Editor’s Column: On Snail Mail, States’ Rights and Tweets
The creeping economic recovery has pushed credit unions to think more creatively to generate new revenues and efficiencies. A story we posted referring to Kern Schools Federal Credit Union last year drew an angry comment from a member recently. According to the commenter, he or she was charged $5 for each letter the credit union tried to send regarding an account problem. This grabbed our editors’ attention and, although we couldn't approve the comment because it contained profanity, when we asked Kern Schools, we discovered that the credit union started a $5 monthly returned mail fee to prod members into updating their contact information with the credit union. Once the credit union receives up-to-date information, the $5 is returned.
This is a really innovative idea. Credit unions can be member friendly and still use tactics like this to get their point across. Friendly works both ways: Members need to take some responsibility to maintain their personal information. It represents a security issue to them and the credit union and has compliance implications as well. Either they fix it and get their five bucks back, or they move on, which means they probably weren’t the most committed members anyway.
I like to think of this returned mail fee as cooperative coercion. The fee isn’t intended to make money but uncovered an efficient way to collect current information from members who were slow to inform the credit union. It’s in both parties’ best interest in the end.
From Frying Pan to Fire
Earlier this month the NCUA approved a final regulation permitting the agency to step in at troubled, state-chartered credit unions. Known for his prolific expounding on many areas of the credit union industry, Henry Wirz makes the point in his Viewpoint article (page 12) that the NCUA is supplanting its judgment for that of the state regulators. On the other hand, NCUA Chairman Debbie Matz decried the perception that the NCUA was taking over when it’s merely leveling the playing field.
The insurance fund is a weighty sword for the NCUA to wield. And it does. However, that doesn’t mean the actions the agency takes won’t be in the best long-term interests of the 99% of credit unions that fund the NCUSIF. It will truly depend upon board policy. And an independent fund is not feasible; the NCUSIF would likely be merged with the FDIC, whose metrics for measuring financial success are not necessarily in line with credit unions’ business model. Moving the NCUSIF out of the NCUA is moving from the frying pan to the fire.
On the other hand, the NCUA may be trying to level the playing field between federal and state regulators, but that’s in direct contradiction with the purpose of the dual chartering system. The point is to have different fields to play on. A troubled credit union should not continue operations without strict scrutiny from a regulator. But let them live and die by the charter in which they exist.
Play That Funky Media
Meanwhile the Federal Financial Institutions Examination Council issued for comment proposed guidelines regarding credit unions’ (and other financial institutions’) use of social media to seek out, engage and lend to members. The 31-page request for comment outlines a plan for risk management and all of the consumer protection regulations that credit unions would have to consider as part of any social media effort, including Truth in Savings, Truth in Lending, the Real Estate Settlement Procedures Act and the Fair Debt Collection Act. The list literally goes on and on.
Credit unions already engaged in social media efforts would seriously have to consider their current level of compliance and how that measures up before deciding to continue with a program, no matter how successful it has been. A credit union that is considering a social media campaign is likely to say, “Forget that!” I wouldn’t blame them. Adding the federal deposit insurance disclosures to every tweet would take up valuable characters.
Ironically, this sparked some discussion on Twitter last week. No one employed by a credit union chimed in, so don’t fear about your credit union’s compliance. While one tweeter said the guidance would never stand as is, I would have to very sadly disagree. Unfortunately, after the financial crisis, regulators’ reaction has been to regulate risk out of the business of financial institutions despite the fact that it’s mostly affecting financial institutions like credit unions that had little fault in the crisis. But tweet up and let your social media voices be heard–although I don’t believe the regulators take comments via social media.