AFTRA-SAG credit union asks members to withdraw some funds
Financial institutions typically don’t ask customers to take their money elsewhere.
But the AFTRA-SAG Federal Credit Union, which is not affiliated with the actors unions but serves many of their members, took the unusual step this week of asking well-heeled depositors to consider withdrawing some of their funds.
“Due to the unusual economic and market conditions, we are asking you, as a select group of our large depositors, to move a portion of your funds to another institution,” the credit union said in a letter mailed out this week. “This request is a temporary one, so we would like to explain why we are making this request: The Credit Union is ‘flooded with cash.’ ”
The letter went on to say that even though the credit union was flush with deposits, returns from investments in U.S. government-backed securities had been unusually low. At the same time, “most members are reluctant to borrow, causing our loan growth to decline.”
Interest income from loans is a key source of income for credit unions because it helps maintain capital ratios required by federal regulations.
Requests like the one made by the AFTRA-SAG Federal Credit Union are relatively rare, said Henry Kertman, spokesman for the California Credit Union League. But they are not unheard of: A few other credit unions in California have taken similar steps to improve their capital ratios.
“There is more money to lend than there are people to take out loans on that money,” Kertman said. “As a result, some credit unions have taken very aggressive steps to reduce the amount of capital they have on hand.”
Those steps include offering more competitive terms and interest rates on loans and lower interest rates on deposits to discourage consumers from putting too much in their bank accounts.
While banks have also been affected by the low rate of borrowing, credit unions, which are owned by members, have been squeezed even more because they pay slightly higher rates on deposits than do banks and savings and loans.
The letter assured members that “there is no cause for alarm. Your individual savings and individual retirement accounts are safe and continue to be insured up to $250,000 by the National Credit Union Share Insurance Fund.”
Even so, some members of the credit union were taken aback.
“I was shocked. I thought it was a scam at first,” said Dawne Marie Wynne, a former actress who has appeared on “General Hospital” and now works as a home school teacher. Wynne, who has less than $100,000 in an account at the credit union, said that she liked the friendly service and competitive rates on loans but that the letter sent the wrong message.
“My reaction is, ‘OK, if you don’t like my business, I’ll take it elsewhere.’ ”
A manager at AFTRA-SAG Federal Credit Union declined to comment about the letter and referred calls to a public relations representative, who left a voice-mail message saying she would not be available until Monday. SAG and AFTRA representatives also declined to comment.
Although the credit union has no connection to the unions, it was established in 1962 as a “financial resource for members of the American Federation of Television and Radio Artists,” according to its website. In 1971, the name was amended to include the Screen Actors Guild, whose members also became eligible to join. The credit union has more than 35,000 members nationwide and has more than $200 million in assets, the website said.
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