Iowa CU Faces Name Controversy

University of Iowa Community Credit Union president/CEO Jeff Disterhoft believes the decades-long controversy over the cooperative’s controversial name finally came to a head because of its size and success, and a lawyer who owns shares in a bank.

The long-simmering naming issue finally reached a climax when state politicians passed legislation signed by Governor Kim Reynolds in May that forced one of Iowa’s most successful financial institutions to change the name it has had since 1938.

Though the name change will cost UICCU more than $2.5 million, it won’t change its core commitments to deliver top services and products that have fueled the credit union’s exceptional growth in assets, loans and members over the last decade. The legislation will also require the $22 million University of Northern Iowa Credit Union in Cedar Falls to change its name, which it has held since 1955.

“I think the fact that we have grown in size relative to most of our banking counterparts here in the state of Iowa probably catches some people’s attention,” Disterhoft reflected. “And quite frankly, if we weren’t enjoying the success that we’ve had over the years and taking care of Iowans, I don’t know if we’d be having this conversation. I don’t know if it would have been quite such a pressing issue because we’ve had the name for 80 years. Why is it more of an issue today? Probably, in part, because of our size and our success.”

Indeed, UICCU’s growth has been and continues to be impressive.

Just 10 years ago, the credit union posted $649 million in assets, $559 million in loans and 52,833 members. Today, UICCU manages $4.7 billion in assets and $4.4 billion in loans, and serves 177,193 members.

UNI CU has seen steady growth but on a smaller scale, delivering personable service to more than 2,000 members, most of whom are affiliated with the University of Northern Iowa. UNI CU President/CEO Leitha Aten said members are OK with the name change but want the new name to have a connection to the university in some way.

In March, Larry McKibben, a board member of the Iowa Board of Regents that governs the state university system, raised a concern in March that a scandal at UICCU could “wreak havoc” on the University of Iowa’s reputation. He specifically pointed to the Wells Fargo fiasco in which the bank admitted to creating millions in fake accounts to reach sales quota goals, according to a report in the Des Moines Register newspaper.

That argument is valid, Disterhoft noted, but only if it applies to both parties.

“There’s always, I suppose, a risk that an organization is going to make a mistake and tarnish its reputation, but that risk does not rest solely with us in this relationship,” he said. “The University of Iowa has a lot of moving parts, and on any given day, they also might find themselves in situation where their reputation or brand is tarnished a little bit, and in that regard, it could affect us.”

But Disterhoft raised a lot of eyebrows when he revealed that McKibben, a partner with a law firm in Marshalltown, Iowa, is also is a part owner of Farmers Savings Bank, based in the same city. McKibben did not disclose this bank relationship on his conflict of interest form to serve on the Board of Regents. The attorney told a local newspaper he didn’t disclose his bank shares because he felt it’s unrelated to his work on the board.

“I just know in my own experience with respect to conflict of interest forms, it seems like most folks I know really err on the side of ensuring that any and all conflicts are disclosed,” Disterhoft said.

Nonetheless, he acknowledged that the credit union’s name has been a point of contention from among some of its competitors for at least 30 years.

“Obviously, the University of Iowa serves both consumer and commercial entities throughout the state of Iowa, and so if any of those commercial entities have a concern with our use of the name, that does have a spillover effect on the University of Iowa and we understand that; we’re sensitive to that,” he said.

In 2014, State Representative Chip Baltimore asked the state’s attorney general’s office to investigate the credit union’s use of the university’s name, logo and mascot, complaining that UICCU repeatedly uses the university’s name in ads despite having no formal relationship with the school, according to the Des Moines Register.

The newspaper reported the AG’s office was unable to provide a legal opinion, but noted the credit union’s name was based on the original relationship with the university that began in 1938. The AG’s office also pointed out that UICCU does not use any trademarked image owned by the university.

Most recently, in May, Iowa Bankers Association President/CEO John Sorensen called the credit union’s use of the university’s name deceptive.

“Iowans should no longer be deceived by an inaccurate portrayal of the UICCU as a home for the Hawkeyes or a branch of the university,” he wrote in a letter to the Board of Regents to address the naming issue. “Iowans deserve to know the University of Iowa is not affiliated with the UICCU and that doing business with the UICCU does not benefit the university.”

When established eight decades ago, the credit union’s name was the State University of Iowa Hospital Employees Credit Union, which was created to serve the staff of the university hospital. In 1966, it expanded to serve all staff, students and alums, and the name was changed to the University of Iowa Credit Union. In 1988, the word community was added. The credit union then expanded its charter to serve residents throughout the state who were not necessarily tied to the University of Iowa. The credit union also serves members in four Illinois counties.

Over the years, University of Iowa officials have had conversations with the credit union about concerns they had about the name, but the university made formal requests, according to Disterhoft. In 2007, the credit union proposed to change its name to Optiva Credit Union, but it was rejected by the members.

The credit union has no formal relationship with the university, although it used to operate a branch and ATMs on campus. UICCU walked away from its contract after three or five years to continue to operate the campus branch and ATMs, and surprisingly has done little marketing to attract college students.

“If we rewind the clock 11 years to 2007, we were primarily domiciled in just Johnson County, for the most part. As you fast forward to today, we have offices in several of the major markets throughout the state of Iowa,” Disterhoft explained. “Because of that geographic dispersion, we probably have a different feel to the organization today that we did 11 years ago. And at the same time, maybe 25% of our members are affiliated with the University of Iowa and so much of our growth comes in markets outside of Johnson County.”

According to the credit union’s new member surveys, less than 2% said they joined UICCU because of its name. In addition, a downside to the name was that it gave people the impression they had to be affiliated with the university in some way to join the credit union, Disterhoft pointed out.

The credit union board consulted with trademark attorneys to weigh all of the pros and cons on whether to fight the name change in court. It made more sense to the board, Disterhoft said, to pay for the expense of a name change rather than absorb a lot of legal costs for a long court battle that the credit union could lose.

What’s more, the Board of Regents made it clear they were not going to allow any organization, credit union, bank or otherwise to use a logo that in any way infringed upon the University of Iowa or a regent-funded university, Disterhoft said.

UICCU and UNI CU have asked their members to submit suggestions for new names.

Disterhoft believes the name change will not slow the credit union’s growth trends.

“I think our growth, hopefully, is a reflection of the value that we provide consumers, and that value is a combination of price and service,” he said. “That isn’t going to change regardless of what our name is or is not. I think our future is every bit as bright as it was before, and in fact is in some regard, maybe even brighter. Because so much of our growth comes in markets outside of Johnson County today, it would be nice to have a name that wasn’t quite so geographic specific for those markets and those consumers in those markets.”