Budget Provision Threatens
Credit Union Members’ Equity
MADISON, Wis. (May 24, 2011) – Responding to banking interests, the Joint Finance Committee advanced a non-fiscal amendment to the state budget on May 12 that weakens the process for converting a non-profit credit union to a for-profit bank to the detriment of credit union members. Potentially at stake is the equity members have built by choosing to do business with a credit union—equity that belongs to the members.
“This is an unfortunate example of moneyed interests using their influence to weaken state laws that have, until now, put the interests of credit union members first. Evaluating the terms of a proposed credit union conversion must be based on honesty and transparency. Shorting the process by disposing of inconvenient provisions in state law to make it easier to convert a credit union isn’t good for its members,” said Bill Oemichen, President & CEO of Cooperative Network.
According to Oemichen, “credit union members have good reason to be concerned when it’s their equity that is potentially at stake.” Unlike the existing cooperative statute which requires a 2/3rds vote of the membership, the budget proposal only requires only a simple majority to convert a credit union. “We are concerned that the amendment would place the fate of a credit union in the hands a very small number of the members. The amendment only provides lip service to the potential for a conflict of interest between management and the members,” said Oemichen.
Compared with the JFC proposal, laws in other states provide greater protection for credit union members’ equity. For instance, Indiana law prohibits senior management and board members from receiving stock in the converted bank for a period of at least two years.
“It’s too bad that members of the Joint Finance Committee did not talk to credit union representatives before deciding on a conversion process pushed by banking interests and justifies why this provision should be stripped from the budget and given proper consideration so that it truly does protect members’ equity,” said Oemichen. |
