CUNA, CUs Suspect Bankers are Behind Flood of Membership Inquiries or Could Something Even Darker Be Lurking?

WASHINGTON-A number of credit unions have been inundated recently with eligibility and other questions-many from people out of state-to the point the institutions and CUNA believe the inquiries are not legitimate. CUNA told reporters last week it had discovered that a Florida resident had sent out 1,200 postcards requesting to purchase a five-year, $5,000 share certificate. At this point credit unions in Texas and Hawaii are known to have received the postcards. According to CUNA, this may be a trick by the banks to test credit unions’ field of membership practices. University Credit Union President and CEO Michael J. Welch, Sr. also contacted Credit Union Times saying a branch of his credit union had also received the postcard. When Credit Union Times attempted to call the Boca Raton, Fla. number on the postcard, the person who answered said it was a wrong number. However, according to a source familiar with the situation, who declined to have his name published, at least the postcards may be legitimate requests. There is a business out there for investors to deposit shares in credit unions that are large and more likely to convert to mutual thrift charters with the hopes they would eventually go public. The source said there are about 1,200 credit unions that are large enough to be worthwhile to deposit is, equal to the number of postcards sent out. Of those, this source said, about 200 of the top ones converting would cause a “field day” for his clients. These clients also probably would not bother to figure out if they were eligible to join the credit union, the source said. The three main banking trades at the federal level, American Bankers Association, America’s Community Bankers, and the Independent Community Bankers of America, flat out denied any connection, officially or unofficially, with these efforts. “We have not, nor would we, perpetrate anything like that,” ACB Corporate Communications Managing Director Bob Schmermund said. “Clearly from our viewpoint, this is a little bit of paranoia on [CUNA's] part,” ABA Senior Economist Keith Leggett stated. He added, “They should have done their due diligence before making wild accusations. All it does in undermine their credibility.” “We think this is also fraud against credit unions because we’re not sure who is behind this,” CUNA Associate General Counsel Mary Dunn said. “These are entities that we feel are trying to test common bond and how stringent credit unions are enforcing their fields of membership.” CUNA is looking into whether this apparent attempt to entrap credit unions is illegal. “That’s what we want to talk to the regulators about. If its somebody who is not eligible to be in a credit union and they’re trying to get the credit union to violate its field of membership requirements, we definitely are looking into that,” Dunn said. “This is part of a larger issue that we’re really concerned about,” she continued. “Entities are pawning themselves off as credit unions, and we’ve talked to the Justice Department. We’ve met with both Justice and the FBI and we are going to be meeting again with them on it.” Following this situation, CUNA reported that credit unions in Vermont and Michigan are also receiving suspicious phone calls and mail about membership. “We definitely are trying to explore it to see what can be done,” CUNA’s Dunn said. “It may be that nothing (other) than just revealing and publicizing this and shining light on it.” [email protected]