Industry Shows Creativity and Lack Thereof: Editor/Publisher's Column
Staring down shrinking margins and the confusing moniker “credit union,” some have gotten creative with their fields of membership. This is not a particularly new phenomenon but one that has garnered attention from an L.A. blogger who was just looking for a credit union to join. She’s had a great member experience and wanted to share the news through her blog.
And here again, we hit on something average consumers do not understand: Credit unions weren’t initially intended to be open to everyone. They have restricted fields of membership. The Federal Credit Union Act requires a common bond. Policies, like the ones at these multiple-SEG credit unions, meet the letter of the law but sucker punch the spirit of it.
The field of membership is an antiquated concept that should be abolished. Until it is changed, the law is what it is, and credit unions will get creative to work their business strategies within it. Some credit unions’ strategies are to stay tight knit, even regret converting to community charters. That’s their choice. However, the others that prefer to work on volume shouldn’t have to get cutesy with their membership policies to achieve that.
Some will decry that field of membership is a basic tenant of credit unions. The democratic election of credit union officials is at the core of credit union philosophy and even determines whether a field of membership expands or not. Yet credit unions skirt that basic tenant, informing their member-owners with a brief mention of elections in a newsletter that no one reads so current officials can be “re-elected.”
Another basic tenet credit unions should support is that everything is about the member. If that’s true, as our Trailblazer 40 Below Brandon Michaels, CEO of Mazuma Credit Union says on page 6, everything a credit union does must be about the frontline employees who are in contact with them every day. When employees are treated with respect and as human beings who have more important things outside of work to consider and are rewarded financially, they will treat the members better. When employees who excel are rewarded with upward mobility training or are recognized for an innovation they came up with by presenting it to senior management or the board, it makes them feel important and invested in, so they invest more of themselves in the credit union.
Marc Schaefer of Truliant FCU brings up another credit union tenant on page 12: Size doesn’t matter. It shouldn’t. Credit unions were founded to help the average person with their financial business at a fair rate. Yet many regulators are tempted by the efficiency of setting an asset threshold for applying regulations. It’s better than applying some regulations to all financial institutions, but it does make it appear that larger financial institutions are less consumer-friendly and require regulating.
In many cases, nothing could be farther from the truth. However, the alternative would be that the regulator would have to spend time sifting through financial institutions to determine their mission and whether or not they were actually fulfilling that. Not only would it be inefficient, but also no one really wants to place that kind of judgment call in the regulators’ hands.
Credit unions can’t catch a break on any sort of regulatory relief, even of the symbolic nature. Sen. John Boozman (R-Ark.) recently tossed community banks a bone in a budget amendment to create a reserve fund to address regulatory burden on the community banks. There was not a single mention of credit unions, which led NAFCU to write an “Us, too! Us, too!” letter to the Senate majority and minority leaders. Credit unions, unfortunately, remain a minor blip, perhaps mistaken for a speck of dust, on the congressional radar.
It’s not terribly surprising when Congress and the regulators are not able to see Wal-Mart’s roundabout journey to a bank charter. Its Bluebird prepaid card deal with American Express requested FDIC coverage just six months after the companies said they had no intentions of seeking federal insurance for Bluebird. All of the sudden they realize, “Gee, we need deposit insurance to take Social Security funds.” Yeah, I’m sure these banking and commerce behemoths never saw that coming.
Still, at least they’re trying to do something to serve those not served by traditional financial services providers. Credit unions need to unite to create universal products and services worthy of serving the underbanked. Why is it that Walmart and AmEx created Bluebird? Why didn’t the credit union community?