A fresh look at the 7 principles

I’ve been wanting to do this for a while and it finally looks like I can carve out enough time to give it the attention it deserves. I want to start a discussion about the 7 principles from a 2008 and beyond perspective.

I believe there is plenty out there about the origins of these principals and how each one has played out in the world of credit union “yesterfar” but there’s not a ton of talk about what those principals mean today and how they (should) influence credit union practices.

Now some of you might say that the principles mean the same today as yesterday and that’s why we don’t need to talk about them. We may come to the end of this discussion and find that you, Mr. Timeless, are correct. Never the less, I think the discussion can only help the understanding of the community, and specifically my generation.

I also want to stress that this is a discussion. I am definitely short on answers as I look down this list, so your thoughts, comments, and banter are welcome, appreciated, and needed.

A quick last minute thought and then I’m off to write about Voluntary Membership. Along this journey, let’s not just take the time to determine what these principals do mean in the present day credit union, but lets also be bold enough to talk about what they could mean to the CU of tomorrow. Don’t worry, I’ll still be skeptical (it’s kind of my thing) but that doesn’t mean you have to be. 😉

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1 comment so far

  1. monty cardigan on

    Credit Unions are different – different to the extent they are considered the poor mans bank here in Ireland. As we Irish jumped from Catholicism to Individualism we continued to save with but stopped borrowing from our credit unions.

    We had not need to go cap in hand to our local neighbour to be demeaned by their all too curious questions. We saw the credit union as being a thing of a past we were leaving behind – a past where we had little left over at the end of a working week. We had money in our pockets and access to 24/7 cash machines and convenient cheap credit from a plethora of providers.

    Credit unions stood still! They remained savings and loans outfits – and failed to respond to a huge demand for banking services. Irish credit unions still do not provide mortgages, credit cards, investment & insurance products. A small handful arrange mortgages as mortgage brokers. Their products and services remain largely undeveloped since the 1970’s.

    Credit union loan to assets collapsed from a reasonable level of 65% in 2000 to about 47% today. The underlying figures are even worse with many credit unions having ratios as low as 20% – they are termed dysfunctional savings clubs.

    Middle class CU boards fed their appetite for a nice juicy dividend and voted on dividend rates hundreds of times higher than banks were paying for equivalent deposits. To pay for these juicy returns loan rates remained high- too high and people stopped borrowing. Getting the picture. Yup, eye off the ball stuff. It is called “governance by dividend declaration” where the entire focus of board attention is on how much they can declare as a dividend to savers.

    Of course the Irish government helped by permitting the CU’s to continue to offer non-taxed interest savings accounts – guess what? Billions of new Irish wealth poured into the good old cu. People aware of the special tax treatment were able to earn dividends, without having their dividend taxed directly by government…of course there were limits on the size of a persons deposit – well people got around this by opening accounts in single, joint names and in the names of their children – a lot of juvenile savers are quite wealthy savers ! One of the largest credit unions adopted a rule to limit withdrawals from juvenile accounts to prevent their parents use to evade the taxman!

    Now as the loans/assets ratio collapsed and savers piled wealth into their local cu- this gave rise to another problem – what to do with the surplus. Well credit union boards invested the surplus as retail investors in a plethora of imprudent products and funds – they did so chasing income returns to bolster their high dividend rates. Yup, it got out way of hand and the regulator moved to limit the type of investments. A bit like shovelling the manure after the horse had bolted as the Irish media are constantly reporting on some really scary credit union investment losses.

    Thing is principles are no substitute for solid business sense. Irish credit unionism is great example of what happens when don’t translate principles into business sense.

    The Irish public use their credit unions but for reasons credit unionists have failed to understand- we are first and foremost looking for a good deal for ourselves. We could give a toss about who owns what. We saved with credit unions because they used to pay us a good rate and we borrowed elsewhere because they screwed us with high rates, bad products and shoddy service. We don’t buy principles we buy good products, convenience and service.


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