SUPERIOR, Wis. — Taking a cue from the American Bankers Association in attacking credit union loans in the Florida land scandal, the state's banker trade group lobbed a media broadside this month at the $143 million Superior Choice Credit Union for holding faulty participation loans with Norlarco Credit Union of Fort Collins, Colo.
In a news release distributed throughout the state and in this far northern Wisconsin community, the Wisconsin Bankers Association charged Superior Choice had veered far off its charter and "abused its tax exempt status by pursuing a commercial loan adventure more than 1,500 miles from the south shore of Lake Superior."
The Wisconsin Credit Union League was quick to respond accusing the WBA of resorting "to the same old smear tactics and hypocrisy" by using falsehoods to distort the overall CU mission while banks grossly ignore low income and the disadvantaged.
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The president/CEO of the $143 million Superior Choice, Gary L. Elliott, has said while the bad loans are regrettable the CU has a "strong, well capitalized position" and that the financial condition speaks for itself with no need now for its management to counter the WBA media blast.
The CU posted a $1.05 million loss in its June 30 call report, first highlighted last month in news stories appearing in Superior and nearby Duluth, Minn. papers. Its latest call report filed with NCUA showed an $806,000 loss for the third quarter with Wisconsin regulators stressing the CU is being monitored but maintains an overall satisfactory condition.
"They are working off the Norlarco loans," said an official of the Wisconsin Office of Credit Unions in Madison.
Superior Choice is currently party to a June 27 federal Colorado court suit against Norlarco in connection with real estate investments and construction loan guarantees. Superior Choice has accused Norlarco, now under NCUA conservatorship, of fraud, alleging it misrepresented attractive guarantees for the Ft. Myers, Fla. loans.
There were reportedly 19 other CUs across the U.S. that took part in Norlarco participations.
In its media attack, the WBA charged that loan losses at Superior Choice and Huron River Area CU of Ann Arbor, Mich., also under conservatorship, are new examples of CUs taking advantage "of their tax subsidy to engage in shaky adventures."
SCCU's Florida involvement demonstrates how "profit-driven credit unions abuse their tax subsidy at the expense of the people they were created to serve in the first place," said Kurt Bauer, president/CEO of the WBA.
"Credit unions, no matter how large or how profit-hungry, do not pay state or federal corporate income tax," wrote the WBA. "Credit unions were given that privileged status in exchange for serving what Congress defines as 'people of low- and modest-means.'"
So asked, WBA in its release, "how does SCCU's taxpayer subsidized lending serve that congressionally mandated mission?"
Brett Thompson, president/CEO of the Wisconsin League, countered in the media exchange that the WBA is engaging in an ongoing "inaccurate spin about credit unions."
The WBA, he said, repeatedly cites "flawed studies about credit unions, including one that was admitted unreliable by the very Congressman who requested it and another paid for by the WBA. Not surprisingly, WBA's spin ignores the real story about credit unions."
"For example, 2006 federal data show that credit unions do a better job than other lenders serving target groups. Wisconsin's low-income mortgage borrowers' approval rate is 78.7% at credit unions and 48.5% at non-credit union lenders. For minority mortgage applicants, the credit union approval rate in Wisconsin is 84.6% compared to 55.4% at non-credit union lenders."
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