Campaign Season - First Member-To-Member Letters Inaugurate New Era In CU-Bank Conversion Fight

Credit Union Times  January 23, 2008
By David Morrison

SALT LAKE CITY and ODESSA, Texas — For the first time ever, members whose credit unions are seeking to convert to bank charters have been given the chance to hear from the credit union leadership that backs the conversion and other CU members who oppose it. Beginning in early January, the more than 22,000 members eligible to vote in Beehive's upcoming conversion balloting received both communication from members opposed to the conversion and another communication from Beehive's leadership. Beehive Members Protecting Member Interests, the group of members opposed to the conversion, responded to the second letter on their Web site

NCUA lists almost 24,000 members at First Basin, but it's unclear how many of them would be considered eligible to vote and therefore communication from the credit union or the opposed members. The CU has not yet commented on the members' group or its efforts.

Under NCUA's latest revision of its regulations that oversee the credit union-to-bank charter conversion process, credit unions wishing to convert must give any members who oppose the conversion the chance to convince other members to vote against it. The members opposed to the conversion must pay the costs of the communication and the credit union can challenge the material the members placed in their letter to the NCUA on the grounds it is "not proper." NCUA's regional director then reviews the letter, communicates with the members who authored the letter, and conveys a determination of propriety, according to the agency's regulations.

On Dec. 19, 2007, two Beehive members, Lori Christian Chavez and Teri Dial, the co-founders of the Beehive Members group, submitted their letter to the credit union. Two days later, according to NCUA's correspondence, Beehive CEO Scott Jorgensen submitted a lengthy letter to NCUA, objecting to broad parts of the members' letter.

Dial said later that she was not surprised at the length of Beehive's letter or the CU’s speed in drafting and sending it. "I expect they were ready for it," she said. "It wasn’t a secret that members were unhappy with what they were doing or that there would probably be a letter."

Dial said neither she nor Chavez nor any of the other members have seen Jorgensen's letter, and they had not asked to see it. But Dial said she had been told that the CU's letter was 30 pages long and the detailed NCUA response, which the members had seen, indicated the thrust of the CEO's objections.

All told, NCUA replied to 29 Beehive objections to the member letter and reported that the members had changed their letter, sometimes in response to the objections and sometimes not, 12 times. The agency denied 17 of Beehive’s objections.

But, crucially, NCUA agreed with Beehive that the member's letter would need to be delivered by postal mail to all the CU's members, including those who had said they would welcome communication by e-mail. This decision raised the cost of the mailing from an initial cost of $8,871 to $13,741. Members opposed to the conversion put up some of the money Dial said, and the National Center For Member Trust, the organization that works to keep members informed in these charter change contests, also contributed.

Dial admitted that the agency's agreeing with the credit union had hiked the cost of the mailing but explained that it had an upside as well. "Now the people who got the message in the e-mail are going to get it in their mailbox too, so we get a second bite of the apple!"

Dial said the response to the letter has been encouraging. She wondered if the CU had not already had a lot of time to lay the groundwork for a victory with its employees and their extended families. "They have had a year to work at this," she said. "We have just had a number of weeks."

Still, there are indications that the topic has begun to gain attention. Dial reported that she will be interviewed on an area radio program on Jan. 12 and a Salt Lake paper is leading its Sunday business section with the story on Jan. 13. "If we lose and Beehive becomes a bank I will do what a lot of other people have said they will do as well," Dial said. "I will take my money elsewhere."

Language Barrier

Meanwhile, whether First Basin succeeds in its attempted charter change may hinge on a cultural split between the credit union's leadership, which is primarily English-speaking and the CU's Hispanic, Spanish-speaking members.

First Basin began life in 1965 as Medical Community Credit Union but then merged twice, once with Ector County Credit Union and then Neighborhood Credit Union. The addition of Neighborhood, which had been started on the south side of Odessa, particularly increased the credit union's percentage of Hispanic members, according to Carol Uranga, a longtime CU member who is also the executive director of the Hispanic Heritage of Odessa organization.

"I have been a member of the credit union from the beginning, when it was Neighborhood," she explained. "Back then it started in a store which sold boots and western wear and rented Spanish videos so it was very accessible and people were always in and out renting their videos and using the credit union," Uranga said. Now many of the CU's 24,000 members are Hispanic, she said.

She and others organized to let people know about the conversion vote because the CU's communications on the conversion had only been in English. "Many of the members don't really have English very well," she said. "They need to know what is going on." The group has made a point of distributing its letter to members in both Spanish and English.

Letty Morena, another founder of the Save First Basin committee, echoed Uranga's concerns noting the gap between the people who would benefit most from the CU's conversion and the people who use the credit union itself. Morena was senior vice president of the credit union until she left in 2005, about two years after current CEO Shem Culpepper arrived.

"I saw the credit union changing," she explained, "shifting its focus so it was not the same place anymore." She said some of the CU's other former employees had come out to support the CU as well citing similar concerns.

She also described an age split along the question. "All they have to get is a majority of the members who vote so there really isn't an incentive to really reach out broadly to the primarily Spanish speaking members," she said. "This is really an issue among older members who don't really like banks anyway and who are not really inclined to read things from the credit union."

Morena delivered the final version of the letter to First Basin on Jan. 10 and thus had not been delivered to other members by press time. Uranga and Morena reported that the story of the predominantly Hispanic credit union that might become a bank has already drawn the attention of the Spanish media; the pair has been interviewed by Spanish speaking Univision.


© 2008, Used with permission from The Credit Union Times. All rights reserved.

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