The clock is ticking for two Iowa credit unions.
Because of a rider tacked onto an unrelated budget bill late in the Iowa state legislature’s recent session, University of Iowa Community Credit Union and Northern Iowa University CU must change their names by April 2019. But what are the implications nationwide? Will other CUs be forced to change their names?
Iowa has been a hotbed of banker attacks on credit unions in the last year, including an attempt to tax the state’s CUs and multiple attempts to make one credit union change its name. The latter finally stuck, thanks to the rider that prohibits any Iowa credit union from using the names of state universities in their name.
As Jeff Disterhoft, president and CEO of $4.7 billion-asset University of Iowa Community CU, has pointed out in previous interviews with Credit Union Journal, the issue of the credit union’s name seemingly was settled four years ago, when the University of Iowa contacted the credit union and found no legal manner to make the CU change its name – in part because the school itself is not using its legal name, the State University of Iowa.
For its part, $22 million-asset University of Northern Iowa Credit Union’s charter name is UNI Credit Union, so it does not expressly use the university’s actual name.
And while these are just two CUs out of nearly 400 operating in Iowa, at least one analyst says there could be similar battles ahead.
Geoff Bacino, a former NCUA board member and a partner in the Alexandria, Va.-based consultancy Bacino & Associates, warned credit unions to heed what happened in the Hawkeye State, lest it happen again in their own backyard.
“While some might see this as petty, it does represent the thin entering wedge of allowing bankers to dictate credit union policy,” Bacino assessed. “It was disconcerting to read that two members of the Board of Regents (McKibben and Dunkel) also happened to be on the boards of local banks and that this fact was not disclosed to the public. Any public policy that is conducted without the full disinfectant of sunlight carries the stigma of being illegitimate...and this is no different. There also were unsubstantiated allegations that there were financial issues at these credit unions. From my reading of their financials, these insinuations are false. If other states plan on following the Iowa blueprint, credit unions must oppose these and will need to get all the facts out in the open.”
Carrie Hunt, executive vice president and general counsel for the National Association of Federally-Insured Credit Unions, told Credit Union Journal, “What happened in Iowa is yet another example of bankers attacking credit unions without getting to the heart of the issue – which is nothing new.”
“Credit unions will continue to fight this,” Hunt said.
John McKechnie, a credit union consultant and partner at Total Spectrum, and a former staffer at both NCUA and CUNA, expressed disbelief at the new law.
“Let me get this straight: the Iowa legislature thinks it's improper for a state university's name to appear in a credit union name...but Wells Fargo having an on-campus presence with schools there is OK with them? This is really mind-boggling. You have to wonder if the lawmakers in Iowa who made this decision read the newspapers.”
Murray Williams, COO of the Iowa Credit Union League, said the league believes all Iowans should have access to credit unions. “As not-for-profit financial cooperatives, credit unions provide significant value to members and offer consumers a needed choice in Iowa’s financial marketplace. Regardless of name, Iowa credit unions will continue to focus on providing members with the most affordable financial services in our communities.”
About more than just names
The major issue, said NAFCU’s Hunt, isn’t credit union names or how CUs market themselves. Credit unions are constantly evolving, she said, noting many have changed their names to reflect new directions, such as a modified or expanded field of membership.
“In Iowa there is the specific issue of bankers attacking what they say is ‘unfair competition.’ This is very difficult to prove, but bankers got lawmakers in Iowa to do it. There is a parallel to Wisconsin with the fight over using ‘bank’ or ‘banking.’ NCUA has the ability to pre-empt, as it did in Wisconsin with a legal opinion letter.”
Hunt said she expects more attacks from banks in the future due to increased competition. “The banks see it as fighting for customers, but the reality is big banks are more of a threat to community banks than are credit unions.”
Ryan Donovan, chief advocacy officer for the Credit Union National Association, insisted the name of a credit union “ought to be the credit union members’ decision.”
“Limiting the powers of credit unions adversely impacts the member-owners who join because the institution is reflective of the community it supports,” Donovan said.
In Iowa, acceptance, if not resignation
After two lengthy interviews for previous Credit Union Journal stories on the topic of University of Iowa Community CU’s name, CEO Jeff Disterhoft declined to comment for this article, instead referring readers to informational pages on the CU’s website.
Leitha Aten, CEO of UNI CU, said the management team is in the process of asking members for options.
“Of course we will have to do due diligence,” Aten told CU Journal. “We work with a marketing firm in Des Moines and they will help us. Our board of directors will make the final decision. There will be some thought that goes into it, and the Iowa Credit Union Division will have to approve.
“We don’t always like things that happen, but we will stay within what the law requires us to do,” Aten added. “I have been in touch with University of Iowa Community Credit Union and they have been very supportive.”
Dangers of public naming contests
According to Mia Perez, chief administrative officer for $248 million Louisiana FCU, and chair of the CUNA Marketing and Business Development Council, name changes and brand overhauls typically are a result of “much strategic dialogue” around the executive table.
“Naturally, an expedited timeline that fast-tracks a name change presents a number of challenges,” Perez said of what the Iowa credit unions are facing.
An organization with multiple brand assets will be faced with an “exorbitant investment” in modifying those assets in such a short time frame, Perez explained. “Not to mention the resources needed to execute the science behind strategizing an equitable name.”
In addition, Perez said executing a name change does not end with replacing the organization’s standard brand assets such as signage, retail design elements and advertisements. She noted every vendor, service provider and partner will need to modify systems, forms and member documents, which will present many more challenges.
“Lastly, with such a shortened timeline, an organization likely will feel the financial impact of having to expedite such a costly undertaking,” Perez said.
Regarding a credit union’s desire to employ members in the naming process, Perez said while it might seem like a good idea to capitalize on today’s social media influence, she warned CUs need to keep in mind the pitfalls involved in assigning the naming process to consumers.
“While this strategy might invoke a sense of community, the executive marketing team should consider the long-term impact of relinquishing this process.”
Perez pointed to the example of the New Orleans Zephyrs, a minor league baseball team that was renamed “Baby Cakes” after an unpopular “Name the Team” contest. The term “Baby Cakes” is a reference to the miniature baby found in king cake during Carnival season in her home state of Louisiana.
“Baby Cakes was selected from a group of seven finalists after the team received more than 3,000 submissions by fans to replace the Zephyrs nickname, which carried over with the franchise when the team relocated from Denver,” she noted.
The seven finalist names included “Red-Headed Step Team,” “Alcoballics” (presumably a combination of alcohol in homage to New Orleans’ reputation as a party city merged with a baseball term), and even a name that included profanity, Perez reported. The social media backlash has been relentless, she said, noting that the all-male team’s name represents neither the city nor its culture.
“While the social buzz may be beneficial in creating awareness for the credit union, marketing executives need to consider the long-term impact a new name will have on the credit union legacy and plan, or relinquish, with careful consideration,” she added.
Earlier this year, Louisiana-based Red River Mill Employees CU launched a contest to let the public help rename the institution and while the new name hasn’t been announced yet, there may be a lesson there for CUs in Iowa considering that strategy: Many of the suggested new names included the word “bank.”