Barnes & Noble and Smashwords.