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NCBA board member objects to Coastway conversion plan
PROVIDENCE, R.I. (3/27/09)--A letter to the editor of the Providence Journal (March 25) objects to Coastway CU's plans to convert to a mutual savings bank. The letter writer, Erbin Crowell of Glocester, R.I., is a member of the Cranston, R.I.-based credit union and a member of the board of the National Cooperative Business Association. Coastway's members will vote on April 29 on whether to change charters (News Now March 13). "With our financial system in disarray, I was surprised to learn that my credit union, Coastway CU, has proposed converting from a member-owned nonprofit into a bank," Crowell wrote. "After all, credit unions have been a bright spot in these difficult times, providing loans in a responsible manner and avoiding the kinds of risky, greed-driven lending that fed the crisis," he added. He noted "serious questions" about the conversion attempt regarding motivation of the credit union's leadership, whether it would raise rates and fees after losing its credit union tax-exempt status and what will happen to the $25 million owned by members. "These are the sorts of concerns that have led national organizations such as the Consumer Federation of America and the NCBA to oppose proposed credit union conversions such as Coastway's," he added. He doubted that becoming a bank would better serve members. "First, credit unions that have converted to banks now charge higher rates on loans and offer lower-paying deposits," he said, citing BankRateData. Second, members' ownership of the $25 million of member-equity "is at risk" if the credit union becomes a bank, he wrote, adding that Coastway's leadership tries to assure members it has no plans to sell stock while converting, but the credit union's literature "leaves plenty of wiggle room." He noted 75% of credit unions that have converted have eventually sold stock and questioned why the credit union is using Georgeson, Inc., which specializes in "strategic shareholder consulting" if it doesn't intend to become stock-owned. He urged members to reject the conversion in their vote and urged legislators to reform the U.S. conversion law. For his complete letter, use the resource link.
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