By Frank J. Diekmann
Here’s something you would think credit unions would brag about, but…
The CU community is quite fond, and rightly so, of pointing to one of their key market differentiations, which is member democratic control. It’s a point that’s been obscured behind a mask of late due to the coronavirus pandemic, although the bushel basket has been overflowing with “we are here for our members” references when it comes to PPP loans.
But there’s one element of credit union democracy that you never really hear anyone talking about—in fact, it’s almost the CU version of the crazy aunt in the attic story—even though it’s probably the greatest example of member democracy in action—the rejection of merger proposals.
As CUToday.info reported here, for the second time in a month members of one CU have nixed plans to merge with another. In this case, it was members of the $78-million Partners Financial Credit Union in Virginia, who opted out of a plan to combine with the $74-million People’s Advantage FCU.
Not long before that, as reported here, members of the $57-million N.W. Iowa Credit Union made clear the N.W. stands for “No Way” when it came to merging into the $205-million Siouxland FCU.
Frustrating, But…
I’m sure for the boards and management at these credit unions this is the frustrating part of being member-owned and controlled––it isn’t just a talking point for a Washington hill visit; it really means member-owned and controlled. Can you think of a better example of democratically run?
And yet credit unions, and especially their trade groups, never crank up the press release and tweet machines extolling cases when those Main Street members we keep hearing about stand up and said, “No thanks, we vote in favor of keeping our cooperative.”
That’s one story. But the two recent merger rejections also tell another story that perhaps credit unions also don’t really want to tell. Both Partners Financial and N.W. Iowa credit unions are, relatively speaking, small. From a practical standpoint, it’s just easier for members at such institutions to block a merger when the vote occurs at a special meeting. It’s easier to communicate with other members and those who are opposed are most likely to turn out. In the case of Partners Financial, for instance, it was a small percentage of the overall membership that cast “no” votes.
Feeling the Union
But there is also something to be said about the connection those members have with their CUs and communities. They feelsomething; the union is about more than just a group of people pooling their money.
When they say they know their members by name, it’s not just advertising copy. Do you have 50,000 or 100,000 or more members and make the same claim? Really? Go ahead and name them. I’ll wait.
At the same time CUToday.info was reporting those two mergers that have gotten the kibosh, we also reported on a merger plan by two very large California CUs: the $4.8-billion Kinecta and the $902-million Xceed Financial. The two SoCal CUs plan to complete a combination that will include more than 300,000 members by the first quarter of 2021.
Reverse Scale
I’m going to go way out on the limb and predict Kinecta connects with Xceed because members will give it the OK. In making its announcement Kinecta/Xceed made the usual statements about better serving members and economies of scale.
But members of Partners Financial and N.W. Iowa made their own statement, that there is something to be said for what I’ll call “reverse scale.” And in speaking up for their own personal economies, they also spoke up for the best part of credit union democracy.
Frank J. Diekmann is Cooperator in Chief at CUToday.info. He can be reached at Frank@CUToday.info or @FrankCUToday.