I read with great interest Edward Speed’s Guest Opinion [July 18 issue, page 12].
I appreciate Speed sharing his thoughts about regulators, trade associations, CUSOs and business lending. We need to dialog about the issues we face so that collectively we can make the right decisions.
But I think Speed has the wrong perspective on so many things. He states that his views about regulators are radically different than those of other credit union professionals. I would allow that his views on CUNA, regulators, CUSOs and member business lending are just plain wrong.
In the first place his credit union, Texas Dow Employees Credit Union, disaffiliated from CUNA because of “unending vitriolic attacks on credit union regulators.” I have disagreed with CUNA and my league, the California Credit Union League, from time to time. But we did not quit, we instead raised our voice and stood up for our opinions. I have found that you can’t change an organization like CUNA or our league by quitting. Organizations are changed by those inside the organization more often than by those who quit. I have not heard Speed’s comments or his concerns about CUNA’s criticism of regulators until now.
I think the NCUA has numerous problems. The NCUA did not raise any warnings about the corporate system until long after it failed. The NCUA’s own Inspector General has criticized the examination process and found that the NCUA failed to provide prompt corrective action in a number of recent credit union failures. The NCUA has been criticized for its accounting practices, for delays in issuing audited financial statements, for a lack of transparency and the NCUA has been criticized for arbitrary and inconsistent examination findings and exam follow-ups.
I think CUNA has an obligation to address these and other issues with the NCUA on behalf of credit unions.
Speed said that regulators are far too busy trying to address the damage we as an industry seem inflict on ourselves. In his opinion, CUSOs and member business lending “have far more potential to harm our insurance fund, not to mention reputational risk to our movement, than anything resulting from the corporate collapse.”
In my opinion, that is a dangerous and misguided view of how a modern credit union operates and serves members. He goes on to damn member business lending–“MBL is perceived as the salvation for credit unions that either can’t or don’t know how to make consumer loans.”
Speed couldn’t be more wrong about both CUSOS and member business lending.
CUSOs are the ideal way for credit unions to cooperate to provide members services and delivery channels like ATM networks, indirect lending, shared branching, credit card processing, student loans, member business lending and so much more. CUSOs allow credit unions of all sizes to operate more efficiently.
Credit unions are chartered to make loans for provident and productive purposes. Nothing is more provident and productive than lending members money to start a business and create jobs and wealth. Our members and our communities depend on small businesses for jobs, for service and innovating and creating new products and services. Credit unions should serve all of their members and that includes small business.
Speed is making the same mistake that the NCUA makes in its examination process. It is the mistake finding fault with CUSOs or member business lending rather than finding fault with those who operate CUSOs badly or who make bad business loans. There is nothing inherently wrong with business loans or with CUSOs. There is always risk whenever you do anything badly. The fact that CUSOs have failed or the fact that some credit unions have made a terrible mess of business lending does not prove that CUSOs or member business loans are ipso facto bad.
The best way to prevent insurance fund losses is to hold credit unions accountable for how they manage vendors, including CUSOs, and how they manage services, including business lending.
The direct line to insurance fund losses points not to CUSOs and member business lending but instead to credit unions that are poor risk managers and to credit unions that fail to adapt to the changing marketplace. That line also points to a lack of prompt corrective action by regulators and a faulty examination process.
SAFE Credit Union
North Highlands, Calif.