The Latest Cooperative Score:  3 Wins and 107 Losses

The credit union system continues its losing ways.   As of September 2023  there had been a total of three new charters and 107 failures that is, charters given up by boards.

The trend is the same pattern as 2022’s full results.  Last year there were four new charters and 146 cancellations.

While some characterize the closings as mergers (rarely liquidations) they are operating failures of organizations that have existed for generations.

When a previously independently led, local credit union becomes a branch or, in some cases completely closes its physical presence, and transfers members accounts to a new entity with whom members have no relationship, this is a business failure.

The dollar value of a credit union charter is $500,000 to $1 million or more.  That is the order of magnitude NCUA requires of organizers of new credit unions to raise.   Instead of repurposing long standing charters, most of whom from NCUA’s own characterization are financially solvent, this value and legacy is lost.

Is Anyone Accountable?

Why is this failing trend continuing?    Three years ago NCUA announced a new chartering approach consisting of three phases:  proof of concept, charter application, and final approval.  There is no evidence this has made the chartering steps any easier.

In February 2023 , Vice Chair Hauptmann in a speech to the GAC announced the implementation of a new “provisional charter,” an approval that would facilitate organizer’s raising NCUA’s required capital.  Eight months later, it is just an idea.

NCUA’s Prior History of Charter Support

New charter numbers began to show decline from an average of one per week in the 1980’s to only single digits (fewer than ten) for an entire year in 1998, again in 2008 and every year since 2011.   One might surmise that expanded fields of membership met some of the interest in new charters.  But a more likely reason is that there is no constituency promoting and supporting new charters.

In the past NCUA has advocated and promoted  chartering as an integral part of its supervisory responsibility.

In its May 1984 NCUA News, the agency reported on “Student CU Conference a Success,” a meeting of 70 students from 15 colleges with student credit unions or in the process of organization.

In an October 1984 article the News reported that “McDonalds has something new, and not fast food.  It is a credit union.  A New York City based franchise recently became the first in New York state to sponsor a credit union for its employees.

These examples were part of NCUA’s efforts to increase credit union membership.   In its December 15, 1982 Letter to Credit Unions these were outlined as follows:

In an effort to preserve and expand credit union membership, the Board has delegated to the Regional Directors the authority to approve and disapprove most new charters . . .

A major credit union expansion effort called CUR-84 was launched late in 1982.  It is a two-year national program involving the cooperative efforts of NCUA, state regulators, national trade associations, state leagues and others interested in strengthening the credit union system. . .  CUE has as its minimum goal 50 million credit union members by 1984, the 50th anniversary of the Federal Credit Union Act. This will be accomplished by chartering new credit unions where feasible. . .”  (page 5)

These efforts are profiled in the full 1982 NCUA Annual Report (pages 10-11).   It also highlighted the Regional Directors’ role.   “Region I grabbed the chartering and expansion ball and ran with it.  Thirty nine new Federal credit union charters were approved by the region during the year, 34 percent of all Federal credit union charters granted in 1982. 

This was followed by a list of significant new charters including New York University Employees FCU and Fidelity Employees FCU.  (page 15)

The NCUA’s 1983 Annual Report singled out new student charters as well as ones for employees of Dow Jones & Company and Channel, Inc the cosmetic company.  ((page 8).

Here are the total new charters granted for the years 1981 through 1985:   119, 114, 107, 135, and 55.

NCUA set the tone, promised support and organizers stepped forth.   When the board meetings were held on the road, it was a common practice to present a new charter in the region where the event took place as part of the agenda.

That regulatory inspired, system-wide effort is missing today.  The result is an industry with slowing growth more and more dependent on mergers, bank acquisitions and wholesale financial markets for expansion.  Without new entrants, any industry becomes mature, lacking entrepreneurial drive and increasingly dependent on external versus internal organic growth options.

Are we the Future?

In the December 1984 largest ever credit union conference of all regulators and credit unions in Las Vegas, Chairman Ed Callahan gave the closing charge.  He said:

We are the future.  But If credit unions are lumped together with banks and S&L’s, that will be a challenge.  The future depends on how you look at yourselves. Credit unions are different, and you must go public with that attitude. 

You must hammer away at the differences (with banks) with deeds as well as words.   For 75 years credit unions have been doing one thing.   To have an identity crisis now makes no sense at all.  Seventy-five years of success should tell you what the future is-it’s been people in the beginning, it’s people now and it will be people in the future.”

What does the first two decades of charter decline in this century portend for the future?  Where are the innovators who will promote and expand this unique system?

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