CUNA Comment Letter

Proposal to Change Voting Requirements for Federally Chartered Mutual Savings Associations

June 15, 1998

Dissemination Branch
Records Management and
Information Policy
Office of Thrift Supervision
1700 G Street, NW
Washington, DC 20552

Attention: Docket No. 98-34

To Whom It May Concern:

The Credit Union National Association appreciates this opportunity to comment on the proposed changes to 12 CFR 544.2(b)(4) to allow federally chartered mutual savings associations to set the number of votes per member, within the range of 1 to 1,000. By way of background, CUNA represents the nation's more than 11,200 state and federal credit unions which serve over 72 million members.

According to the "Supplementary Information" included in the Notice of Proposed Rulemaking published in the Federal Register April 14, 1998, OTS issued the proposal in response to the interest various institutions, including credit unions, expressed in becoming federal mutual thrifts and in retaining their current voting requirements after conversion.

The notion of "one member, one vote" is a hallmark of the credit union system. In contrast, a depositor in a federal mutual thrift may be allowed up to 1,000 votes (one vote for every $100 in deposits, with a total per depositor cap of 50 to 1,000 votes, as set by the institution.) The proposal would change the range of maximum votes to one to 1,000, ostensibly allowing institutions to retain a one member, one vote structure. Also under the proposal, an existing federally chartered thrift and those institutions converting to a federally chartered thrift would be able to adopt any cap within the range of one to 1,000 votes per depositor without prior approval from OTS.

While CUNA strongly supports the principle of one member, one vote as applied to credit unions, we cannot support the proposed amendment at this time and urge OTS to refrain from adopting it.

Credit unions were established to serve the financial needs of consumers, many of whom are not able to get such services elsewhere. As stated in the Treasury Department's study, "Credit Unions," issued in December 1997, credit unions have several characteristics that taken together make them unique institutions. The first distinction cited in the study in that each member has

"one vote in selecting board members and making certain other decisions. This voting structure...differs from that of mutual savings associations and mutual savings banks in that a mutual institution...allocates voting rights according to the size of a member's deposit...."

We believe this characteristic is of vital importance to the individuals who comprise a credit union. Under the guise of preserving this significant structural principal, the proposal would actually place it in jeopardy. That is because under the amendment, an institution would not be required to set a cap on total votes at one and therefore, there would be no guarantee to the membership that such a limit would be retained. In fact, under the proposal it appears it would be relatively easy to implement an increase in the vote cap, as prior approval from OTS is not required.

Even if we could support this proposal, which is not the case, we question OTS' timing in issuing the proposed changes. In this temporary period of uncertainty following the Supreme Court's ruling on field of membership, and as we await adoption of HR 1151, the "Credit Union Membership Access Act," some credit unions concerned about their ability to grow may be enticed to consider changing to a federal thrift. We believe OTS should refrain from adopting policies that might encourage precipitous conversions which federal credit unions should not feel compelled to pursue for reasons related to growth after the passage of HR 1151.

There is a concern within the credit union system that the board and management of a few institutions may seek to convert for reasons related solely to their own personal enrichment. We believe that such motivations should not be rewarded. In that connection, we urge OTS to consider the adoption of a policy that will discourage such unjust compensation by requiring a mutual thrift that was formerly a credit union to wait seven years before it may convert to a stock thrift charter. Such a policy would help to ensure a conversion is in the best interests of the institution and its depositors, not just the institution's management.

In closing, thank you again for the opportunity to express our views.


Mary Mitchell Dunn
Associate General Counsel
for Regulatory Advocacy