A Stronger, More Effective Single Trade Association: The Time is NOW

Presented by Kirk Kordeleski, CCE; Nader Moghaddam; Teresa Freeborn; Gordon Dames; Mary Cunningham; John Bommarito; Gary Oakland; Richard Harris; and Mark Spenny

Statement of Position

Both the National Association of Federal Credit Unions and the Credit Union National Association care deeply about the principles of the credit union movement. However, the current system of supporting two trade associations no longer works in our movement's best interests. It is our belief that there would be significant benefit to the American credit union movement in bringing NAFCU and CUNA together to explore a meaningful partnership that will provide a complete and comprehensive package of benefits for all credit unions. Our intent is to encourage meaningful and productive dialogue that could bring about a consolidated structure which respects the issues and concerns of all charters, sizes and field of membership types. Let us be clear that whatever the form the new association takes, it must have the ability to make all key political and regulatory decisions on these matters.

Because of the diversity of the credit union movement with large and small credit unions, federal and state charters, occupational and community-based fields of membership, it is easy to categorize credit unions based upon supposed differences and assume that their needs for national trade association representation might be unique. But in reality, a "common bond" of all credit unions is the desire to be positioned to succeed in both member service and financial stability under the credit union charter as their charter of choice.

Any trade association or combination of trade associations that effectively works toward legislative and regulatory solutions for the movement is of great value to all credit unions. Unfortunately, that isn't what is occurring in the credit union movement today.

While our trade associations are deeply committed to the credit union movement, they compete against each other for dollars, for congressional action, and for the regulator's ear. Given the competitive nature of the trades, we do not believe our current trade associations can speak with one voice or act with strength and single-minded purpose. The existence of two trade associations is harming the movement. When it works, they agree, and the two associations have a neutral effect (one would have been as effective as two). When they don't work together, particularly on major bills or regulations, we all lose. There are very rare exceptions to these points. We offer our leadership and support toward identifying the issues and supporting any natural evolution, with the understanding that we represent many who have passively expressed concern about this issue but have not, as of yet, come forward. With the current economic and legislative climate, we believe the time is right to challenge the status quo.

History of the Current Organizational Challenge

As credit unions that have been involved in long-term membership and unequivocal support of the affairs of both CUNA and NAFCU, we believe our history provides us with standing to raise our concerns about the ineffectiveness of the present structure of these two very different trade associations.

Historically, the framework established by CUNA and the state leagues has provided credit unions with a strong representation for each respective state. By working through a system where CUNA serves credit unions through the league structure, a strong grassroots outreach system has been established over the years and has, without question, served the credit union system well. We firmly believe in a two-charter system (federal and state), and we must not lose charter options. Effectively fighting the political and regulatory battles in each state is critical to our movement's success.

However, many decades ago it was felt that the unique interests of federally chartered credit unions were not being adequately served within the structure of CUNA and the leagues. Therefore NAFCU was created and it likewise has played an important role as the trade association for member federal credit unions. Through the years, there have certainly been key instances whereby having two trade associations to represent an industry as small as the American credit union movement has been beneficial when the message has been in concert. There are also instances, including HR 1151 (the Credit Union Membership Act), where the lack of coordination forced credit unions affiliated with both trades to insist that the two organizations come together and coordinate efforts. And in the present environment where we need a coordinated effort to promote passage of CURIA, this is the central point. Two trades do more harm than good.

Why now? Nearly every other aspect of our industry is undergoing significant change as we face the challenges of the 21st century financial marketplace. Yet our two primary trade associations are still operating under an antiquated and obsolete structure. Here are the relevant changes in our movement that suggest a review is in order:

There are fewer credit unions (dropping from 24,000 in the '60s to 8,000 in '08). The speed of consolidation is increasing because of the economic issues facing our industry, and we see this trend evolving as large credit unions are beginning to merge with each other.

Mergers make political and economic sense and are occurring in all phases of our movement.
- Credit unions of all sizes
- Corporate credit unions
- And certainly within banks and their own trade associations

Expense control is of greater concern today than ever before as our margins have decreased and competition has increased. The expense of supporting separate trade associations also continues to increase. We are fighting a common enemy with two armies of lobbyists, lawyers, advocacy, research and economists—does that make sense, financial or otherwise? We believe supporting two organizations that fight the banks on one hand, and each other on the other, makes no sense.

Federal and state-chartered credit unions, most of which are federally insured, all have much more in common than we did in years past. One trade association could and should handle all credit union interests.

Banks continue to outmaneuver credit unions in Congress as well as at the federal regulatory level. With the recent merger of the bank trades, we must recognize the ineffectiveness of having two trade associations.

Observations on the Current Organizational Challenges

CUNA is the largest of the two trade associations and has significant influence on Capitol Hill. NAFCU, as an association focused on issues related to federal credit unions, has assembled a respectable Capitol Hill presence. Because there are a number of credit unions that wish to have direct access to trade association representation for their credit union without requiring state league affiliation, NAFCU and CUNA have differing membership structures. This is one of the key issues that will need to be addressed.

We found it interesting to note that as of June '07 NCUA call report data, there were approximately 5,100 federally chartered credit unions. Just over 800 of those were NAFCU members. Over 4,100 federally chartered credit unions were members of CUNA and their state leagues. Approximately 600 of the 800 NAFCU members were also members of CUNA and their state league. Approximately 200 were exclusively NAFCU members.

Neither trade association presently possesses the full package of services necessary to meet the needs of the entire range of credit unions, nor does a level of cooperation exist between the two associations. Therefore, our belief is that the long-term survival and success of the credit union charter demands that there be a single trade association for the entire credit union movement, one that combines the best practices of CUNA and NAFCU.

While our movement continues down the inevitable path of consolidation in a marketplace where credit unions have failed to grow significantly over the past decade, the focus of credit unions must be matched by the focus of our trade associations. To thrive, we must stand united on such crucial issues as building market share, opposing the banking industry's attempts to influence Congress, and the struggle to maintain the viability of the credit union charter against recent challenges on both the legislative and regulatory fronts.

However, the most important aspect of effective advocacy is speaking with one voice. Having two voices, where there are even small differences in message, can do harm in an environment where legislators are looking for reasons not to take action (to avoid offending another important constituent), which we believe happens and is happening today.

Therefore, the strengths of both trade associations should be recognized, valued and brought into a consolidated structure that will position the credit union industry to speak with one voice on Capitol Hill, in the halls of NCUA and at other state and national forums. The time has come to end the intra-industry politics that all too often have resulted from a lack of cooperation between CUNA and NAFCU. The lack of a unified voice has diffused the industry's message, confused our friends and adversaries alike in Congress, and weakened the voice of our small system in comparison to our bank competitors.

As much as some would like to believe that Congress, Treasury, state legislative bodies, and regulators understand the unique roles, backgrounds and membership structures of NAFCU and CUNA, the fact is that most members of Congress, their staffs, Treasury officials, and even some regulators do not have a clear understanding of the differences in the two associations, the reasons the two associations exist or why the two associations would not have a common voice.

Having to interpret and sort out the uncoordinated message from the credit union industry is a challenge for decision makers and hinders the effectiveness of the industry message in influencing legislation and regulation. Again, any small difference in message provides an excuse not to act and, with a competitive environment, there are always differences.

Recommended Areas of Dialogue

The combination of CUNA and NAFCU would strengthen the effectiveness of the credit union voice. If such a partnership were handled appropriately and addressed the interests that initially created two separate trade associations, we believe the entire movement would embrace and support the combined entity.

Any such combination would require the recognition of the crucial role of having a strong credit union presence in every state through a state or regional credit union league or association. Likewise, the desire of some credit unions to have direct access to a combined organization without the necessity of joining a local or state association would have to be recognized. This is particularly important to those credit unions operating branches in multiple states. The membership criteria, along with the necessity to protect a strong state associational voice and presence, could be accommodated through the dues structure of both the state associations and any national association.

We suggest that representatives be named to a small committee that should be convened to discuss the combining of the two trade organizations. We ask that each trade association step forward and, in writing, agree in good faith to take the first step by endorsing this concept: We would be glad to support the effort in whatever manner the boards of these organizations see fit.

Conclusion

As credit unions committed to the credit union charter and with a sincere desire to protect the viability of the charter for the next generation of credit unions, their leaders and their members, the authors of this position paper believe that our recommendations are far from radical. We also believe that it isn't just a few of us who feel this passionate resolve to fix this issue now, but many, many credit unions support our view. To ignore such an apparent need to examine this issue and determine ways to better cooperate would be foolhardy, in our opinion.

It is our position that these recommendations are the minimum that should be implemented as dialogue continues on other ways to create a more effective voice for credit unions on Capitol Hill, in the legislative halls of our states, in the various regulatory agencies, and throughout the official decision-making processes of our nation.

Anyone who is interested in supporting our proposal can send us an e-mail by clicking on our names, below, or add to the discussion by commenting at the end our post.

Signed this, the 28^th day of July 2008, by the following: