The First Miami Student Credit Union (FMSCU) is now able to accept more account holders following an update in credit union laws. According to Randi Thomas, director of Institutional Relations, the ability to receive monetary infusions from entities other than account holders will bolster the number of accounts the credit union is allowed to support at any given time.
The National Credit Union Share Insurance Fund insures the deposits of credit unions like The First Miami Student Credit Union and functions similarly to the FDIC, insuring amounts up to $250,000.
This regulatory body views the accounts held by credit unions like First Miami as liabilities since they are insuring the account holder's assets. As a result, credit unions are required to maintain a net worth ratio of retained earnings over total assets. This means if credit unions do not increase the amount of cash on hand in proportion to the number of accounts brought in, their ratio, and therefore classification rating, suffers.
According to Thomas, entities that choose to infuse cash into the credit union look for a return on their investment but are also aware of the risks posed by investing in a low-income credit union. The contractual nature of the investment does not guarantee a return for the third-party entity but does stipulate a time limit with which the new capital must be paid back to the investor.
The investment does not give the third-party a vote in how to run the credit union, instead functioning as a way for benefactors to gain interest and get a return on their investment.
"These infusions will give the credit union more latitude to take in members," Thomas said. According to Thomas, one unnamed entity has already put up a $50,000 investment.
According to Dan Krancevic, chief operating officer of the FMSCU, the organization currently manages assets of roughly $1 million and employs 75 people.
Krancevic said the credit union is entirely student run and focuses on attracting financial attention of students, faculty and family members.
Krancevic emphasized the low cost of opening an account with a credit union when compared to a traditional bank and also stated since the credit union is not a publicly traded company with stockholders dictating the course of the union, account holders own the business.
Krancevic highlighted the experience gained working at an organization like First Miami as extremely beneficial in terms of management experience and financial education.
"The nice thing about the credit union from an experience standpoint is that I'm actually able to help manage the money and help students finance their education," he said.
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"The fact that we are only one of two student run credit unions in the country gives participants in First Miami an early look at real world experiences and sets our university apart in terms of its self-governance," sophomore Nick Lewis said.
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