As an undergraduate at UCLA in 1976, I wrote a term paper that predicted the decline of communism due to its failure to provide a sustainable economic model for the future. However, I also envisioned capitalist society moving more toward the type of social welfare state that characterized the communist societies of the day. Those observations have been borne out in the historical events that followed. Perhaps age and experience dulls our perceptions and I never envisioned that, after the hard fought battles for credit union survival that culminated in the Credit Union Membership Act of 1998, credit unions would move closer to the banking model in philosophy and pricing. For example, many credit unions have sold their credit card portfolios to third party, for-profit credit card companies subjecting their members to policies and pricing that they cannot control. Some have introduced sub-prime third-party car loan “investment” programs at the very limit of their rate cap at what many would consider usurious in the historically low rate environment. They don’t serve them as members, rather they are “investments” placed on the books as such for yield. Others are widely using so-called bounce protect programs that mimic the traditional consumer-friendly overdraft line of credit but with punishing non-sufficient funds (NSF) fees attached. Our members are supposed to be overjoyed that they paid $28 instead of perhaps $1 in interest for the credit union not returning a check. The pricing philosophy for these programs doesn’t entail cost plus reasonable profit to grow capital with assets; rather the programs are based on “what the market will bear” with handsome profits for third party providers and even for our leagues’ and trade associations’ “endorsement. They produce materials and advertisements that depict their services as dedicated to helping the less fortunate, much as our finance company competitors have done, but their pricing and food chains of profit belie the true purpose. We should not confuse these “ready-made” programs with programs that are actually structured to help the underserved. With the rationalizations required to make these choices, is it any wonder that some CEOs, management and boards are boarding the gravy train to mutual and subsequently stock-based financial institution conversion? Perhaps some of these departures from our member-focused purpose are warranted by slim margins, poor performance in credit card portfolios, or a lack of understanding of how some of the programs actually work. To my many friends and colleagues who have traveled these roads I say, I understand, I commiserate. I too have strayed (NSF fees, indirect auto lending, etc.). But the cumulative effect of programs that sacrifice true member/consumer values has the potential to erode “credit union uniqueness” to meaningless verbiage. There are plenty of foes waiting in the wings to tell us where the next steps are from there. Marcus Schaefer President and CEO Truliant FCU Winston-Salem, N.C.

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