Start One!
First Steps to Starting a New Credit Union
Starting a credit union today is difficult, but not impossible. We have been working closely with several de novo credit unions, and we've identified three main hurdles to starting a credit union:
- Chartering
- Capital
- Opening the Doors (and keeping them open)
The latter two are also often given as the reasons that existing credit unions feel they have no choice but to merge.
NCUA Vice Chairman Kyle Hauptman made a pledge to the 2021 GAC attendees that he would work hard to modernize the charter process, saying “There has got to be an easier path for de novo credit unions”
And true to his word, NCUA released a new process in 2022! The beginning stages are now handled online, with clearer guidance and timelines.
A very labor intensive part of the process is also writing the policies and procedures and since the NCUA does not supply templates for that we reached out to CUPolicy Pro and they graciously agreed to give de novos access to their incredible library.
The Problem
Many of the credit unions listed on our de novo page are stuck here.Depending on the business plan submitted, they may be required to raise up to one million dollars in capital before they can open their doors!
The Solution
The CU De Novo Collective has formed a foundation, that will seek donations to provide grants for de novos (as well as “at risk” credit unions). The grant program will be structured somewhat like the Community Development Financial Institution (CDFI) grants, and will provide assistance in two important areas
- Technical assistance: This will help them with the most expensive startup investment, the core processor, as well as digital banking, card processing, etc.
- Capital: This could be all or a portion of the capital required by the NCUA.
So that we don’t add complexity to the new charter process, the de novo credit union would submit the same documents the NCUA requires in Phase 2 of the charter application process. This is the business plan that includes products, services, financial projections, etc.
From the 1930s until the 1970s, one of the chief duties of the Credit Union League system was to promote and help facilitate the chartering of new credit unions.
The state Leagues also operated for profit "services corporations" which provide services (credit card processing, commercial printing, ATM networks, shared service centers, etc.) to credit unions and to other state leagues. This was to ensure even the smallest credit union had access to the products and services they needed to remain competitive.
The Problem
These services rarely exist today in a form that's affordable or accessible for small and de novo credit unions. This is another reason that mergers are commonplace.
The Solutions
The sixth cooperative principle: cooperation among cooperatives is the answer!
So many wonderful organizations and CUSOs are stepping up to offer scholarships and/or reduced pricing for de novos. Check out the Resource page.
CUSS (Credit Union Shared Services) is currently in the development phase and will provide leading-edge back-office and technology services to small and startup credit unions at sustainable prices. The new initiative is the result of ongoing work by the “UNDERGROUND Credit Union Shared Services,” also known as “CUSS,” working group. Mitchell Stankovic have brought together technology experts and credit union industry leaders to “define a native language, cloud-based core and sandbox of additional solutions.