NCUA Approves California FCU for 10+ Million Member Community

PASADENA, Calif.-LA Financial Credit Union made history in July by being approved for the largest federal community charter ever. NCUA’s Region V gave the OK to LA Financial to serve a field of membership encompassing all of Los Angeles County with a population of more than 10.1 million, the highest of any county in the country as of January 2004. According to a release from the credit union, approximately 28% of all California residents live in Los Angeles County. Los Angeles County is 4,084 square miles, 800 square miles more than the states of Delaware and Rhode Island combined. The $300 million LA Financial, which currently serves 45,000 members, is convinced of its ability to provide services to the entire area successfully. Because the credit union had been concentrated around Los Angeles County, originally serving county employees, LA Financial Vice President of Marketing Renee MacKanin said they should not have much trouble serving all of the county. She added, “We felt that we really needed to expand our field of membership in order to compete in our area.” NCUA evidently worked to ensure the credit union could serve the entire population when processing such a large request, since LA Financial sent in its application almost as soon as NCUA changed its FOM rules, more than a year ago. One of the updates was to permit the regional offices to approve fields of membership that were presumed to be communities, such as single county areas. MacKanin said it did seem the credit union had to do a little extra to demonstrate its ability to serve the area, which includes a larger underserved area. The credit union was also able to maintain another field of membership in Lake Havasu City, Ariz., the result of an emergency merger. MacKanin said they market this FOM as a separate entity. LA Financial had also adopted around 500 select employee groups prior to the conversion, all of which were in Los Angeles County. “We’re not going to lose any of our SEGs because of the conversion,” she explained, though they will no longer be considered SEGs. NCUA Special Assistant to the Chairman and Director of External Affairs Nick Owens explained that clearly the U.S. Census Bureau and the state of California had determined the area of Los Angeles County to be a community. America’s Community Bankers Corporate Communications Managing Director Robert Schmermund stated, “This had to be the dumbest thing they’ve ever done.” The approval of Los Angeles County as a community, he said, with a population larger than 42 of America’s 50 states, “doesn’t even come close to passing the hee-haw test.” Independent Community Bankers of America Senior Vice President and Director of the Congressional Relations Group Steve Verdier is not buying that argument. He said it’s a $40 cab ride to get across the county; that cannot be a community. “It really just so starkly highlights the points we’ve all been making,” Verdier said of the banking lobby. He said various government entities can have a variety of definitions for a community, but they are “not necessarily relevant from a policy point of view for NCUA.” He added that this bolsters the argument for credit unions to be taxed. “The agency makes its decisions based on safety and soundness and the credit union’s compliance with our regulation,” Owens stated. “NCUA is not going to make its decisions based upon competitive complaints from outside groups. The most important thing is access to “affordable financial services,” he said, and this credit union has a successful track record in serving a geographic area, as well as a mature product line and delivery methods. LA Financial President and CEO Barbara Nall agrees. “Our product offerings rival those found at most other financial institutions including state of the art home banking with bill payment and a full service real estate department. Our next phase will be to make our financial services more accessible to all people in Los Angeles County. Our members have access to 33 shared branches in Los Angeles County and over 1,120 Shared Branch Outlets in 40 states, Puerto Rico, Japan, South Korea, Guam, Italy and Germany,” she said. The credit union also has “an extensive network of surcharge free ATMs.” Still, ACB President and CEO Diane Casey Landry fumed, “It reflects the great disdain that the NCUA has developed for any reasonable, rational regulation of large, complex credit unions. This is especially obvious since this incredible decision does not even require a review in Washington.” She continued, “This outlandish decision should not just be of concern to community banks, but to small and midsize credit unions across the nation as well.” Joann Stevens, CEO of the $3.7 million Angelus Can Employees Federal Credit Union in Los Angeles, stated quite to the contrary. “I don’t think it would impact us at all,” she said, explaining that the credit union is employer-based. She added that her credit union has explored the community charter option, but has determined it is not appropriate at this time. In her opinion, Stevens said, NCUA is not going too far with its community FOM grants so long as proper attention is given to the underserved areas; even though Los Angeles is a highly competitive market, there are a number of underserved areas. When asked whether the LA Financial community charter would impact the business of Episcopal Community Federal Credit Union, CEO Urla Abrigo said she was not sure since the field of membership is basically Episcopalian. “With churches, members tend to be more church oriented and with everything the church does,” she said. Members of this $5.4 million credit union in Los Angeles tend to be very loyal. She added that she doubts LA Financial will come after her members because Episcopal Community basically serves an underserved area and does “very high risk lending.” However, she said she does believe that credit unions do try to serve the underserved areas within their communities. As far as whether the approval is appropriate, Abrigo said, “I really don’t think so. That’s what’s happening with the banks attacking us.” CUNA and NAFCU are standing behind NCUA’s decision to approve the over 10 million person field of membership. “We have always maintained that size and services offered are not the defining characteristic of non-profit and democratically controlled credit unions that deliver low-cost financial services regardless of size or services offered,” NAFCU President and CEO Fred Becker said. “The bankers, once again, are pursuing a divide and conquer tactic in pursuit of the demise of credit unions,” CUNA Vice President of Communications and Media Outreach Pat Keefe said. “They have no concern whatsoever about the continuation of small or medium credit unions – they want all credit unions to go away. Their `outrage’ is disingenuous and cynical. Frankly, they should get their nose out of credit union business, and focus more on urging their fellow bankers to provide better service to their customers.” [email protected]