Credit unions see a boost in membership after Bank Transfer Day

Arturo C. suspended his routine activities on the afternoon of November 10 to make what he considers his contribution to the “transformation of capitalism.” He didn’t join the Occupy protests or rally in front of a bank. Instead, the 34-year old part-time student and online sporting gear shop owner drove to a shopping mall to transfer his money from Bank of America to the local branch of PatelCo Credit Union, a nonprofit cooperative financial institution.

The Chabot Community College student, who declined to give his last name, was participating in Bank Transfer Day, an initiative that urged people to move their money from commercial banks to credit union accounts by Saturday, November 5.  “Imagine if all college students did the same,” he said. “Shareholders would be really pissed off. They would be forced to change at least some of the ways they operate.”

The goal of Bank Transfer Day was to protest against banks’ “outrageous fees and severe lack of services,” according Kristen Christian, the Los Angeles art curator who started the initiative. “If you don’t believe in a company’s practices or feel that a company’s practices are unethical, then, you should not have money with that company,” she wrote in a statement sent to Oakland North. By transferring money to a local credit union, Christian wrote, “citizens can independently take action to promote growth within their communities.”

Although Christian did not start Bank Transfer Day as an Occupy-related protest, Occupy supporters across the U.S., readily latched onto it, including the group in Oakland, which urged its members to take part. Before the camp’s first eviction on October 25, instructions on how to transfer money from one institution to another were pasted on plastic tables at one of the tents where residents kept fliers, press releases and copies of eviction notices. “Take your cash away from too-big-to-fail banksters aligned with the Fed and deposit it with your local credit union,” read a message posted on October 28 on the “Open Mic” section of the Occupy Oakland website, where protesters can share information, announcements and events.

“Not everybody can stay here at the camp, but everybody can contribute,” said Susan Q, an Occupy Oakland protester, who declined to give her last name. “We have a diversity of tactics, and transferring money to a credit union is definitely a good way to support our cause.”

Miles Avery, a 22-year-old Occupy Oakland supporter who participated in the November 12 march to recognize the demonstrations in Egypt, did so while holding a sign that read “Boycott the Big Banks.” Only two weeks before, he had moved his money from a Bank of America account and opened one with a Provident Credit Union branch in Oakland. It took him four days to withdraw all his money through an ATM and make deposits in his new credit union account—something he did to save money and time, he said.  “They charge you three dollars to close an account and they take three days to process the request,” Avery said.

Avery said that Christian’s launch of Bank Transfer Day had encouraged him to finally make a transfer his grandfather had long urged. “He told me if you want to avoid the fees and all the bank bullshit, you should switch,” he said.

Nationwide, the outcome of Bank Transfer Day—and the support it was gaining from Occupy protesters—became noticeable very quickly. On November 8, the Bloomberg news wire reported that credit unions gained 40,000 new customers during the weekend of November 5. According to the Credit Union National Association (CUNA), a Washington D.C.-based coalition of state-chartered credit unions, 650,000 people have joined its member institutions since September 29, one week after the launch of the Occupy Wall Street protests.

“It’s the largest increase of credit union costumers in a short period of time, at least in recent years,” said Henry Kertman, director of public relations of the California and Nevada Credit Union League, an organization headquartered in Ontario, California, that provides legal, public relations and financial services to credit unions. Kertman said the 432 credit unions operating in California alone gained 90,000 new members and $629 million in deposits during the same period.

“We have reached a peak in our membership,” he said. “These grassroots movements have helped spread the word about credit unions and encouraged people who are frustrated with their banks to look for an alternative.”

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To understand why credit unions suddenly became a focus for the Occupy protesters, it helps to understand their background as financial organizations for union members and working class people.

In the 19^th century, labor unions and local businesses in England and Germany created the first credit unions to provide credit and loan services—and distribute dividends to—their members, who couldn’t afford paying banks’ interest rates. This model was replicated in the U.S. shortly afterward to serve working-class families who were becoming more affluent, but were not wealthy enough to attract the trust or interest of commercial banks.

Credit unions are nonprofit financial cooperatives, which means all members have a right to a share of the credit union’s assets. According to the Credit Union National Association’s website, “credit unions do not issue stock or pay dividends to outside stockholders. Instead, earnings are returned to our members in the form of lower loan rates, higher interest on deposits, and lower fees.”

Credit unions’ nonprofit status exempts them from paying corporate income taxes, which are paid by banks. But credit unions pay other types of taxes, such as payroll, sales and property taxes.

Some credit unions provide services only to members of certain organizations, businesses or communities. In the Bay Area, for example, employees of AC Transit and the East Bay Municipal Utility District run their own credit unions. Religious organizations can also have their own credit unions, such as the Allen Temple Baptist Church and the Taylor Memorial United Methodist Church, both located in West Oakland.

Other credit unions serve a broader range of customers, and a certain kind called charter credit unions provide financial services to other credit unions. “Not all credit unions can accept everyone, but everyone can join at least one credit union,” Kertman said.

Today, banks and credit unions provide similar basic financial services: savings, checking and credit accounts, mortgage loans and other personal and business loans. But, Kertman said, the nonprofit nature of credit unions allow them to offer lower interest rates on loans and credit, as well as higher interest rates on savings than most commercial banks. “The goal of banks to generate income for their shareholders,” he said. “Credit unions are created to serve their members. When you join a credit union, you become a co-owner of that union and the income it generates comes back to you in savings interest rates and dividends.”

According to the California and Nevada Credit Union League, 7,442 credit unions operate across the country with about $951 billion in combined assets. By contrast, according to the Federal Insurance Deposit Corporation, a federal agency that provides deposit insurance and regulates commercial banks, banks operating in the U.S. reported a total of $12.3 trillion in assets as of June 30, 2011.

Kertman said that the main reason people have accounts in banks and not credit unions is simply because they don’t know much about credit unions. “There’s a lack of awareness about credit unions and the services we provide, specially among young people,” he said. “Our demographics consist mainly of people ranging from ages 40 to 50 or older.”

But Beth Mills, spokesperson for the California Bankers Association, an organization headquartered in Sacramento that offers lobbying, financial, legal and technology services to California-based banks, says there are other reasons why people would prefer to put their money in banks. “Banks offer a bigger array of financial services, more branch locations and ATMs,” she said. “Credit unions don’t necessarily offer the best rates, either. Banks are constantly competing with each other to offer the best rates and products.”

Mills said her group’s members understand the frustrations and anger some people have about their banks, but they hope people are closing their bank accounts for the right reasons. “We hope they are not switching because of the popularity of the movement, rather than because they are unhappy about a particular service,” she said. “We encourage people to share their complaints. We are open to discussion and offer the best possible service to costumers.”

And even Kertman agreed that in some instances having bank accounts might come in handy. “Some of our members also have bank accounts,” he said. “They could have some particular advantages—maybe a family shares a bank account. Advantages could also be location or business-related.” But, he said of credit union supporters, “They are smart shoppers. They will make wise financial decisions.”

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Kristen Christian, the 27-year-old owner of Le Spec urban art gallery in Los Angeles who started Bank Transfer Day, decided to transfer her money to a credit union after Bank of America announced in late September that it would charge $5 a month to its debit card customers who have less than $20,000 in their accounts. Christian, one of those customers, called this decision the “final straw” in her decision to withdraw her money from the bank. “It’s apparent this new policy directly targets the impoverished and working class,” she wrote in statement to Oakland North.

On October 15, she invited 500 of her friends on Facebook to follow along with her, and started a public event page on Facebook called “Bank Transfer Day.” More than 85,000 people RSVP’d. “I never anticipated that this directive would be met with overwhelming support both nationally and abroad,” she wrote. She said she hadn’t intended any association with either Occupy or Anonymous, an international group that protests Internet censorship and corporate control over online content. (Anonymous caught the media’s attention in December 2010, when supporters crashed MasterCard’s online services after the credit card company cancelled the accounts of WikiLeaks, an international organization that distributes confidential and classified government and corporate documents online.)

Christian said she chose November 5 for “Bank Transfer Day” in honor of the “Gunpowder Plot,” a failed conspiracy planned by two Catholics to kill the protestant aristocracy of England on November 5, 1605. The face of Guy Fawkes, one of the conspirators, was used as a symbol for the Bank Transfer Day. The black and white smiling face—featuring a pointy moustache and beard—has also widely appeared on masks, posters, fliers, videos and t-shirts circulated by Occupy and Anonymous protesters.

“While the Bank Transfer Day movement acknowledges the enthusiasm from Anonymous and Occupy Wall Street, the movement was neither inspired by, derived from nor organized by them,” Christian wrote.  “The goal of Bank Transfer Day is to enrich communities, rather than disrupt them.”

California Bankers Association spokesperson Beth Mills said that the reason Bank of America had proposed the $5 fee that originally sparked Bank Transfer Day was because banks are now allowed to charge merchants less for every debit card transaction. Banks used to be able to charge merchants 44 cents for each transaction. After the passage of the Dodd-Frank Wall Street Reform and Consumer Protection Act on July 21, 2010—which imposed new regulations for financial institutions after the Wall Street crash and eventual bank bailouts in 2008—“that charge had a dramatic decrease of 24 to 21 cents per transaction,” Mills said.

But on November 1, Bank of America issued a press release saying it would not proceed with the $5 charge. “We have listened to our customers very closely over the last few weeks and recognize their concern with our proposed debit usage fee,” said David Darnell, co-chief operating officer at Bank of America, in a press release. “As a result, we are not currently charging the fee and will not be moving forward with any additional plans to do so.”

Other banks, including Wells Fargo and Regions Bank, also backed down from their plans to charge fees for debit card usage, according to news reports.

While credit unions are not immune to fee increases, Kertman said that that they’re unlikely to happen any time soon. “I can’t rule out that we will never need to increase fees,” he said. “There is no question that we face difficult economic times—that’s why we [proceed] to remain well funded, and we are careful about our decisions. We don’t have the pressure of making profit like banks, so that’s why our members have announced they will not increase fees for as long as they can.”

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Now that Bank Transfer Day is over, people in the banking industry are analyzing its effects, including assessing whether commercial banks have been damaged by the protest.

James Wilcox, a professor at UC Berkeley’s Haas School of Business, said that large commercial banks were not greatly affected by Bank Transfer Day. “These movements have brought visibility to people’s frustration over the banks’ behavior and performance. This is not a good thing for the banks. They want to keep all their customers happy,” he said. “But it’s not likely to have a huge impact on them.”

Wilcox said banks will not be truly affected by people moving their money as long as they maintain their “profitable customers”—those with great wealth or who use services that the bank can charge for or earn interest from, like taking out large loans. “In almost every business, some customers are more profitable than others, and more valued,” he said. “A graduate student that shops at Nordstorm is not going to be as valued as his or her parents, who usually spend more on the store. Banks are no exception: Customers with a low balance, who requested a small loan, or have a free debit card account are not as profitable. These customers are usually those that are going to be tempted to transfer their money to credit unions.”

While Wilcox said that the number of people who participated in Bank Transfer Day wasn’t enough to make a substantial difference for either banks or credit unions, he added that the long-term effects of both Occupy and Bank Transfer Day remain uncertain. “We don’t know what will happen,” he said. “Maybe these movements will mushroom, their visibility would lead to a bigger phenomenon. Maybe not. We just don’t know.”

But locally, Heather Ziemer, vice president of Financial Benefits Credit Union, an Alameda city-based credit union with five full-time employees and $19 million in deposits, said the Occupy and Bank Transfer Day initiatives have had a big impact on her financial institution. “These movements have educated people on what a credit union is, something that we had failed to do, maybe because we haven’t worked enough on our marketing,” she said.

Ziemer said her credit union usually opens two or three accounts every month, but in October it opened a record of 18. “Half of them are checking accounts, which means people are making a full commitment with us,” she said. “They will be making payroll deposits and other important transactions into it. It’s wonderful to see that.”

At the two Oakland branch offices of 1^st United Services Credit Union, which provides financial services to Alameda and Contra Costa Counties’ residents, new membership for this October “is over 600 percent above the new membership numbers” for October 2010, said services chief administrative officer Greg Pulliam. “It’s an ongoing trend. We see new people come by our offices every week,” Pulliam said.

The increase was particularly strong at the Pleasanton-based credit union’s Oakland branches during September and October, Pulliam said. “By scanning the numbers, I would say our Oakland branches had twice the increase percentage of other branches,” he said.

“During the last two months, we’ve have had a tremendous amount of traffic in our Oakland offices, especially in the Rockridge office,” Pulliam added. “We’ve also seen an increase of inquiries of our services and account options. More people are visiting our website and [making] phone calls to our offices.”

But Pulliam said that the trend wasn’t caused by the Occupy Oakland protests alone. “I think the whole Occupy movement, Bank Transfer Day and other similar movements, along with new bank fees, are making people consider joining a credit union,” he said.

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Controversy erupted among Occupy protesters and supporters when people learned that one entity had actually put money into a commercial bank after Bank Transfer Day—Occupy Oakland.

On November 7, during a General Assembly meeting, Occupy protesters approved the transfer of $20,000 in donations to a Wells Fargo account to pay the bail of some of the protesters arrested during the clash between police and protesters after the general strike on November 2.

This didn’t go over well with other parts of the Occupy protest. “!!!HYPOCRITES!!! Occupy Oakland makes $20K deposit at Wells Fargo,” a post on the Occupy Wall Street website read the next day.

Twitter commenters also expressed outrage. “#OWS gave Occupy Oakland 20k for bail $. They put it in.. Not a credit union.. But Wells Fargo! Who they previously vandalized. #hypocrites,” wrote one Twitter user who goes by the handle “AliJeanHughes.”

“Say WHAT? No one has a credit union acct?? Not a one?” wrote a Twitter user who goes by “artcatscoffee.”

On November 10, Timothy Fong, the arrested protesters’ lawyer, issued a release on the Occupy Oakland website explaining why they had deposited money at Wells Fargo. He wrote that he owned the Wells Fargo account into which the money had been transferred and that transferring the money to it was the quickest way to pay the bail for the arrested protesters.

“If I have to choose between bad PR and human lives, then I will choose bad PR every time,” he wrote. “I was informed that people had already faced seriously dangerous conditions in the jail. The night before the general strike I had no way to know that the day would not end in mass arrests at the port, or a hail of rubber bullets and wooden dowels like the anti-war port protest in 2003.”

Additionally, he wrote, “My client trust account existed previously—I did not open it recently. I was in process of moving all my accounts for 5 November when I got sick.”

The San Francisco lawyer added he was also in the process of closing his Well Fargo account and opening one at a credit union.

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Arturo C. has transferred his money from a bank account to a credit union, but he said he won’t stop there. He said he is starting an online initiative to urge college students to follow his steps that will provide instructions on how to transfer money. “College students usually don’t pay mortgages, loans or support other people,” he said. “They have nothing to lose and they will greatly benefit the community. Universities are huge infrastructures—if students pass the message along it could be very powerful.”

Oakland resident Miles Avery said he felt proud of being among the people who participated in Bank Transfer Day and that he will continue encouraging others to join.“It shouldn’t be a one-day thing,” he said. “I usually bring up the topic when I’m with my friends. I know I have better chances to convince my friends to switch, than total strangers.”

Greg Pulliam, of 1^st United Services Credit Union, said that enrollment or account openings at branch offices may “may slow down a little” now that Bank Transfer Day is over. But he added that new members might inform friends and family members about credit unions and convince them to join. “Customers today like the idea of being more active in the businesses they belong to,” he said. “They are definitely interested in the cooperative approach of credit unions. As long as more people understand how they work, more people will join them.”