Heather Anderson Recently, I received an auto loan refinance promotion offer in the mail that put a damper on the good work so many credit unions are doing in the community.

I live in Southern California. The credit union that mailed the offer is on the East Coast.

Some credit unions have a national field of membership; this isn't one of them.

The envelope teaser didn't literally say anyone could join, a marketing pitch some regulators have warned credit unions shouldn't use. However, it did assure me that even though I'm not an employee of the namesake select employer, I could still get great deals at the credit union.

How could I qualify for membership? The loan offer didn't say, not even in the disclosures.

A quick search of the credit union's website revealed one of those despicable back door membership associations banks use on Capitol Hill to support their argument that the credit union tax exemption should be abolished.

Should the Federal Credit Union Act be amended to eliminate or modernize the common bond requirement? I think so. However, the political payoff required to execute that legislative victory may be a price the community is unwilling to pay.

And let's not get ahead of ourselves. It hasn't happened yet.

This particular credit union's association doesn't appear to be one invented by the credit union solely for the sake of growing membership, but the website offered complimentary membership to those interested.

Anyone who responds to the refi offer will only be joining the association to get the loan. While membership in the association doesn't violate the FCUA in form, this use of associations to circumvent the common bond requirement violates the substance of the act. That's a slippery slope, folks. It's unlikely Congress will undertake major tax reform, but if it happened and the banker tax exemption message gained traction, promotions like this would deserve the blame.

Unfortunately, that wasn't even the worst thing about this offer.

The credit union bragged that it could lower my current monthly payment by $100, which it said means more cash in my pocket. I'm sure many consumers would think that was a pretty good deal.

But I'm not your average consumer. After 25 years in the financial services industry, I know my way around APR, loan terms and fine print details.

To say the devil was in the details is an understatement.

To save $100 per month, I would have to refinance my remaining 54-month loan into a 75-month loan. And, the credit union's best available rate was 40 basis points higher than what I'm currently paying at my credit union. My. Credit. Union.

I'll buy the argument that some consumers really need that $100 per month. But shouldn't there be another way – or at least an effort to find another way – than a loan that poaches off another credit union and features a higher rate and a longer term?

Only financially illiterate consumers, or those who were intentionally misled, would take that offer. So much for people helping people.

More assets may pay off for members in economy of scale. However, if the new members are financially illiterate and have no emotional or social bond to the credit union, will those loans actually pay off financially? Furthermore, what will one credit union's gain cost other credit unions in lost business, not to mention the entire community in political capital?

I'm privileged to know retired credit union CEO John Tippets, who grew the Fort Worth, Texas-based American Airlines FCU into the excellent $6 billion institution Angie Owens runs today. He also came out of retirement to save two credit unions that already had one foot in the grave.

Not only is John a brilliant and principled credit union leader, he's also a fine American and a fascinating man. And, for no other reason I can figure other than God loves me, he's taken an interest in the work I do at CU Times, offering encouragement, praise and some occasional criticism when needed.

Many of you have probably caught his leadership principles presentation at industry conferences. If you haven't, I highly recommend it.

Some of John's 12 Principles outlined below should be applied to credit union loan offers like the one I received.

Do the right thing. John's very first rule is to always do the right thing. We have choices of actions and sometimes there is pressure to make a decision one way or another. Bankers bend and break the rules, and I appreciate how infuriating that is. However, that doesn't give credit unions the right to join them.

Don't do anything stupid. Often, there is not a clear right choice and there may be multiple right options. That's where this second rule comes into play.

It's the members' money! Every decision should be a reminder to do what is truly in the interest of member-owners. Don't grow your credit union at the expense of members by tricking them into a loan offer that is worse than what they currently have.

Do no harm. Think about the consequences of your actions and make things better, not worse. Don't just consider your credit union and its members, but the entire community.

Otherwise, we're only an industry, not a community.

Heather Anderson is executive editor of CU Times. She can be reached at handerson@cutimes.com.

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When People Help People, Principles Matter

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