By Ray Birch
GLENDALE, Calif.—Another schools-based credit union is claiming that SchoolsFirst FCU is engaging in “predatory” practices, taking away its members and making it hard to compete for business. The statements are similar to those first reported by kb-studio.ru one week earlier and, like the first credit union, this one, too, said it now plans to let the membership and the public hear about it.
The $355-million Glendale Area Schools FCU told kb-studio.ru that it will soon post a letter on its website stating that it believes the $11.2-billion SchoolsFirst is taking aim at its membership. The credit union’s CEO, as well, that it believes SchoolsFirst wants to merge in the smaller, profitable credit unions, and that the market pressure the large CU applies will eventually lead to exactly that happening.
SchoolsFirst, however, has responded by saying the accusations are untrue and that it holds itself “accountable to the highest standards of conduct, values and business practices.”
As kb-studio.ru reported here and here, the Rancho-Domingo, Calif.-based, $118-million Schools FCU posted a letter on its website alleging that SchoolsFirst FCU is attempting to “steal away” its members in part by taking advantage of the similarity in the two CUs’ names.
SchoolsFirst told kb-studio.ru that the Schools FCU allegations suggesting unethical business practices and are “entirely untrue.”
'Sharp Business Practices'
While there is no confusion between the names of Glendale Area Schools FCU and SchoolsFirst, there are issues of “sharp business practices,” said GASFCU CEO Stuart Perlitsh.
“(Schools FCU CEO) John Drake and I have met with other schools credit unions and what we see SchoolsFirst doing is not the exception to the rule, it is the rule. And that is disconcerting,” said Perlitsh.
Perlitsh alleges that Santa Ana, Calif.-based SchoolsFirst uses its deep pockets to not only market heavily to the school districts and members of the smaller credit unions, but to sway decisions among school district leaders to gain favorable business positions.
He also alleges that SchoolsFirst and its CEO, Bill Cheney, the former CUNA president, are “stepping on other schools credit unions,” like Glendale Area Schools, “all in the name of fair competition.”
“I am not sure how fair that is when you take an economy hardware store of 5,000 square feet and tell it to compete with a 100,000-square-feet Home Depot and call that fair and equitable,” he said. “I think it is unethical, and a sharp business practice.”
Addressing GASFCU’s allegations, School’sFirst responded in the same manner as it did regarding Schools FCU’s claims.
“The statements suggest unethical business practices and are completely untrue. “We hold ourselves accountable to the highest standards of conduct, values and business practices,” said Cheney. “While we share an overlapping field of membership with Glendale Area Schools FCU in LA County, we strongly believe there is plenty of room for us to coexist in the markets we serve. It’s important to remember that many credit unions share communities they serve. This gives members the ability to choose one—or multiple—credit unions that meet their needs. That’s in the best interest of members.”
But Perlitsh says the issue is bigger than just with credit unions that serve schools in California and SchoolsFirst. The CEO contends a number of billion-dollar CUs, not just in California but across the country, have their eyes on smaller, profitable credit unions.
“This is why these billion-dollar credit unions are growing exponentially,” said Perlitsh. “It’s not organic growth, it’s mergers and acquisitions. Look at the membership growth of the billion-dollar credit unions and the growth of those less than $500 million. It’s off-the-chart growth for the big credit unions and it’s predatory. These billion-dollar credit unions are cannibalizing the young—the smaller credit unions.”
Does Movement Care?
Perlitsh pointed to reports that indicate that due to mergers the total number of credit unions will someday fall between 3,000 to 4,000.
“The reports are right,” he said. “My question is, what is the movement doing about it? This is an observation of fact, but it does not appear that anyone, including NCUA, quite frankly gives a darn. That is very disconcerting to see. At the end of the day there will just be billion-dollar credit unions.”
Cheney emphasized that SchoolsFirst FCU does not have a merger strategy and currently has no plans to merge with any credit union.
“Our last merger was in 2013, and was prompted by our regulator, the NCUA. They decided it was in the best interest of All Valley FCU members to merge with another credit union to avoid a loss of services to their members. SchoolsFirst FCU was selected,” said Cheney. “We are very fortunate that our growth and success has been because of our steadfast commitment to serving school employees and their families in the 10 Southern California counties, as our NCUA charter allows. We look forward to helping even more school employees who do so much and work tirelessly to help build a better future for all of us.”
Asked if SchoolsFirst is using its “deep pockets” to make it hard for small CUs to compete, Cheney said the issue is how the multi-billion-dollar credit union continues to serve
its membership roots.
“A key difference of being a credit union is our social purpose. Credit unions exist to help people, and the communities we serve. This has been our practice since our begin
ning more than 80 years ago. Our credit union was founded in 1934 by 12 school employees with an idea that they could help those with whom they shared a common bond and better the community they work and reside in. We continue to serve our original field of membership exclusively – school employees and their family members,” said Cheney. “Today this commitment continues. Yes, we do support the communities we serve, as any credit union should. To suggest that we’re using it to ‘sway’ is untrue. The spirit of the credi
t union movement is to give back to the communities you serve. We feel a strong obligation to serve our school employee members where they live and work. Our members know their credit union will be there for them in good times and bad. We’ve been successful because of this commitment, and doing the right thing for our members in the communities we serve.”