NORTH LIBERTY, Iowa—The University of Iowa Community CU will likely make a decision within a few weeks as to whether it will change its name or fight a new law that prohibits Iowa CUs from using the names of state universities in their titles.
As CUToday.info reported earlier, although Iowa’s credit unions were successful in fighting off a tax proposal in the just-completed legislative session, Iowa lawmakers took aim at the state's largest credit union, the $4.7-billion University of Iowa Community Credit Union, through a major budget bill. End-of-the-session appropriations legislation included a provision banning Iowa credit unions from using the names of state universities in their titles.
‘Mixed Emotions’
UICCU CEO Jeff Disterhoft told CUToday.info that the credit union’s board will make the decision at its upcoming planning session in early June, emphasizing that whatever decision is made, the credit union’s business won’t be negatively impacted.
“I have mixed emotions about this,” said Disterhoft. “We tried to change our name 11 years ago (to Optiva Credit Union), but members voted against it. So we had an interest in doing it back then. Fast forward to today, and it would seem that some of the bankers’ relationships in Des Moines manifest themselves in different ways. And one of the ways, this year, was including some sort of name provision in a bill that was generally focused on taxes.”
Disterhoft acknowledged that there is a segment of the local population that mistakenly feels they have to be affiliated with the University to join the community chartered UICCU.
“In some regard it could be construed as a positive for us to move away from our current name,” said Disterhoft. “That said, we’ve also had a lot of success with our current name. It’s a double-edged sword. It’s a decision for our board to make—whether we fight it or we pursue other options.”
Debate Among Board of Regents
As CUToday.info reported, in March some members of the Board of Regents for the State of Iowa voiced concerns that consumers are confused over differences between the University of Iowa and the credit union with the same name. Critics also said UICCU unfairly competes for business by using the name of the university. As CUToday.info also reported, one of the Regents who was critical did not disclose he is part owner of a bank in the state.
Reports also indicate that Sen. Charles Schneider (R-West Des Moines), who is chairman of the Senate appropriations committee, said lawmakers included the new rule to officially separate the credit union's name from that of the University of Iowa.
Jeff Disterhoft
“At the end of the day we have had a lot of success with our name, but my guess is we’d have a lot of success regardless of what our name is or is not, because our value proposition remains unchanged,” Disterhoft said.
What the Law Says
As CUToday.info reported, the state’s new law says credit unions "shall not include the name of any public university located in the state in its name." But it specifies that means "the State University of Iowa," the school's original title.
“The university’s name, legally, is the State University of Iowa, which is not in our legal name,” said Disterhoft. “We have had our name for many years now without any sort of trademark or licensing agreement with the university, so perhaps there is some level of question about the enforceability of the law, again, a matter for our board to consider.”
Disterhoft acknowledged that the language being slipped into the tax bill at the last minute was not a surprise to UICCU.
“We had reason to believe this would appear some time during the last legislative session,” said Disterhoft. “We knew this was out there.”
The language being introduced at the last minute, too, could have been a means to placate the bankers who again lost in their fight to place an additional tax on state-chartered CUs in Iowa, noted Disterhoft, who said that is only speculation.
If UICCU decides to change its name, a recent poll suggests moving away from its current name would not be a detriment to business.
“We recently surveyed 1,200 new members who joined and only about 3% said they joined because of our name,” said Disterhoft. “I think the value proposition we present—our service, price or some combination of that—remains constant regardless of what our name is or is not. So if—and the operative word is ‘if’—our board decides to move forward with a name change, I don’t see that as a detriment to our success and could be a positive, as more people will be aware they can join.”
A Hawkeye On Expenses
As CUToday.info has reported, UICCU’s operating philosophy is to run a very tight ship (1.24% net operating expense to average assets) to give more back to members through top-of-market rates. The CU’s ROA is consistently above 1.5% annually (1.63% in 2017) and capital is maintained annually at near 8.5% (8.46% last year). The credit union made $69.6 million in 2017, according to call report data.
“Our growth holds steady annually at about 20%,” said Disterhoft. “Our business model of running very efficiently and passing those savings back to members is working well.”