What's Love Got to Do With It?
I really liked this blog post by Filene's Brent Dixon regarding the value of trust for credit unions. Every year, there is study upon study regarding consumers' trust for credit unions, in which they historically outrank banks. He cited data showing that 10% of participants in a Mintel Comperemedia report switched primary accounts from banks to credit unions. That's excellent news, for now.
Credit unions are trusted and that's why there's typically a flight to safety that often ends on credit unions' doorstep in times of crisis. As the economy begins to turn around now or two years from now or whatever experts may be saying this week, credit unions must be prepared to avoid an exodus from safety and trust to whatever financial services provider has the best rates.
Dixon noted that his organization's own research that trust and member satisfaction don't necessarily equate to growth. Filene asserted that credit unions often lack in "basic quality service and offerings" to keep members there. Members trust credit unions but apparently can find them less useful than their financial needs require. The report highlights that great service is a means to an end, market share, not a goal. As Tina Turner said back in the 80s, "What's love but a second-hand emotion?"
"When our emotional rankings terminate on themselves, they become pointless," Dixon stated. Ouch, that stung. But is it true at your organization? Credit unions aren't in business to give members the warm fuzzies; they're in business to provide members the financial services they need and accomplish that in a warmer, fuzzier way than other financial providers.
"What's love but a sweet, old fashioned notion?"
I'm currently reading Henry James' The Portrait of a Lady. It's excellent and a fascinating sociological study in its quaint portrayal of women, marriage and the world. Reading Portrait is something I'm doing at my leisure because I want to; my financial services needs are not. Appearing quaint can be a very effective marketing tool and business development strategy, but you can't be quaint.
Credit unions are not-for-profit, but profits are necessary to keep the lights on. More credit unions are seeing that now as a multitude of issues negatively impacting their bottom lines are lining up with hands out, ranging from assessments to a poor economy to hiring compliance expertise to handle the NCUA's newfound exam vigor.
Obviously in less favorable economic times, regulators need to be more vigilant than ever-especially when counterbalancing accusations leveled that they previously were not watchful enough. However, this has elevated the natural tension between regulator and regulated to outright acrimony in some instances. The National Federation has been chasing this issue down for some time for its members, but the assets of the credit unions making the noise weren't enough for concerted national attention.
Now on the same day last week, CUNA and NAFCU both announced initiatives to help credit unions handle exam frustrations. CUNA started a page on its website to launch a survey for its members to report back their examination experiences. NAFCU on the other hand provided a best practices paper publicly accessible on its website on how to handle exams and the difficulties that can accompany them. It includes practical explanations of how to deal with examiners and the appeals process, should it become necessary. The offerings there were certainly more conducive steps than suing the regulator or the NCUA publicly alleging a credit union is filing misleading figures (though both made for big news days at CU Times!).
A basic theme running through NAFCU's paper is that working with an examiner can be an education process on both sides. Credit unions should know and understand what their examiners will be looking for in an examination. Conversely, credit unions can also work toward educating their examiners on how and why certain things are done at the credit union. You know your credit union and your membership better than anyone else. It's not easy but the burden of proof rests with the credit union.
And, sometimes credit unions are better off biting the bullet on small matters. Weigh the costs and benefits being distracted from your institution's core mission to challenge an examination against moving forward with your business. It may not be fair or just, but it is what it is and being savvy about the matter is the only way to handle it and press forward to the continued success of the credit union.
Bigger ones are entirely different. One credit union sold off an entire piece of its loan portfolio because the NCUA said to, and another is being pressured about curbing a different part of its lending, each due to risk. In some instances, one has to ponder risk of what to what. Interest rate risk, risk of default, concentration risk and compliance risk all must be part of the equation. Risk avoidance versus risk evasion. Risk to the entity and risk to the insurance fund. And where is that line of demarcation of taking just enough risk and who draws it? It has to be a joint effort that includes both sides having a keen understanding of that institution's particular situation.
Conversely, while credit unions are complaining about being treated too harshly, a recent poll of visitors to the Credit Union Times homepage found that 55.7% said the NCUA is moving too slowly on troubled credit unions. The survey was admittedly not scientific, but it seems that the NCUA would have to increase restrictions if it is to act more quickly on troubled credit unions. Perhaps the problem is in the need to redefine what constitutes a troubled credit union both at the NCUA and among credit unions.
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