LFCU Executives Attempt Predatory Conversion; Public Officials and Credit Union Members Call for Transparency

WASHINGTON, Aug. 24 (allCUnews) -- Congresswoman Eleanor Holmes Norton (D-DC) today joined Councilmember Jim Graham and member owners of the Lafayette Federal Credit Union (LFCU) to demand more time to review the executive team's proposal to convert the non-profit credit union to a for- profit bank. The transaction could impact 16,000 members of the credit union - - made up mostly of federal workers from the U.S. Agency for International Development (USAID), the Peace Corps, and the Small Business Administration (SBA).

"Member owners in a cooperative such as a credit union should have an ample opportunity to receive full disclosure of all the information and weigh the pros and cons before a major change occurs in a financial institution that they own," said Congresswoman Norton. "The Lafayette board has made the mistake of underestimating the financial intelligence of the federal employees who are member owners of the Lafayette Federal Credit Union."

In addition to Representative Norton, 122 members have co-sponsored federal legislation in support of due process and transparency for credit union members confronted with predatory conversions.

While the LFCU executive board has proposed holding a town hall meeting after the ballot passes, the members of LFCU may not be provided proper notice from the board of directors before a vote on fundamental change in ownership status occurs. "Denying members advance notice violates their right to due process and keeps members from getting a clear picture of the issues that impact their financial decisions," said Michael Beall, CEO, Maryland and DC Credit Union Association.

If the LFCU executives are successful, they stand to gain significant financial enrichment. It is estimated that previous conversions have netted volunteer directors and officials an average of $742,000, and management an average of $1.2 million and more than $2 million in additional compensation. While directors and other executives gain from conversions, research shows that member owners do not benefit and, in fact, often shoulder higher fees.

"A conversion leads to losing tax-exempt status, and that translates into a business cost that has to be passed along to customers in the form of higher fees and charges or lower service," said Scott Stiens, a USAID employee and member of LFCU.

Credit unions create much-needed competition in the marketplace by providing an alternative to banks. The not-for-profit status of credit unions allows them to offer lower rates to consumers regardless of economic standing.

Credit unions have been serving communities for generations, helping working families borrow, invest and save for the future.

About Members Against Predatory Conversions

Members Against Predatory Conversions (MAPC) is a coalition of credit union members and community leaders who are committed to preserving the non- profit status of their member-owned credit unions. MAPC members have come together with credit union members across Maryland and the District to protect credit union members from unjust enrichment of corporate officers at the expense of consumers.

CONTACT
Michelle Balch
Maryland and DC Credit Union Association
202-380-7114

Source: Maryland and DC Credit Union Association