New Coalition for CU Charter Options Targets Any Changes That Make CU-to-Bank Conversions More Difficult

WASHINGTON – A coalition appearing to consist of banking groups and some private firms has begun to form to fight any changes to legislation or regulations governing credit union conversion to mutual bank charters. The goal of the Coalition for Credit Union Charter Options will be tasked with keeping open the option for credit unions to convert to the thrift – or mutual savings bank – charter, the nascent coalition wrote in a press release. The group’s efforts in Washington are being coordinated through the lobbying firm Butera and Andrews, which has a number of different banking clients. “NCUA has been holding up recent conversion filings and has actually overturned a legal vote in favor of conversion,” said James J. Butera, acting executive director of the coalition. “After five and a half years of reluctantly but even-handedly administering the revised statute, NCUA is now trying to rewrite the law which instructed the agency to institute new regulations that would facilitate statutorily authorized conversions.” The coalition also targeted NCUA’s recent moves to tighten up disclosure rules in conversions, which it called “onerous.” The coalition took note that half of the individual credit unions commenting on the proposed tighter regulations had opposed them. “The support of individual credit unions for the preservation of the charter conversion option exemplifies the larger problem, namely that NCUA is involved in the conversion process at all,” according to Butera. “For all other types of financial institutions, it is the successor agency that regulates conversions, thereby removing regulatory conflicts of interest.” In addition to educating lawmakers about the issue, the coalition also said it was targeting the higher approval votes that would be required in the Credit Union Regulatory Improvements Act (H.R. 3579) currently before Congress. Currently, credit unions wishing to convert to a mutual bank charter must win the approval of a majority of the members participating in the conversion ballot. Under section 113 of the proposed law, a credit union would have to get at least 20% of its members to participate in the ballot and then get a majority of the votes in order to convert. Officially coalition members are being kept confidential, although it is unclear whether they are confidential by choice or because relatively few associations or institutions have joined. Attached to the press release was a February 3 letter from 22 state banking associations to the Senate Banking Committee Chairman Richard Shelby (R-Ala.) in which the associations took issue with some of NCUA’s recent moves on conversions. In addition to the tighter disclosure rules, the 22 contended that NCUA “encouraged” legislation that would make conversions harder to do. They also took the agency to task for “reexamining” the voting in the Columbia Credit Union controversy and “delaying the approval process” for credit unions to begin to convert. “For all these reasons, we request that you take whatever legislative or other steps that would be appropriate to ensure that the NCUA ceases its obstructionist tactics and returns to a regulatory approach which observes both the letter and the spirit of the market-oriented and market validated amendment which you successfully advocated in 1998,” the letter read. Signatories to the letter included the banking associations from Texas, Pennsylvania, New York, Indiana, New Jersey, Iowa, Washington State, Illinois, Wisconsin, Florida, Massachusetts, Kentucky, Tennessee, Minnesota, New Hampshire, Missouri, Maine, Connecticut, Michigan, Louisiana, North Carolina and Virginia. But Eric Sandburg, president of the Texas Savings and Community Bankers Association, one of the signatories to the letter, denied that his organization was a coalition member or that the other signatories were necessarily members as well. “My board has not made any decision on our being part of any coalition or group,” Sandberg said. He said that the 22 associations had written their letter on February 3 and that they had not even known that the letter would be included in with the press release. He also denied that his association had paid any money to be part of the association. John Annaloro, CEO of the Washington State Credit Union League said “we obviously don’t agree with the assertions in Mr. Butera’s letter. It looks like Butera collected a fat $5,000 fee from 22 individual state banking trade associations and made himself a cool $110,000.” For his part, Butera later called including the letter with the press release a “mistake” and confirmed that not all the signatories were coalition members. “I would hope that many of my regular banking clients would join the Coalition at some point,” Butera said. [email protected].