Chatsworth credit union demise ignites pay, business loan debate

The failure of Telesis Community Credit Union in Chatsworth provides a behind-the-scenes glimpse into controversies over business lending and multimillion-dollar executive pay at some of the member-owned financial cooperatives.

State financial regulators late Friday seized Telesis, a financially troubled institution that remains open under control of the National Credit Union Administration. The NCUA oversees a federal insurance program for credit union accounts up to $250,000.

Telesis was among 120 credit unions that NCUA exempted from a usual limit of no more than 12.25% of assets in business loans larger than $50,000.

Its woes, along with those of giant Texans Credit Union and other specialists in member business loans, provide ammunition for banking lobbyists opposing a credit union-backed bill lifting the limits, which is being considered in the Congress.

“Telesis ... is a case study in how disastrous expanded MBL [member business loan] levels can be for the credit union sector,” Paul Merski, chief economist for a community bankers group, told the Credit Union Journal.

The lobbyists say tax-exempt credit unions should convert themselves into mutual savings banks, which pay taxes, if they want to do more business lending.

Telesis’ failure also reignited a debate over multimillion-dollar pay packages awarded to some credit union leaders. Telesis paid its chief executive officer, Grace Mayo, more than $2.1 million in 2010, a year in which it lost more than $11 million.

A spokesman told the Credit Union Times that the payment was actually part of a cost-saving measure in which senior executives forfeited large deferred compensation packages in return for big one-time payouts.

Telesis’ soured business credits included a California resort project, a Memphis historic development and a Florida shopping mall, according to reports.

RELATED:

Regulators take over Telesis Community Credit Union

Credit unions aren’t immune from financial crisis

Kinecta, NuVision credit unions call off merger