Letter To The Editor: Erosion Of Democracy A Dangerous Reality

Congratulations on the thought-provoking article in the Nov. 6 edition entitled, "Member Rights & Credit Union Democracy." Among the many important issues covered by your reporter and those individuals she interviewed, it was particularly illuminating to read former NCUA Chairman Dennis Dollar's concerns about the standard FCU bylaws such as, "I personally believe the viability of the federal credit union charter would be greatly enhanced by such flexibility being granted in the bylaw area, and I foresee NCUA eventually recognizing that it cannot prescribe strict standardized bylaws to practically every federal credit union and then not becoming a police force to enforce them."

Arguably, the federal credit union charter is the most dangerous federally insured charter that any financial institution can hold. Because of NCUA's anachronistic FCU bylaw, a mere 750 members can disrupt the credit union by calling for removal of the entire board, liquidation of the credit union, or any other statutorily allowed purpose. Under a strict interpretation of the NCUA standard bylaw, the 750-member number applies to 2.7 million-member Navy Federal Credit Union just as it would to a much smaller credit union.

If Navy FCU were a Colorado-chartered credit union, it would require 270,000 members to force the credit union to hold the same meeting for the same purpose for which NCUA says only 750 is needed.

Apparently, the Colorado State Legislature and the Colorado Financial Services Division are doing more to protect the stability of the credit union industry and the share insurance fund than is NCUA.

Until the federal credit union bylaws (and some states' standard bylaws) are modernized to reflect the needs of credit unions in 2006 rather than 1936, the entire industry is at risk. After all, every credit union shares the same last name and the dissident-driven disruptions at Columbia CU, DFCU Financial, and now Lafayette FCU, are undermining credit unions' credibility.

Highly public conflicts and hostilities over governance issues initiated by a handful of dissident credit union members have nothing to do with meeting members' financial needs, and may ultimately dissuade consumers from trusting credit unions with their personal finances. I find it appalling that anyone is defending this type of horrific interference in credit union governance under the pretense that they are promoting democracy.

Marvin C. Umholtz, CEO

Umholtz Strategic Planning & Consulting Services,

Castle Rock, Colo.

Send Letters To The Editor To Lisa Freeman at lfreeman<at>cujournal.com.