Open Source CU Podcast: Episode 5
Posted by Trey Reeme on January 10th, 2007
“What would you like to see most from credit unions in 2007?”
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It’s the question we’ve asked some of the most innovative folks both within and outside credit unions. The response has been so refreshing, we’re breaking it up into (at least) a four-part series over the next few weeks.
In this first installment, you’ll hear from:
- Wade Lagrone of Zopa
- Denise Wymore, Author, Blogger/Podcaster, Speaker and Brand Consultant
- Colin Henderson, Consultant, Blogger at Bankwatch, and member of the Board of Advisors at CommunityLend
- Rob Rutkowski, Attorney, Speaker, and contributer to the Current Issues in Credit Unions podcast
On our upcoming podcasts, you’ll hear from Mark Meyer, George Hofheimer, and Denise Gabel of the Filene Research Institute, Shari Storm of Verity Credit Union, Doug True of FORUM Solutions, Jim Bruene of the Online Banking Report, Ben Rogers from The CEO Report, Fred Johnson of CUES, and others.
After you give it a listen, leave a comment or your own response to the question below or better yet on our audio comments line by calling (206) 350-OSCU (6728). You can subscribe in iTunes here or download the podcast here.
As a bonus, here’s the transcript:
Wade Lagrone: This is Wade Lagrone from Zopa, the world’s first online way for people to lend and borrow directly with each other. Now we’re newcomers to the credit union industry in the US, and so maybe we don’t know too much. But as outsiders, maybe we can point out a few things about the industry that are so obvious that nobody talks about them anymore. So here it is. For 2007 we’d hope that credit unions get their mojo back.
As internet people, we’re here to say that the basic credit union idea – people helping people – isn’t just friendly, or humane, or even a way to get good rates on financial products. No, it’s that we think credit unions are cool. And we think credit unions could be the first choice of an entire new generation of American consumers.
Now all that sounds hard. And we know that the industry is getting older. And we know that banks keep getting bigger and spending more. But credit unions have something those guys don’t. They’ve got a soul. Only maybe in the race to match banks on features and rates, maybe that soul’s gotten a little lost. So our hope in 2007 is that credit unions can double down on what makes them special, what makes them cool. And at Zopa, we’re here to help. But no matter what we wish credit unions a happy – and a hip – New Year.
Denise Wymore: I was speaking to an audience recently of about 110 marketers and I asked them a very simple question: “What are they doing to promote thrift?” And I got some chuckles, and I then realized that they were kind of laughing through the question; I rephrased it. “How many of you are promoting thrift?” Not one hand went up, except for the one asking me, “What does the word ‘thrift’ mean?” And I realized my wish for 2007 is for a board of directors to buy a dictionary and to take it into a board meeting along with their credit union charter document and look up some of the words in there.
‘Thrift’ means the quality of using money and other resources carefully and not wastefully, and it’s what credit unions were founded to do – to promote thrift. And yet we have become a society that is promoting debt. There’s all kinds of statistics out there to show: American household – I looked it up this morning – the average U.S. credit card debt is $9,300. The savings rate for American households in 2006 was in the negative. Credit unions have done a lousy job of promoting thrift.
We also are chartered – and I can’t imagine it’s not in their credit union’s charter – that we were to do loans for provident and productive purposes. So again, look up the word ‘provident’ – it says to provide carefully for the future. A 110% mortgage loan is not provident. Courtesy pay is not promoting thrift. Doing an 84 month new car loan I find it hard to believe is provident and perhaps productive for the credit union. But I think that’s my greatest wish for credit unions in 2007. That’s what we were chartered to do and we have failed miserably.
The second wish would be for there an emerging wealthy Boston merchant – some independent person like Edward Filene was – that is in it really because he believes in people helping people. He’s not in it for personal gain, he’s not in it for political reasons, he’s truly a good, kind person. And today I think that the structure of the leagues, of CUNA, has gotten so political that we’re not willing to call credit unions out when they don’t act like credit unions.
Case in point are the crazy mergers that are going on. There’s a statement out there that leagues support credit union self-determination. Basically, we trust that the credit unions are always acting in the best interest of their members. And yet my credit union tried to merge several years ago and sent a letter to me saying that it was going to be in my best interest if they merged. And I challenged them on every single point because it was crap. It was not in my best interest for them to merge; it was in a few employees, namely management’s, best interests personally if they merged. And someone needs to be a watchdog for this. You must be able to prove that it truly is in the members’ best interest and that there is not absurd personal financial gain for some of these management people.
That’s my wish for 2007. I really hope after seventy-plus years of credit unions that we don’t destroy them. I don’t want to be part of that history. I don’t want to see credit unions go down on my watch.
Colin Henderson: I’m just going to make one point I think – try to keep it simple. One thing I’ve noticed is some conversation within some of the comments on the credit union blogs – some suggestion of negativity and maybe suggestions that some credit unions have a problem with not listening.
I think I would take the opposite view. I’d take a look at what’s happening with your own Open Source CU, Verity’s “Who Are V”, Credit Union Online UK, (building the) Black Rock FCU – I think these are all good examples of a willingness to take personal accountability and speak like a real person, which is really what blogging is all about and I think it’s really what will make the difference with customers in the future.
These are all examples of credit unions taking it seriously, and I especially like “Who are V” who are an actual credit union demonstrating listening particularly with the storms in December and the way they were reacting to those when their branches were closed.
So in closing I would just say that I think credit unions have a natural advantage in forming a community because they already are a more natural community than banks. This is the perfect time for credit unions to leap into that void, listen to their customers, listen to these comments, make a point of responding to them honestly and clearly, and I think the high loyalty scores will only just go higher. This is just one thing that’s going to make it even more difficult for banks to compete with the customer loyalty scores that credit unions are able to achieve.
Rob Rutkowski: You’ve asked, “What would you like to see most from credit unions in 2007?” Well, my message to credit unions would be don’t give up. Get past the negativity. Keep your overhead low while still focusing on member service. Try new things: commercial lending, maybe peer-to-peer lending, payday lending.
Credit unions are special and the movement really is a glorious thing. And there are a lot of opportunities for credit unions in 2007.
Denise – I think you’re forgetting one major point, and that is competition. We ARE here for the members best interest. You are completely right on that. However, there is a fine line between offering options that are in the members best interest and forcing it on them. While an 84 month new car loan may not be what we consider in the members best interest, the member ultimately has the choice. And if we do not offer this loan to them, where we can still help them out and be there for them, they are just going to get the same loan somewhere else, possibly at a higher interest rate, where they are NOT going to watch out for that member. If other people are offering these loans, we have to stay competitive. I think you you ask the member, they will tell you that if they can get it at a bank, they should be able to get it at their credit union, and that offering these services to qualifying members is what they want, and therefor may be what they consider in their best interest. It’s all in priorities. And if the member wants a new vehicle and wants low payments, then while we may advise them of our opinion that that is not in their best interest, all they’re going to see is that we are not helping them acheive what they want and go somewhere else.
Jessica,
My huband is the CFO of a large credit union and he said word for word the same thing. His credit union offers an 84 month car loan.
Of course my response to him was, “Kids are just going to try drugs anyway, so you might as well give it to them. if you don’t, someone else will.”
That went over well (NOT) and I guess we agreed to disagree.
Credit unions were founded because the average consumer was getting charged outrageous rates. WE could’ve charged those rates too—after all, people were willing to pay it. The demand was there. But we chose to do what helped members. What was provident and productive.
If you DO have an 84 month car loan—are you at least balancing that act with “something” that promotes thrift?
I consider myself generally to be on the same side of the war as Denise, but I have to disagree on the merger front. I would substitute the world “conversion” for “merger” in her comments and then agree wholeheartedly. In the dozen or so plus mergers I’ve been involved in, sweetheart deals played no role whatsoever. Market and regulatory forces sure did though. Mergers, sad to say, are the natural product of the current economy.
When CEOs are asking for two to three times their annual salaries in merger proposals, it is hard to ignore the personal gain associated with a merger.
Denise -
Thank you for your response. While I see your point, I am gonna have to go with the “agree to disagree” theory. On a parents note, I would not give my kids drugs. I instead educate them about the negative effects of drugs. But ultimately the choice is theirs, and as a parent, I have to allow them to make that choice, and be there to help them up if they fall. Likewise, I educate my members on the pros and cons of their choices, but ultimately the decision is theirs. And you better bet I am there with a plan of action if they make the “wrong” choice and fall.
As for your question of promoting thrift, we strongly recommend that people (especially those with direct deposit) have a certain amount of each paycheck be distributed to their savings. We also offer very competetive CD rates to try to encourage members to save that way and make a little off of their money. We really push IRAs and Money Market accounts. And my strong suit, we really work with each and every member to try to improve their financial stability. I love the opportunity to look at a persons credit report and suggest to them ways to get them out of situations that they are in and into a better position. Whether that means setting up a plan to save, or refinancing a loan to get them a better interest rate, or even offering a Visa credit card to transfer balances from the finance companies. We are always striving to find ways to get our members into a better position than where they’re at now. :)
Jessica,
Thank you for sharing all the ways you promote thrift. Just the simple act of encouraging members to “pay themselves first” with direct deposit to savings cannot be stressed enough these days.
I fear our focus has been on promoting debt. Let’s “get that loan” which I know is how we make money—but there needs to be the balance.
That’s all i’m sayin…..love this blog.
D.
Dear Anonymous,
I agree. I know first hand about a merger of a small credit union into a very large one where there were HUGE payouts for not only the CEO but the VP of this credit union.
As I understand it, this credit union could no longer make it on their own. Management has to bear some of that responsibility. It was not 100% the economy, the environment, competition, etc.
And yet they are seeking financial gain for their failure? That’s insane. That would be like a CEO of a huge company quitting and then demanding $210 million dollars. Oh wait, that just happened. (Home Depot).