Velocity Credit Union's Board of Directors has changed its mind regarding the switch from NCUA to ASI deposit insurance. Velocity's president issued a letter to the members yesterday. Here are excerpts of the letter:
We are writing today to let you know that our Board of Directors has decided not to switch to ASI. We have informed both ASI and NCUA of our decision to remain with NCUA.
Unfortunately, on the final day of our member vote, ASI announced an assessment of their credit unions for the exact amount of the NCUA assessment: 0.15% of each credit union’s deposits. (This assessment did not include Velocity.)
Frankly, we were surprised and disturbed by the timing of ASI’s announcement and by their decision to assess the credit unions they serve. Given ASI’s surprise assessment, we have reconsidered our recommendation to convert to the private insurer.
This was a surprise to me since Velocity's board and management were heavily advocating for this switch, and the credit union members voted in favor in late December.
The ASI assessment should not have been a big surprise. When I first reported on Velocity Credit Union's plan to switch in September, I described the financial problems of a major ASI-only credit union in Nevada. Velocity's president claimed that they "conducted vigorous due diligence with ASI" before the decision to switch.
According to this Austin Statesman article "the cost of the voting process, including mailing ballots to members and hiring an independent tabulator, was $187,000." So this was a costly mistake.
Even though money was wasted, I'm sure many Velocity members will be glad their deposits will remain federally insured via the NCUA. It'll make my life easier when I report on Velocity's CD deals. I won't have to worry about warning readers that the credit union is not federally insured. So those who may have avoided Velocity, may now want to reconsider their latest CD special which was recently extended to last through February (see review).
Thanks to the readers who emailed me and commented on this news.
For more information on the private ASI deposit insurance and which credit unions are eligible to switch from NCUA to ASI insurance, refer to my ASI review.