Magazine article American Banker

Credit Union, in Break from Industry, May Require a Big Minimum Balance

Magazine article American Banker

Credit Union, in Break from Industry, May Require a Big Minimum Balance

Article excerpt

Will stiff minimum balances for credit union members play in Peoria? Citizens Equity Federal Credit may soon find out.

The credit union, one of the nation's largest, is considering a plan to drop any customer whose deposits and loans together do not exceed $4,000. More than one-quarter of the institution's 206,000 members wouldn't make the cut.

The proposal is highly unusual for a credit union; most have no minimums at all. But executives of Peoria-based Citizens are clearly gung-ho on the plan. Their aim, they say, is to keep fees low for most members by losing the ones who simply are not profitable.

John T. Siefken, chief executive, said he expects the proposal will be implemented early next year, after a vote of the membership. He said he has received largely positive feedback from members.

"Reaction has been two-to-one in favor of our stand," he said. "I think most of our members expect everyone to carry their own weight."

While many banks and thrifts have been increasing fees on low-balance deposit accounts and other services deemed unprofitable, credit unions have shied away from the strategy. Indeed, the industry often promotes itself as a haven for savers and borrowers of modest means.

"I haven't heard of anything like this before," said Robert E. Loftus, a spokesman for the National Credit Union Administration. "Basically credit unions are democratic cooperatives and the members run them, so if the members wanted to do it, I guess they could."

In a letter addressed to members of Citizens Equity, Chairman Robert Loveless said the move would "eliminate much of the subsidization" that is taking place at the credit union. …

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