- Key insight: San Diego County Credit Union wants to revise the terms of its deal with California Coast Credit Union, so that it retains control of the combined institution’s board. Cal Coast says SDCCU’s actions breached their merger contract.
- What’s at stake: The deal would create a $13 billion-asset financial institution with more than 600,000 members in Southern California.
- Forward look: Cal Coast is asking a judge to order SDCCU to abandon its termination notice and pay damages and legal costs.
A charged legal battle between two San Diego credit unions has left their planned merger, which would create a $13 billion-asset institution, up in the air.
San Diego County Credit Union told California Coast Credit Union in November that it wanted to change the terms of the deal,
Processing Content
Cal Coast sued SDCCU a few weeks later, alleging the termination notice was unlawful and that SDCCU’s actions marked a breach of contract. Cal Coast also claimed that what SDCCU identified as regulatory failures were not unlawful, but were actually differences in risk appetites between the two institutions.
Neither company says it wants the deal to fall through, despite the legal animosity.
Cal Coast and SDCCU originally inked their merger agreement last April, with plans to close the deal in early 2026. The merged company would have about 1,400 employees and more than 600,000 members. About two-thirds of the members would come from SDCCU, which also has more than twice as many assets as Cal Coast.
At the time the deal was announced, the plan was for the combined credit union’s board to represent an equal split between legacy directors of each institution, plus an additional seat for Cal Coast’s president and CEO, Todd Lane.
Lane was also slated to become president and CEO of the merged entity, while SDCCU President and CEO Teresa Campbell had plans to retire.
With its termination notice in November, SDCCU instead proposed a 9-2 board split, with a majority of directors from SDCCU, and Campbell taking the helm of the combined entity. SDCCU said that allowing its leadership to “undertake the daunting challenge of remediating Cal Coast’s noncompliance” was its solution to Cal Coast’s alleged violations.
Cal Coast alleged in its legal filing that SDCCU’s actions are part of a “deliberate campaign to derail” the deal in “an effort to re-trade fundamental terms it accepted during the parties’ negotiations.”
Cal Coast wants a state court judge to find that SDCCU violated the terms of the merger agreement by issuing the notice and pausing its integration work streams, and to order SDCCU to pay damages and legal costs.
Robert Schneid, spokesperson for Cal Coast, said in an email that the credit union is still committed to the merger. He added that Cal Coast took legal action to “ensure clarity in the merger review process and uphold the terms of the merger.”
“Cal Coast has been in full compliance with its obligations under the merger agreement,” he said.
SDCCU claims that during post-merger integration processes, it found a number of what it called compliance and regulatory failures at Cal Coast, along with a compliance culture that “demonstrably differ[s]” from its own.
SDCCU alleged that Cal Coast’s policies regarding certain lending regulations were “deficient.”
One of the services that SDCCU pointed to as a problem was a Cal Coast loan designed to enable San Diego State University students to pay for laptops. Cal Coast logged the debt as technology loans. But outside counsel hired by SDCCU said the loans should be accounted for as student loans, and that Cal Coast’s classification “likely” violated disclosure regulations.
SDCCU also said that Cal Coast’s underwriters disregarded low credit scores on certain auto loans, and that it marketed certain products in Spanish but didn’t offer disclosures and contracts in the language.
Cal Coast also offers certain short-term, small-dollar loans called QCash — a product used by dozens of credit unions — which SDCCU alleged were “being issued predominantly to borrowers with verifiably low credit scores, yielding unacceptable credit and default risk.”
Cal Coast argued in its lawsuit that what SDCCU described as legal noncompliance were cases of business risks that differed between the institutions.
Cal Coast added that it didn’t agree with the analyses of SDCCU’s external counsel, but “to avoid distraction and advance regulatory readiness” at the time, elected to implement certain recommendations, without admitting liability or legal failures.
Carolyn Kissick, SDCCU’s chief risk officer, claimed in a legal filing that during a meeting regarding the alleged legal risk at Cal Coast, CEO Lane berated her, disregarded her claims of violations and asserted that his authority as the leader of his credit union was absolute.
“Integration meetings, documents, and revelations made all too clear that Todd Lane would not, in fact, steer the combined entity true to ‘conservative banking principles,’ as he had pledged,” SDCCU said in its filing. “So SDCCU offered the only satisfying solution: substituting the leadership that had always been scrupulously committed to compliance.”
Cal Coast said in an email to American Banker that Kissick’s claims about Lane’s conduct were inaccurate, and “[do] not reflect his leadership approach.”