RANCHO DOMINGUEZ, Calif.—After going public with accusations that SchoolsFirst FCU is attempting to “steal away” its members, Schools FCU says it will not back away from its position. In an interview, the CEO of the much smaller CU further asserts that the larger credit union is attempting to force a merger through its actions.
As CUToday.info was first to report here, the $110-million Schools FCU here is also asserting that the $11.2-billion SchoolsFirst acts like a bank and therefore should be regulated like a bank.
In a letter from its board of directors to its membership posted on the credit union’s website under the headline, “Support Needed!,” Schools FCU is alleging that SchoolsFirst FCU in Santa Ana has been using its “deep pockets” and similar name to “confuse” Schools FCU members and its potential membership base as part of a campaign to bring them over to SchoolsFirst.
SchoolsFirst told CUToday.info that the allegations suggest unethical business practices and are “entirely untrue.”
Schools FCU CEO John Drake told CUToday.info that the credit union will not take down the letter until SchoolsFirst provides some written assurance that the “predatory” practices Schools FCU alleges are occurring will cease.
“We published the letter with the intent to bring awareness to members, because there is confusion between our credit union and SchoolsFirst—just the name itself,” said Drake. “So we have many people thinking they are joining our credit union, but in fact they are joining SchoolsFirst.”
Drake said Schools FCU also wanted to alert members, and the public, about the activities of SchoolsFirst.
Among the allegations the letter makes, available in the CUToday.info Vault here, is that SchoolsFirst is “misrepresenting itself and confusing our members due to the similarity of its name with ours. This similarity has made it easy for them to gain entry to our campuses. Their representatives regularly attend classified, certificated, and other LAUSD (Los Angeles Unified School District) events. They donate generously to these organizations, thus making it very difficult for our credit union to compete and participate.”
SchoolsFirst serves the educational community in 10 California counties. Its CEO is former CUNA CEO Bill Cheney. Schools FCU serves four school districts and numerous colleges in and around the Los Angeles area.
The Schools FCU letter says the alleged actions of SchoolsFirst “jeopardizes the very existence of YOUR credit union.”
“We also wanted to bring awareness that a large credit union based in Orange County is taking these kinds of actions, and that if these activities keep occurring it will dwindle our resources and at some pint we will have to merge because we are putting all of our money into marketing the credit union to compete with SchoolsFirst—money better spent on things like more equipment and IT.”
Mark Rapp. senior vice president of strategic marketing at SchoolsFirst FCU, said the SFCU claims are untrue, and that SchoolsFirst is “extremely disappointed” by the credit union’s “approach.”
“We don’t believe it represents the cooperative spirit of credit unions,” said Rapp. “Our credit unions share a common field of membership. SchoolsFirst FCU has a T.I.P. charter to serve school employees in the 10 counties of Southern California; Schools FCU serves school employees in portions of Los Angeles County. However, we strongly believe there is plenty of room for SchoolsFirst FCU and Schools FCU to coexist in the markets we serve. Credit unions are about choice; members have the right to choose the best financial institution to meet their needs.”
Drake contends that the pressure from SchoolsFirst and other large CUs in California are forcing many small CUs to merge into the huge shops—something Drake contends is what the big credit unions want.
“This type of activity has been going on for so many years—the large credit unions pouncing on small CUs,” said Drake. “We want to get the public involved, because at the end of the day we think these large credit unions, namely SchoolsFirst, should be regulated as a bank. They should not be a credit union because they act like a bank. They look nothing like us. They are attacking us and now, in turn, we are attacking them.”