A Guest Rant

I was sent this post by a member of the CU community that didn’t feel comfortable having it appear on his/her personal blog. I totally understand wanting to say things that need to be said, but not wanting those things always tied to your personal persona, so I’m always happy to publish anything you want said in total annoyminity. Here we go…..

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The first step in solving a problem is admitting that there is a problem. In credit union land, this realization has simply not been made.

The world of auto sales is a perfect indicator of this point. When the economy tightens, guess what auto dealers do? They cut prices. They improve interest rates. They do everything they can to make their products more attractive. After all, “waiting this economy out” is not an option for them. Even Honda and Toyota, the two most attractive automakers of our time, are offering 0-2% financing and huge rebates (or employee pricing).

What do credit unions do in tough economic times? We move mountains to decrease our cost of funds. We make it tougher to get loans. We become less attractive when our members need them most. We become an equally bad deal as banks, when we should be scrambling to take advantage of the opening banks are giving us.

Yeah, I know. I’m comparing apples to oranges, right? Maybe.

Consider wages, then. In 2007, total compensation for CU executives rose 7.7%. Assets from December 2006 to June 2007 grew only 4.3%. Is this in line with what the rest of America is experiencing? Hardly. Earnings increased only 1.1% for all workers in the U.S. economy.

This is not to say credit union executives are overpaid. I truly believe that in many cases the opposite is true. What is startling, however, is that our behavior communicates to the public that we are isolated from the struggles they are facing. While they are facing layoffs, hiring freezes, and pitiful pay increases, we are giving financial high fives to way too many executives who simply aren’t performing.

We say we want to start attracting younger members and employees, but have we changed our approach to either? Hardly. I have seen precious few examples of true innovation in our industry that would excite anyone under the age of 45. We are not recruiting on college campuses. We are not attracting elite employees. We aren’t putting our money where our mouth is when it comes to investing in innovation.

Peer-to-peer lending? Give me a break! Taking a cut out of an over-priced peer-to-peer lending transaction is not peer-to-peer lending. Blogs? Let’s face facts, that’s not innovation. Turning teller lines into pods? Wow, no bank could ever pull that off.

And why do credit unions think that “best practices” are the answer to all of our woes? Best practices are simply proven strategies for other credit unions. If you are waiting to act on an idea until a best practices report comes out, you are part of the problem not part of the solution. Want to convert into a bank? Good riddance. We didn’t want you any way. And if bank conversion is what’s truly best for your members, why should the movement stop you? Isn’t that what we’re in business to do?

How often do we truly cooperate with one another? No, seriously. How often? Being chummy at a conference doesn’t count. I can count on my right hand (and right now it is on my keyboard’s home row) how many times in the last year credit unions have come together to meet a specific, or even general, member need. Where are our solutions to high energy prices? What are we doing to help folks cope with, or better yet avoid, foreclosure or bankruptcy? The truth is we don’t cooperate unless there’s something in it for us, or it’s a community service project.

We’ll blame regulators or ALM or “the economy”, but in all actuality the riskier (read: more needy) a member is the less likely we are to help them out. “Not-for-profit” should not mean “for charity”, I realize. But you and I both know that we are still shutting out an awfully large amount of people. Essentially, we aren’t serving unmet needs. Instead, we are duplicating the efforts of banks and, worse, each other. We’re competitors. Stop pretending we are inter-cooperative until you prove otherwise.

You see. The frustrating thing is not that the credit union philosophy is broken – it most certainly is not. What should piss everyone who loves and believes in the credit union movement is how credit unions have implemented and modernized that philosophy.

We haven’t admitted that we have a problem. So that’s what I’m doing here. We haven’t found a way to increase our paltry share of U.S. deposits. We have yet to convince the majority of Americans that there is a credit union difference. We need new leadership. We need to start being honest with ourselves about what we are and what we are not. And the sooner recapture the greatness of credit unions past, the sooner we can reintroduce ourselves as legitimate players in the modern financial services world.

There. I said it.

(Apologies to the 100 or so credit unions out there that are actually changing with the times. YOU are not the problem. The folks out there that are just now copying the things you did 5 years ago are.)

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3 comments so far

  1. CU Skeptic on

    The part that really brings it home for me:

    The frustrating thing is not that the credit union philosophy is broken – it most certainly is not. What should piss everyone who loves and believes in the credit union movement is how credit unions have implemented and modernized that philosophy.

    While modernization of a philosophy is inevitable, the implementation is where I believe so many credit unions fail to distinguish themselves from any other type of financial institution.

  2. Winter on

    “What do credit unions do in tough economic times? We move mountains to decrease our cost of funds. We make it tougher to get loans. We become less attractive when our members need them most. We become an equally bad deal as banks, when we should be scrambling to take advantage of the opening banks are giving us.”

    Amen!

  3. Monty Cardigan on

    Great piece. It’s remarkable how similar the “movement” is here in Ireland. The same problems as people, who lack leadership, struggle to make sense out of the modernising for a modern society.
    One of the issues is having too many people who think they are leaders when they are not. They act to prevent those that are from getting things done. Those few who manage to move foward are always hampered by the “collective will”. Here in Ireland the future of credit unions is quite bleak indeed. See here: http://www.irishcuvoice.com/
    There comes a time in great social movements when a step change is required. But it takes resolute leadership and followership.

    Monty


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