Are credit unions really successful at achieving theirmission? Do credit unions have an objective system to assess howsuccessful they are reaching out to people of modest means? Arecredit unions just wearing white hats of virtue, but do they haveno cattle? If Diogenes shined his lamp on your credit union, wouldhe find an honest operation?

With more people on the fringe turning to usurious solutions totheir financial needs, the answer seems to be no. Yet, creditunions market the legend, not the reality. A potentially honestassessment of current status of the credit union system is that itis only slightly less egregious than banks with deliveringfinancial services to A and B level members.

Over the years I have participated in many strategic planningsessions. They usually start with a self-congratulatory mirror,mirror on the wall moment. Considerable time is spent chest bumpingabout how good we were and how bad everyone else was. As afacilitator or mirror I would never consider not claiming thatcredit unions weren't the fairest of them all. Financialconsiderations tend to trump my objectivity.

Evidence to the contrary about the fairness of credit unionsseems to indicate that more and more people are falling through thecracks. During the reviews of credit union progress we interpretstatistics to our own advantage. The driving metric seems to be howmany A/B member accounts have been opened. Limited time is given toquestioning whether true member relationships are being developed.Lip service may be given to potential members of modest means. Nodecisive actions are taken because barriers to addressing the needsof potential members are just too high.

There is so much overwhelming unaddressed need, and theseemingly consistent approach being used is feckless in addressingthe problem. The screaming need for change in approach goesunheard. The current solutions are not working, so why not changethe solutions?

I remember the simpler times. People actually knew each other.When you lent Mary money you were doing something that Peter andPaul would have approved. The credit union just kept therecord.

Today, the transactions are electronic. Cold and impersonalexpedited transactions are well and good for a large majority ofpeople who are qualified for loans from ubiquitous sources ofcredit providers. Those of modest means are being left behind.Time, costs and regulatory issues seem to be at the foundation ofthe problem.

The NCUA spends millions each year attempting to figure out whysmall credit unions who are closer to the people of modest meansare no longer working. The NCUA reports back with no effectivesolution but to continues to merge smaller into larger. The largercredit unions are regulated using bank strictures and we all knowhow effective they are in addressing the needs of people of modestmeans.

Read more: Credit unions were effective in providingface-to-face explanations about loan denials …

Everything needs to be done yesterday. I cannot imagine tellinga member today that you have to wait until some day in the futurewhen the credit committee meets to provide you with a decision onyour loan request. Borrowing was considered a privilege and not aright back in the Stone Age. People were content to wait. Effectivecredit unions provided face-to-face explanations about loan denialsand ways to achieve approval. There was greater civility becauseyou could not hide behind an electronic barrier.

Consumer credit for A/B members is available at the click of amouse. No relationship is necessary if you meet the numbers. Whytake on additional expense reaching out to people who don't meetthe numbers? It seems the elected strategy is to compete for moreA/B business.

Credit unions were designed to address a need. Regulations atone time seemed consistent with the goals. Operations of creditunions were also consistent with the economics of the time. Allthis has changed. Regulations designed to prevent consumer abuseseem to have adverse, unintended consequences. Members of modestmeans are put on the road to hell by well-intendedregulations.

Credit unions have become so sophisticated that they fail toserve the desired market. Years ago, Ken Davis, the CEO of TransitFederal Credit Union, suggested to me that credit unions weregetting so sophisticated that they were going to forget how to geta member to his next paycheck. His prediction seems to havecome true.

Can it not be high time to change the paradigm from somethingthat is not working to something that just might? Can we usetechnology more effectively? Can we modify regulatory requirements?Can we restructure credit union relationships to improve outreachto people of modest means?

There is no reason for a credit union to offer an idiot-proofaccess account. Credit unions choose to use checking accounts as afee generator. Maybe we could develop micro-credit unions for smallbusinesses who could be sponsored by larger credit unions. Thissmaller unit could make payday loans based on their knowledge ofprobability of a future paycheck and get a right to the amountnecessary to repay the loan upon leaving employment. Relationshipswith churches and other community associations should be examinedfor potential use of a micro-credit union relationship.

Doing nothing but shaking your fist at the problem does not seemto be an effective solution. All parties need to come together.They need to honestly identify and address the problem. If changesneed to be made, then changes should be made. The first step seemsto be getting honest about the situation and your role in it. Ifyou don't, you may be deluding yourself into believing you aresuccessful, but Diogenes' lamp will pass you by.

Bill Brooks is a certified financial planner with CUProsper. He can be reached at 302-258-4668 [email protected].