July 2010

Statement on the Future of Services  

After over a year of study, analysis, and numerous member credit union town hall meetings, Midwest Corporate Federal Credit Union (Midwest) has received direction from its members on how services will be provided in the future.  Services will be provided through a CUSO, ProDraft Services, Inc. (ProDraft), who will work with a third party settlement institution to provide most of the services now delivered by Midwest.  The benefits of this delivery channel is that there will be no capitalization requirements for participating credit unions, services will still be coordinated through a credit union entity, and the cooperative pricing employed by ProDraft will ensure reasonable pricing for services. 

Midwest continuing as an independent corporate credit union, or merging with one or more other corporate credit unions was considered, however, these options ran into the same issue, the unlikelihood of enough members willing to place additional capital into a corporate credit union.  Initial member meetings in August and September of 2009 were encouraging for member recapitalization, however, as time went on and more losses were incurred from the corporate credit union system, member support began to wane and it became evident that adequate recapitalization by members of Midwest would be unlikely.  The message has been loud and clear that members held no hostility or lack of confidence in Midwest, however, as good stewards of their member’s assets, many felt a fiduciary responsibility to not place more funds at risk in the form of capital deposits at a corporate credit union again. 

Shrinking Midwest’s assets was also explored, however, keeping settlement accounts would still require recapitalization and Midwest could not be confident of being able to be in full compliance with the proposed future regulatory capital ratio requirements. 

While this has been a difficult decision to eventually end Midwest’s participation in the credit union system after 68 years, in the end, it seems to be the only decision that is in the member’s best interest. 

What will happen now?

Midwest’s Board has approved a plan that outlines the orderly transition of member services from Midwest to ProDraft’s new credit union service program.  With the member’s cooperation, this transition will continue through the first half of 2011.  The transition has begun with a few member credit unions who volunteered to be among the first to participate in ProDraft’s program.  Scheduling of the remaining members is in the process of being developed. 

Once members transition away from Midwest, Midwest will cease to have a purpose and the members will need to decide its fate which includes merger or liquidation.  Liquidation would be the only option that could potentially return any remaining member capital deposits to the members. 

In the interim, all services continue to be provided by Midwest and qualifying deposits continue to be covered by the NCUA’s Temporary Corporate Credit Union Share Guarantee Program. 

Questions? 

Questions regarding Midwest’s plans and transition of services should be directed to Midwest’s president, Trudy Wise, at 800/852-2677. 

Questions regarding ProDraft’s new program for services should be directed to ProDraft’s president, Chad Bartosh, at 800/279-3738.