It's been encouraging to see the ample response we've received to our ongoing coverage on reputation risk as it relates to small credit union fraud. Most of the feedback has been positive, with vendors and credit union managers alike saying the issue can no longer be ignored.
While it's reassuring to hear Credit Union Times is on the mark with coverage, I also enjoy hearing the opinions of those who disagree.
Those comments ranged from the shocking to the mocking. Some wondered if our coverage was motivated by those who wish to harm the industry's reputation; which, I assure you, is absolutely not the case.
Others accused us of sensationalism, saying we are making a bigger deal out of the issue than it deserves. Judging by how many credit union failures in the past year have been due to fraud, I disagree.
Some readers agreed with the NCUA's decision to focus more on potential losses at large credit unions, which could result in devastating losses to the share insurance fund.
Certainly, that argument has merit. Corporate assessments continue to leech precious earnings from federally insured credit unions, and the signals I've received from the NCUA indicate the agency will impose another assessment in 2014, despite trade opposition. Large credit unions, both corporate and natural person, have complex balance sheets. The more complex the balance sheet, the more risk factors.
And, as large credit unions grow even larger, I think the NCUA's move to establish the Office of National Examinations and Supervision was a good one.
Our purpose in covering this topic is to ensure that the NCUA is also considering protecting credit unions against reputation risk while also defending the share insurance fund from losses.
Competing against banks isn't easy. One of the precious advantages credit unions have over their for-profit competitors is an honest reputation.
Credit union managers are already facing an overwhelming list of challenges. While they develop strategies to address the risk based capital rule under development at the NCUA, soaring costs of compliance, technology upgrades, security and benefits, paltry investment earnings and low loan rates, increased liquidity requirements, compliance pressure and much more, the last thing the industry needs is another reason for consumers to dismiss credit unions as unsophisticated mom and pop shops that can't control internal fraud.
As a former credit union business development manager, I know first-hand how difficult it can be to clear that small business hurdle. Who among us hasn't had to suppress the urge to bang his or her head against the wall after spending a tidy sum on well-executed marketing campaigns, only to hear yet another member express surprise that the credit union offers products like mortgages or retirement planning?
Ask any employee who opens a new account, product or service: members frequently say they give their business to the credit union because they like the people who work there, and they trust them. We can't afford to lose the few benefits we have as comparatively small shops.
Here's another aspect of small credit union fraud that has me concerned: the continued threat of retaliation by the NCUA. I believe NCUA officials who say they are making an honest effort to improve the exam process. And according to some of my friends in the industry who run credit unions, as well as trade survey results, things are improving.
However, I have been very disappointed in how many folks were unwilling to go on record to discuss the NCUA's concern with fraud at small credit unions. Every last one of them cited a fear of retaliation by the NCUA.
In defense of the NCUA, some could be using that as an excuse when in reality, they just don't want their boss or volunteers to see their name in the paper. But the fact that so many still say they fear retaliation indicates the NCUA still has work to do in this area.
But enough picking on the NCUA. Fraud prevention starts at home, with credit union volunteers. Simply shrugging your shoulders and saying management isn't providing the right reports or assuming a third party will handle everything isn't going to get the job done, even if the NCUA spends months on site inspecting the books.
I'm looking forward to more coverage on this topic, which will include tips on how volunteers can prevent and detect fraud. If there are any additional angles you feel we should cover, please let me know by sending me an email.
Heather Anderson is executive editor of Credit Union Times.