Leading Credit Union Conversion Advocate Cries Foul

The person most identified with making credit union conversions from a CU charter to a bank charter a reality, Alan D. Theriault, President, CU Financial Services, has been showing up in the credit union trade press recently defending what he does for a living in strongly worded letters to the editor. Understandably, the last thing this consultant wants is to see the bank conversion market dry up and disappear. It won’t of course. No matter how unfairly Theriault claims he and those credit unions converting, or even thinking about it are being treated, there will always be an undetermined number of credit union CEOs and their boards eager and willing to make the switch. Nevertheless, his media rantings come across as a man somewhat desperate. His main claim is that he and his conversion colleagues are not being treated fairly by almost everyone, from this publication to NCUA. How strongly does he feel about Credit Union Times and the credit union industry’s federal regulator? Consider this sentence from his recent letter to Credit Union Times: “While profiting from Columbia (CU) sensationalism, Mr. Welch and his paper failed to `expose’ the fact that (like his claim about the lack of bank regulator impartiality) a supposedly `impartial’ NCUA is a `rogue agency’ and `industry cheerleader’ as some have charged; willing to twist H.R. 1151 rules to protect its revenues and appease credit union trade associations.” Even though I think his charges, albeit made indirectly, are full of holes, I won’t attempt here to stand up for NCUA. NCUA is more than capable of defending themselves, like with a rebuttal letter to the editor, if they so chose. As far as this publication is concerned, in the next breath after the dig quoted above, he pays us a backhanded compliment (I think!). “The future will prove that the so called Credit Union Times `expose’ has done more to publicize the bank charter conversion option than all the efforts of CU Financial Services since 1994 when it first started advising credit unions about the conversion opportunity.” We plead guilty. News is news. Important stories will always be covered on these pages regardless of the fallout. In fairness, the man does make a number of good points regarding the way the conversion process works, important member disclosure procedures, cast-in-stone legal considerations, and even why he honestly believes in the benefits members can expect following a conversion to a mutual bank charter and even on to eventually becoming a stock corporation. But what he doesn’t address is also important. Neither Theriault, nor any of his conversion advocates, ever specifically lay out exactly what it is that former credit union members have gained from the conversion except in very general terms (“as a bank, they will be able to raise more capital and make more loans to customers (former members) and have fewer impediments to grow.”) It is far easier to document what former members have given up than what they have supposedly gained. From Theriault’s perspective, those credit unions that have become banks should now be superior in every way to those credit unions that chose to continue to prosper and succeed under a credit union charter. But the facts don’t support that view. Measured by overall member satisfaction levels, innovative products like MBLs and services like online banking, delivery systems, branches, rates, fees, or just plain growth stats, the converts lag far behind hundreds of credit unions that are setting the world on fire as just plain old-fashioned credit unions. Can any former credit union now a bank compare to the member value provided by Wescom Credit Union, Navy Federal Credit Union, GT&E FCU, Boeing Employees Credit Union, North Carolina State Employees CU, CEFCU, Texans Credit Union, Pennsylvania State Employees Credit Union, and hundreds of others throughout the country that I could name? I think not. Theriault does address the issue that is usually the first to surface in discussions among those adamantly opposed to credit union to bank charter conversions. That issue is the financial benefits that flow to management staffs and boards of converted credit unions. Says Theriault: “A few believe the overturning of a legal vote in favor of conversion at Columbia Credit Union was justified, and that the entire incident is an expose of a dark underbelly of conversions, namely insider greed and inadequate disclosure. Apparently Mr. Welch is among them.” Right again. I agree on at least the greed part of his statement. There is no denying that greed, however defined, does play an important role in the decision by a credit union CEO and his or her board to become a bank. The record of past conversions speaks for itself. CEOs and boards got money, lots of it. Why deny it? Saying that “board and management compensation issues, although a tangential part of the process, were of little importance and in most cases not even considered relevant” as Theriault did in another part of his letter simply does not bear up under close scrutiny. As for his accusation that Credit Union Times makes any editorial decisions whatsoever based on what will sell subscriptions, he couldn’t be further off base. Not a word appears in this publication’s 51 weekly issues that is there for any reason whatsoever other than to benefit our over 50,000 readers. In case Theriault hasn’t noticed, that makes Credit Union Times very unique among all credit union publications. Speaking of letters to the editor, on a completely unrelated topic, this final comment; in a recent pro-union letter, a writer made the case that the CUNA Mutual Group had a very good year financially last year and that union members on staff were a big reason why. I would only add that it must then follow that in those years when the company didn’t fare nearly as well on the bottom line that the union members on staff also played a role in that development? Comments? Call 1-800-345-9936, Ext. 15, or Fax 561-683-8514, or E-mail [email protected].