Proposed legislation will let them expand outside their home province

By Fiona Anderson, Vancouver SunApril 27, 2010

 An interesting article sent to me by a colleague … see you online! Robert. 

British Columbians love their credit unions with Canada’s two largest — Vanity and Coast Capital Savings — in the province along with about 50 other smaller ones.

The attraction is they are member-owned and community driven. Vancity started in 1946 and became the first financial institution willing to provide mortgages on homes in Vancouver’s working-class east end, east of Cambie Street. Coast Capital’s roots stem from the Depression in the 1930s when banks refused to lend money to those in trouble.

Most members think the best thing about credit unions is that they aren’t banks, which have the reputation in Canada of charging exorbitant fees and reaping high profits that aren’t given back to customers.

But now that the federal government has said it plans to introduce legislation to amend the Bank Act so that credit unions can operate inter-provincially, members may wonder whether their credit union is going to start looking just like a bank.

Mark McLoughlin, chair of the Case for Progress committee, a group started by Canadian credit unions to lobby for the change, said members need not worry.

While credit unions that decide to go national will fall under the Bank Act they won’t turn into banks, McLoughlin promised.

“The big value proposition for this was to enable and ensure that credit unions stayed with the core principles of what made them a credit union to begin with,” he said.

Members shouldn’t see any differences to the service they get at the counter, he said. But what happens behind the counter — the balance sheet of the credit union — is what will change.

Right now credit unions are limited in how much they can grow because they can’t get members, or acquire smaller credit unions, outside the province, McLoughlin said. “So from a business growth perspective there are some challenges.”

And that’s important because banking is a scale business, he said. “You need large volumes to make profit.”

The more members and the more business the credit union has, the lower the costs and the higher the profits.

That means better products and rates the credit unions can pass on to their members, as well as more money to return to members in the form of dividends or spend in the community, he said.

Coast Capital is an example of why bigger is better, chairman of the board Bill Wellburn said.

Coast Capital is the result of the merger of three credit unions, Pacific Coast Savings on Vancouver Island, Richmond Savings and Surrey Metro Savings.

It was a bold move at the time, joining an Island credit union with one from the mainland, Wellburn said. But it meant people moving from Victoria to the Lower Mainland didn’t have to close their Island account and open a new one. It also meant employees could transfer to another branch if they had to move, and that the credit union had a more diversified, and hence less risky, portfolio of deposits and loans.

“And history has proven that [the mergers] have been a success,” Wellburn said.

“Nobody thought we would be able to put a free chequing account in play, but we’ve done that and it’s hugely popular,” he said. “Because when you’re bigger the average cost per transaction goes down and that allows you to offer more services and products to your members.”

Ultimately, though, it will be the members who decide whether their credit union goes national or not. Because those kinds of decisions have to be approved by the members, Wellburn said