At more than 4,200 people, it is amazing to be one of the 600 newbies at the largest credit union conference in the world. A Canadian in Washington reporting on the CUNA Government Affairs Conference. You are likely thinking, “This does not compute!” But, before you right my views off, I’ll pitch you on why my cross-border perspective might be worth a read.
While I’m 100% Canadian, U.S. credit unions now represent 80% of my company’s client base and income. Every page of my Canadian Passport is filled with temporary work permits and stamps. I am also a board member of a small credit union in British Columbia. Wrap all of this together and you end up with someone who spends a lot of time thinking about credit unions and their challenges on both sides of the 49th parallel. You also get someone who now struggles saying “process” and doesn’t know whether there should be a “u” in “colour.” I mean “color.” I imagine these are same crosses that Justin Beiber and Jim Carrie have to bare.
For my first post about the GAC, I’ll give you a quick contrast between the U.S. and Canadian credit union systems to illustrate the conflicting voices in my head!
U.S. credit unions have a federal regulator—the National Credit Union Administration (NCUA), a department of the federal government, while Canadian credit unions have separate provincial regulators that are departments of the provincial governments. This means that there are separate share insurance funds in each province.
And speaking of share insurance, all U.S. credit union members are protected up to $250,000, while each Canadian province has a different threshold. In B.C. and Alberta, the guarantee is 100%, while others are as low as $100,000.
The major trade association in the U.S. is CUNA, which has a presence in Washington, DC, while the major trade association in Canada is Credit Union Central of Canada, which has a presence in Ottawa, our nation's capital.
U.S. credit unions have federal and state charter options, while credit unions in Canada are bound by provincial borders. However, we will likely see a new federal Canadian credit union charter approved this year. A few of the largest credit unions in Canada might convert to this, but they would then be regulated by the Office of the Superintendent of Financial Institutions of Canada (OSFI), the equivalent of the Federal Deposit Insurance Corporation (FDIC) in the U.S.
Many U.S. credit unions serve particular SEGs (Select Employer Groups), while more than 99% of Canadian credit unions are not bound by a specific field of membership. Any resident of a province can join any credit union in that province (except for a very small handful of employer-based credit unions).
In the U.S., there are credit union leagues that are charged with advocacy, training and marketing at the state level. There are also separate corporate credit unions that provide back-office services to the natural-person credit unions. In Canada these functions are combined into central credit unions that provide advocacy, training, marketing, check (err, I mean cheque) clearing, payments, liquidity and other back-office services.
In the U.S., numerous corporate credit unions ran into trouble and some were conserved during the financial collapse of 2009. No credit union centrals in Canada got into any significant trouble during these times.
U.S. credit unions are tax exempt, while Canadian credit unions have been subject to taxes since the early 1970s. You will never see the term "not-for-profit" in any Canadian credit union marketing or literature.
In the U.S. there are thousands of credit union owned CUSOs (Credit Union Service Organizations), while in Canada there are only a handful. Because of the taxation rules, there is very little that credit unions in Canada cannot do within their own walls.
In the U.S., there is a rich and thriving vendor network as demonstrated by the more than 300 vendors in the GAC exhibit hall. In Canada, the credit union centrals are very large and powerful and tend to build their own technology, so there are very few third-party vendors involved in the credit union industry.
As of 2013, credit unions in Canada and most retailers no longer support swipe-only credit and debit cards. Chip and PIN is now universal across the country. In the U.S., Chip and PIN is only now being talked about.
The Canadian banks and credit unions own their own debit network—Interac—while Visa and MasterCard have virtually no debit card presence in Canada.
Member business lending is a huge priority for U.S. credit unions and is a point of contention as CUNA lobbies to increase this lending cap beyond the current 12% of assets. In Canada, credit unions are heavily involved in business lending and the rules are quite different. The lending cap is flexible depending on the risk appetite and size of the credit union and is based more on available capital than on overall assets.
50% of all credit unions in the U.S. have less than $25 million in assets, while less than 1% of all credit unions in Canada have less than $25 million in assets. In Canada, consolidation is at least 15 years ahead of the U.S. largely due to the fact that very small credit unions were just unable to survive under a taxation model.
In rough numbers, U.S. credit unions hold less than 3% of the mortgage business, while Canadian credit unions hold in excess of 20% of the mortgage business.
Board members in the U.S. are typically volunteer positions, while most credit unions in Canada pay their board members quite handsomely. In fact, for some of the largest credit unions in Canada, a board chair can expect to earn more than $75,000 per year. By the way, my credit union has a volunteer board!
There are no community banks in Canada, so even though Canadian credit unions may seem huge when compared to those in the U.S. credit union system, they are still tiny in comparison to Canada’s five massive chartered banks. Because of this, the credit union difference is much more apparent to most Canadians than their American counterparts.
To illustrate the vast difference in credit union sizes between Canada and U.S., I often talk about my city that I live in to put things into perspective. Chilliwack is a city of 80,000 people at the east end of the Fraser Valley, approximately 70 minutes outside of Vancouver. If I go to the local mall, I can stand in the parking lot and see branches of B.C.’s four largest credit unions. Vancity with $18B and 450,000 members, Coast Capital Savings with $15B and 420,000 members, Envision Financial with $6B and 120,000 members, and Prospera Credit Union with $4B and 100,000 members. Also, notice the lack of "credit union" in these names.
There isn't much political lobbying in Canada and there certainly is nothing like the CUNA GAC. There isn't an anti-credit union voice like the American Bankers' Association in Canada because, as I mentioned, there are only a handful of autonomous mega banks.
It's pretty inspiring to see more than 4,000 people come together to show unity and to demonstrate to members of congress just how important credit unions are. This may just be a Canadian thing that there isn't much lobbying. We hate to make a fuss about anything!
In my 20-plus years of experience in working with credit union people (employees, volunteers and vendors), I have found that these are really good people that believe in the cooperative business model. The people helping people theme is universal.
There are pros and cons to each side of the border and this post will give you some perspective on my perspective for my coverage of the CUNA Governments Affairs Conference over the next few days. The T-word—tax—is a huge topic at this conference and is obviously the biggest difference between the U.S. and Canadian credit union systems. As you can see, this particular difference has such a deep impact on why there are so many others differences.
So there you go—a crash-course on the differences between the U.S. and Canadian credit union systems and a look inside my jumbled credit union mind. This post is a bit of a stream of consciousness, so I bet I've made some errors or missed some key differences. I'm sure you will correct me in the comments!
Tim McAlpine lives in Chilliwack, British Columbia, Canada. He is the President and Creative Director of Currency Marketing, an integrated marketing agency specializing in helping credit unions attract the next generation of members. Tim is best known as the creator of Young & Free.