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Velocity Credit Union in Texas Begins Voting Process for Switch to Private Insurance

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Velocity Credit Union
In September Velocity Credit Union in Texas first contacted members about its plans to convert its deposit insurance provider from the NCUA to the private American Share Insurance (ASI). They are now in the voting phase. Velocity has posted a "vote brochure" on its website informing members about the plans and asking for a supportive vote. As is stated in the brochure, federal regulations require that all members be given the opportunity to vote on the proposition to convert deposit insurance and that a minimum of 20% of the members must vote.

I described Velocity's plans and reviewed ASI private insurance in this September post. As I mentioned in that post, one reason Velocity management is pushing for this switch is the large premium the NCUA is charging insured credit unions. This is needed to help bail out the corparate credit unions. Based on this I thought we would see other credit unions going down this same road. I've searched, but I have not been able to find any others. If you know of any, please leave a comment. I do know of one other Texas credit union, United Heritage, which attempted to do this same switch in 2007, but it was rejected by the members. One thing to note is that only 9 states have laws which allow private deposit insurance for credit unions (see post for the list).

If your credit union is able to get at least 20% of its members to vote yes for such a switch, you don't have to worry about being stuck in a CD without it being federally insured. Federal regulations require credit unions to allow penalty-free early withdrawals in these cases (see post).

In this Tuesday post I reviewed a Las Vegas news article on ASI. The article brought up several worrisome aspects of ASI. There are some large ASI-only credit unions in Nevada, and many have been hit hard by the state's real estate problems.

Would you join a credit union that only has ASI deposit insurance? The latest results of a poll on this show 89.5% would not (out of 572 votes). Refer to the bottom of my September post to participate in the poll.

Update 12/04/09: The Austin American Statesman reported on this vote. One interesting note mentioned is that only one Texas credit union out of 207 has made this switch. That was MCT Credit Union in Port Neches.
  Tags: Velocity Credit Union

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Comments
Comment #1 by Anonymous posted on
Anonymous
The switch from NCUA to ASI on the part of some credit unions is merely an attempt to take on risk to stay competitive. That's the norm right now. Taking on more risk on the part of savers to attain higher yields.

The pouring of funds into the stock and bond markets is the manifestation of this. If you can't get yields worth a darn in CDs, savings, etc. more people are going with dividend paying stocks and corporate/municipal bonds.

The bubble just keeps on getting bigger. It will just keep going until at least mid-2012, when the Fed might raise rates a little.

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