With the departure of U.S. Bank from its Memorial Union (MU) location, conversation about the future of banking services in the university has engendered alternative options.
One group of students and alumni is beginning the process of installing a student-run credit union to take up the financial role that U.S. Bank once served on campus.
“Sure, we got U.S. Bank out of the MU, but what does that accomplish?” said Chandler Hill, a junior economics major. “There is a legitimate need for financial services in our community.”
Hill initially introduced the proposal and established a Facebook group composed of students and alumni to act as an organizational committee.
The enterprise would require startup capital amounting to approximately $300,000 to $400,000, according to Hill.
“That is actually about as much as it might cost to start up a new Jamba Juice,” Hill said. “Those numbers entail finding a place to have this credit union, to buy an ATM or the software for having a vault or a teller system.”
Besides wages and the initial fixed cost, the credit union would also have to pay rent to Student Affairs for a space at the MU, which was approximately $8,000 per month for U.S. Bank.
Although the credit union would be student-owned and -operated, ASUCD would be unable to provide any financial assistance, according to ASUCD Senator Kabir Kapur, a political science and philosophy double major.
“Funding wouldn’t be able to come from ASUCD because of the budget cuts we’re making this upcoming year,” Kapur said.
Both Kapur and Hill agree that a significant portion of money would have to come from alumni endowments and private investors.
Some drawbacks prevent more widespread support for the plan. Members would not enjoy the same accessibility to ATMs and numerous physical branches provided by larger banks. Credit unions also typically offer a smaller variety of financial products.
Regarding the campus community, it is uncertain whether revenue from a credit union would be able to match the $167,000 that U.S. Bank provided last year to student services.
Despite these disadvantages, the alternative business model of a credit union could potentially address some grievances against the presence of commercial banks on campus.
A major difference between credit unions and commercial banks is that in a credit union, members who hold accounts share collective ownership of the business. In this proposal, membership would be extended exclusively to current UC Davis students and alumni.
“Banks exist to deliver profits to their shareholders, not to their customers,” said Artem Raskin, a recent political science graduate from UC Davis. “A financial institution that gains a competitive advantage from being located on the premises of a public university should be democratically accountable to the students of that university.”
Compared to commercial banks, credit unions also tend to offer lower interest rates on loans and higher returns on deposit accounts. According to Hill, lower rates and a member-oriented attitude would mean that students and alumni would have greater access to loans.
“You can’t necessarily go to a bank to get a loan for a bike or a new venture idea because they don’t understand the needs and wants of the university,” Hill said.
U.S. Bank’s termination of its contract with UC Davis opened up the possibility for other financial institutions to come to campus. The next step for the group is to simultaneously gauge student interest and to raise awareness.
Once the project has garnered enough student support, organizers would have to draft a business proposal to submit to the California Credit Union League for revision and guidance.
“That probably might take anywhere from now until the end of the quarter,” Hill said. “It’s a fast process.”
Ultimately, the credit union would have to obtain a charter from the federal or state government to begin operations.
At the university level, the plan would have to be approved by both Vice Chancellor John Meyer and the Unit Relocation and Space Allocation Committee, a permanent body under ASUCD that determines office space allocation among ASUCD units.
“ASUCD would be able to provide a lot of support because of its close relationship with the administration,” Kapur said. “Several senators were really excited or thought that it was a really cool idea.”
Hill is animated about having a financial model that works for students and anticipates a favorable response from the community.
“I really want to see this done for the good of the student community, so that we can have a better claim to fame than pepper spray.”
JUSTIN ABRAHAM can be reached at firstname.lastname@example.org.