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JoAnn Johnson, Chair
Board of Directors
National Credit Union Administration
1775 Duke Street
Alexandria, VA 22314-3428
Dear Chairman Johnson:
I am writing to express my concern with the increasing number of
credit union conversions to mutual savings banks and to support recent
reforms NCUA adopted to protect credit union members’ interests in the
event of a conversion. The Woodstock Institute was founded as a
nonprofit organization in 1973 to research, develop and promote ways to
bring economic resources to lower-income and minority families and
communities. Woodstock works locally, nationally and internationally to
further this goal. Woodstock’s partners include community
organizations, local and national economic justice coalitions,
academics, policy makers, financial institutions, and foundations.
Woodstock fully supports consumer choice. But in our opinion credit
union conversions to mutual savings banks may be to the detriment of
consumers and communities. Our years of research on the comparative
suitability of different financial products for lower-income families
show that credit unions have significant advantages over other
regulated financial institutions. (I should add that we are still very
concerned that credit unions do not exploit these advantages to maxmize
their low-income membership and that the NCUA and state credit union
regulators do not adequately monitor credit unions’ service of
lower-income households.) Credit unions engage in more financial
literary education and offer more affordble products and loans than
banks. As a result of a conversion, members could receive lower savings
rates and higher loan rates. While a recent Woodstock Institute study
found that credit cards issued by credit unions have similar purchase
interest rates as those offered by banks, it found that credit union
issuers offer important other advantages. Credit union credit cards
generally have fewer fees, lower fees, lower default rates, and
conditions that are much clearer.
Conversions may have other implications. Credit union voting rights
are based on one vote, one member. Large account holders of mutual
savings banks have more votes and, thus, greater control. There is also
concern that once the conversion occurs, that stock offerings will
follow, further diluting membership control.
In the event that a conversion is being considered, the members of
credit unions should be fully informed on how it will impact their
voting rights and access to affordable services and loan products.
Further, credit union board of directors and senior management should
provide objective information on the advantages and disadvantages of a
conversion as well as any financial returns to them. The NCUA should
ensure that the conversion offers tangible benefits for the members of
the credit union and that any retained earnings are returned to the
members. In addition, a suitable public comment period as well as
shareholder meetings should be instituted prior to the distribution of
ballots.
I appreciate this opportunity to provide input on credit union
conversion regulatory procedures. If you have any questions or
comments, please feel free to contact me.
Sincerely,
Marva E. Williams
Senior Vice President |
