Political Impact an Understated After-Effect of Bank Transfer Day

Near the end of 2011, Kristen Christian, an art dealer from California, created a Facebook page urging Americans to close their bank accounts and join a credit union. What started as a simple solution to a small complaint—the reaction of several individuals to their bank’s rising fees—sparked a mass consumer movement to credit unions.

One year later, credit unions are still working to understand all the implications of Bank Transfer Day. Approximately 2.2 million consumers joined a credit union in the United States during the 12 months that ended last June—the largest annual increase in credit union memberships in more than a decade. Assets at the nation’s credit unions have risen to $1.2 trillion.

Raw data clearly shows that Bank Transfer Day was a significant event in credit union history. But what have been its more subtle effects? Given the corresponding media attention and surge of public awareness that accompanied the consumer movement, how has Bank Transfer Day affected credit unions from a social and political standpoint?

It is difficult to tie a string of cause and effect from Bank Transfer Day to any single legislative victory or changed opinion, but in the Northwest, the past year has seen significant legislative and political progress for credit unions—and evidence that backlash to bank policies includes government bodies and policymakers as well as consumers.

In the days leading up to Bank Transfer Day last year, Rep. Jefferson Smith (D-Ore.) made the one of the first significant political move affecting credit unions last fall when he published an article in the Huffington Post called on all cities—especially the city of Portland, where he was running for mayor—to “move a meaningful portion of the City’s holdings from banks to local credit unions in order to kick-start a credit union depository usable by any local government in Oregon.”

Months later, in May, Portland passed a Responsible Banking Resolution authored by Mayor Sam Adams. Seven community banks and three credit unions are now participating, including Advantis Credit Union, OnPoint Community Credit Union and Unitus Community Credit Union, with all 10 currently holdling $250,000 in public funds and with pathways in place for even deeper, broader relationships between credit unions and the city.

The Seattle City Council, meanwhile, heeded the call from Smith and voted unanimously in early November to review the city’s banking practices. The resolution was sponsored by Councilmen Nick Licata and Mike O’Brien, both of whom supported the Bank Transfer Day movement personally as well as on a public policy level.

Licata left Bank of America to become a member of Seattle Metropolitan Credit Union during the week leading up to Bank Transfer Day, and O’Brien joined Verity Credit Union on Nov. 5.

The bill allowing public entities to deposit funds in any credit union based in Washington had stalled earlier in 2011, but seemed slated for fast track in 2012. On March 7, Gov. Christine Gregoire signed Senate Bill 5913, allowing public entities for the first time to deposit funds in any credit union in Washington up to the federal insurance maximum of $250,000.

State law previously allowed only state-chartered credit unions to be depositaries up to a maximum of $100,000. The new law, which went into effect June 6, 2012, allows federally-chartered credit unions to act as depositaries and raises the maximum to $250,000 for all credit unions.

And Just last month, five Oregon credit unions submitted the required notice and paperwork with the Oregon State Treasury to allow them to accept public fund deposits above the National Credit Union Administration’s (NCUA’s) $250,000 limit. Credit unions did not previously have an option to hold public funds beyond $250,000, but legislation passed in 2010 and clarified in 2011 called on the State Treasury to establish a collateralization program to protect public deposits at credit unions.

According to Mark Minickiello, vice president of legislative affairs for the Northwest Credit Union Association (NWCUA), the effect of Bank Transfer Day on government extended well beyond municipalities as well.

“It created a heightened awareness of credit unions with legislators,” Minickiello said. “Shortly after Bank Transfer Day, we began receiving inquiries from legislators and their staff about ways they could help credit unions during the upcoming legislative session.  It was a great opportunity for us to talk about our pending legislation, and I have no doubt that it helped us get our public funds bill passed out of both the House and Senate with healthy majorities.”

Bank Transfer Day may have been a one-day event—a once-in-a-lifetime consumer movement from for-profit banks to not-for-profit financial cooperatives—but credit unions continue to benefit from increased public awareness and increased visibility with legislators and policymakers.

As a result, the growth from Bank Transfer Day has been more than just a series of numbers. The landscape for credit unions is more favorable than it was a year earlier, showing that credit unions have been able to use that growth in membership to establish sustainable, long-term paths to continued growth and prosperity.

 

Questions or Concerns? Contact Matt Halvorson, Anthem Editor: mhalvorson@nwcua.org.

Posted in Compliance, Compliance News.